AIG 2013 Annual Report Download - page 193

The following table presents information for each reinsurer representing in excess of five percent of our total
reinsurance recoverable assets:
Reinsurer:
Berkshire Hathaway Group of
Companies AA+ A++ $ 2,015(d) 8.5% $ 1,383 $ 632
Munich Reinsurance Group of
Companies AAⳮA+ $ 1,474 6.2% $ 598 $ 876
Swiss Reinsurance Group of
Companies AAⳮA+ $ 1,454 6.1% $ 467 $ 987
(a) The financial strength ratings reflect the ratings of the various reinsurance subsidiaries of the companies listed as of February 11, 2014.
(b) Total reinsurance assets include both AIG Property Casualty and AIG Life and Retirement reinsurance recoverable.
(c) Excludes collateral held in excess of applicable treaty balances.
(d) Includes $1.6 billion recoverable under the 2011 retroactive reinsurance transaction pursuant to which a large portion of AIG Property
Casualty’s net domestic asbestos liabilities were transferred to NICO. Does not include reinsurance assets ceded to other reinsurers for which NICO
has assumed the collection risk. See Liability for Unpaid Claims and Claim Adjustment Expense — Transfer of Domestic Asbestos Liabilities.
At December 31, 2013, we had no significant general reinsurance recoverable due from any individual reinsurer that
was financially troubled. Reinsurance underwriting profits in 2013 generally have increased reinsurer capital levels
and therefore the industry’s underwriting capacity. This increased capacity has resulted in increased competition and
lower rates for 2014 renewals. Reduced profitability associated with lower rates could potentially result in reduced
capacity or rating downgrades for some reinsurers. The RCD, in conjunction with the credit executives within ERM,
reviews these developments, monitors compliance with credit triggers that may require the reinsurer to post collateral,
and seeks to use other appropriate means to mitigate any material risks arising from these developments.
See Item 7. MD&A — Critical Accounting Estimates — Reinsurance Assets for further discussion of reinsurance
recoverable.
For AIG Life and Retirement, the primary risks are the following:
•Mortality risk — represents the risk of loss arising from actual mortality rates being higher than expected mortality
rates. This risk could arise from pandemics or other events, including longer-term societal changes that cause
higher than expected mortality. This risk exists in a number of our product lines but is most significant for our life
insurance products.
•Longevity risk — represents the risk of a change in value of a policy arising from actual mortality rates being
lower than the expected mortality rates. This risk could arise from longer-term societal health changes as well as
other factors. This risk exists in a number of our product lines but is most significant for our retirement, institutional
and annuity products.
•Client behavioral risk including surrender/lapse risk — there are many assumptions made when products are
sold including how long the contracts will persist. Actual experience can vary significantly from these assumptions.
This risk is impacted by a number of factors including changes in market conditions and policyholder preferences.
This risk exists in the majority of our product lines.
•Interest rate risk — represents the potential for loss due to a change in interest rates. Interest rate risk is
measured with respect to assets, liabilities (both insurance-related and financial), and derivatives. This risk
manifests itself when interest rates move significantly in a short period of time (interest rate shock) but can also
manifest itself over a longer period of time such as a persistent low interest rate environment.
•Equity risk — represents the potential for loss due to changes in equity prices. It affects equity-linked insurance
products, including but not limited to equity-indexed annuities, variable annuities (and associated guaranteed living
and death benefits), universal life insurance, and variable universal life insurance. It also affects our equity
AIG Life and Retirement Key Insurance Risks
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AIG 2013 Form 10-K 175
ITEM 7 / ENTERPRISE RISK MANAGEMENT
A.M. Gross Percent of Uncollateralized
At December 31, 2013 S&P Best Reinsurance Reinsurance Collateral Reinsurance
(in millions) Rating(a) Rating(a) Assets Assets(b) Held(c) Assets
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