Insurance defense lawyers who are wondering how to get on the AIG panel counsel list may find it helpful to have some background on the firm, its lines of coverage, and recent strategic priorities.
Currently, American International Group Inc. (AIG) is in the news because it is considered by the Federal Reserve Board to be “systemically important” (a designation it received in 2013). As such, the Fed is in the process of developing new capital requirements, perhaps based on the establishment of risk categories for various types of assets and liabilities.
Billionaire investor Carl Icahn has been pressuring AIG since 2015 to streamline operations, increase financial reporting disclosure, and “fix the P&C franchise.” (Of course, P&C operations are at the heart of the AIG panel counsel program.)
In an open letter dated January 19, Icahn urged the board to break AIG into smaller units. Spinning off the life insurance and mortgage insurance subsidiaries into separate publicly traded companies is one option advocated by Icahn.
In response to investor pressure, AIG management is working aggressively to reduce costs and streamline activities. Initiatives being pursued by the firm include the following.
- Reduce firm-wide general operating expenses by $1.6 billion (approximately 14 percent) overall. Associated actions are outlined below.
- AIG reduced the ranks of its top 1,400 employees by almost 300 staff members, translating into a $250 million annual savings. Additional staff cuts are expected. While cuts by department are not readily available, insurance defense law firms on the AIG panel will want to stay in close touch with their claims contacts to monitor staff changes (and associated claims flow).
- Staff migration to lower labor cost geographies is in process. Almost 1,300 employees have already been relocated since 2014. More moves are expected in 2016, with a goal of moving 6,300 staff members.
- Improve commercial P&C accident year loss ratio by 6 points.
- Invest in technology such as predictive data analytics to reduce claims expense and accelerate the claim life cycle. AIG panel counsel members may want to familiarize themselves with data analytics, in that its successful application is likely to reduce high cost claims through early identification and/or accelerated settlement efforts.
- Cut unprofitable clients, meaning primarily clients that may only have a single policy and/or who do not purchase across AIG’s multiple coverage lines. From the AIG panel counsel perspective, as AIG jettisons some clients any associated claim flow will diminish also.
- Announced the sale of AIG Advisor Group to Lightyear Capital, which is expected to close in 2Q16, subject to regulatory approval. AIG also announced in January a planned IPO of up to 19.9% of UGC subject to regulatory approval.
Product Line Changes Flow Through to AIG Panel Counsel Program
AIG reportedly exited the lawyers’ professional liability market, effective June 1, 2016. Industry experts indicate that AIG will not write new LPL policies or renew existing policies after that date.
AIG also took action as of February 1, 2016 to discontinue coverage of mono-line site environmental liability/pollution legal liability (PLL) coverage.
Existing policies in discontinued lines will remain in effect, but will not be renewed, according to reports from brokerage firm Lockton.
AIG continues to offer several other environmental coverage products, according to its website, including Pollution Incident and Environmental Response (PIER), Environmental and General Liability Exposures (EAGLE), and contractor pollution liability.
AIG panel counsel members who defended claims in these discontinued lines should be hard at work finding replacement clients.
AIG Panel Counsel Expertise Used to Launch New Unit
In a separate action of interest to insurance defense law firms, AIG announced the launch of a new company named The Legal Operations Company in October, 2015 (see www.thelegalopsco.com).
Drawing on AIG’s experience in managing more than 1,500 law firms and $2 billion in annual legal spend, the new firm will teach litigation management skills to corporate clients with annual legal services budgets of at least $300 million.
While AIG has not released much information on this new company, it would appear that leading retailers, restaurants and hospitality companies would be natural targets. Many of these firms maintain a large self-insured retention (SIR) requirement, meaning that corporate general counsel with responsibility for an in-house panel counsel program would find AIG’s best practices in litigation management to be appealing.
From the perspective of an insurance defense law firm, self-insured entities traditionally have been easier to work for in terms of better billing rates and fewer constraints. This may change if AIG spreads its claims management techniques successfully. Proactive law firms will want to stay close to panel managers, and accelerate their own marketing and business development efforts.
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