The insurance industry, like the broader economic picture, is full of emerging risks. But from where American International Group Inc.'s CEO stands, this is when insurers are needed most.
"We're in the risk business, and risk is booming," Brian Duperreault said at a recent S&P Global Ratings Insurance Conference. "We actually, in some strange way of my business, are living in the best of times."
The AIG executive acknowledged the various challenges the insurance industry is facing, from cyber warfare to the threat of an economic recession. New technology, geopolitical tension, disputes over trade, an aging society, and climate are all contributing to rising uncertainty across the world, he said.
Talent is also undergoing a demographics problem that Duperreault said was probably as severe as he has ever seen it.
"We have a lot of people leaving our industry with tremendous amounts of knowledge," he said. "We need not only to replace that subject matter knowledge, but we need to increase our subject matter knowledge in these very rapidly changing areas like technology."
Also, reserving levels in the industry "aren't great," especially for the property and casualty sector, but Duperreault said he does not think they are at a breaking point.
On the other hand, there are a lot of positive factors prompting the AIG chief to have a sunny outlook.
For example, Duperreault said the pricing environment is "actually pretty good," adding that even in Europe and parts of Asia, reinsurance and primary rates are going up. He also shared that AIG is getting rates above loss cost amid a tightening market.
"So that shows you that things are improving," Duperreault said. "It's a moment where capital actually remains pretty strong."
On the M&A front, Duperreault is not surprised that movement has slowed to some degree. He said the trend might be in part due to mergers of weak companies that are driven together at times when returns are not good.
The AIG CEO said the way to win the "M&A battle" is by putting good people in and making them accretive "in many ways, not just economic."
Toward the end of his remarks, Duperreault said he takes a cautious view on the workers compensation market, and that the years where he made money in that business line are far outnumbered by the years he did not.
"I just see the life of comp tends to be good for a while, and then bad for a longer while," he said. Though returns have been good of late, Duperreault believes the "wind is starting to brew" in that segment.
Overall, Duperreault believes the insurance industry is "in pretty good shape" and that there is a "wonderful world ahead" for insurers.