William R. Berkley, chief executive officer and founder of insurer W.R. Berkley Corp., said bailed-out rival American International Group Inc. will have to raise prices after adding $4.1 billion to reserves for prior claims.
“They were a very aggressive price competitor in the last few years,” Berkeley said today at an investor conference hosted by Bank of America Corp. in New York. “AIG is going to have to raise prices because they’re not so well capitalized.”
AIG said last week it was adding to reserves, a sign that it underestimated the cost of claims. Rivals Travelers Cos. and Chubb Corp. have taken profits after determining they had set aside more funds than necessary. Reserve additions at AIG, including $2.3 billion in the fourth quarter of 2009, are weighing on results as Chief Executive Officer Robert Benmosche seeks private capital to repay the $182.3 billion U.S. bailout.
Chubb, based in Warren, New Jersey, and Liberty Mutual Holding Co. have said AIG’s government backstop let it sell policies below competitive rates. AIG’s Pennsylvania regulator investigated the pricing after the bailout and said in a report last year that rates were “not out of line” with competitors.
Berkeley’s comments were reported earlier by Dow Jones. Mark Herr, a spokesman for New York-based AIG, declined to comment.