American International Group, Inc. (AIG): PESTLE Analysis [Nov-2025 Updated]

You're looking for a clear, actionable breakdown of the forces shaping American International Group, Inc. (AIG) right now. I've spent two decades dissecting firms like this, and what's clear is that AIG's path is less about market share and more about navigating systemic risks, so we need to look beyond the balance sheet. Right now, AIG is balancing the tailwind of sustained higher interest rates boosting net investment income against the headwind of social inflation driving up claims costs, plus they're pushing a defintely strong $5.5 billion capital return target for 2025. This PESTLE analysis maps the complex interplay of political scrutiny, economic shifts, and technological disruption-like AI optimizing underwriting-to give you a precise view of the near-term risks and opportunities.

American International Group, Inc. (AIG) - PESTLE Analysis: Political factors

US political stability influences long-term regulatory certainty.

The core political factor for American International Group, Inc. (AIG) is the persistent, low-grade uncertainty around long-term regulatory stability in the United States. While AIG successfully shed its Systemically Important Financial Institution (SIFI) designation in 2017, the regulatory environment for large insurers remains fluid.

You need to watch the Federal Reserve (Fed) closely. In July 2025, the Fed proposed revisions to its supervisory rating framework for large financial institutions, which includes insurers under its purview. This framework, which assesses 'well managed' status, is a key indicator of future compliance costs and operational flexibility. The political climate, particularly a deregulatory push, could ease some burdens, but the underlying structure of federal oversight remains a constant for an insurer of AIG's size.

Global trade tensions affect international insurance operations and risk exposure.

Global trade policy volatility, especially between the U.S. and China, directly impacts AIG's underwriting profitability. When tariffs spike, it drives inflation, and inflation drives up the cost of claims. It's simple math for an insurer.

For example, AIG's CEO noted in April 2025 that tariffs can cause replacement costs for things like auto parts and construction materials to increase by as much as 40% to 50% in some lines of business. This inflation directly pressures AIG's Property and Casualty (P&C) combined ratio, which measures underwriting profitability. Plus, trade friction reduces the volume of global commerce, which in turn slows demand for trade-related insurance lines, like marine and export credit insurance.

Potential changes to the corporate tax rate impact net income and capital deployment.

The corporate tax landscape, while anchored by the permanent 21% rate from the 2017 Tax Cuts and Jobs Act (TCJA), is anything but settled. The 'One Big Beautiful Bill Act (OBBBA)' signed in July 2025 permanently extended and modified several key provisions that were set to expire at the end of 2025.

This is defintely a source of uncertainty. While the statutory rate is 21%, the debate in 2025 included proposals to lower it further to 18% or raise it to 25% to offset other tax cuts. For a company with AIG's global footprint, the most immediate impact comes from changes to international tax rules, which affect its Net Controlled Foreign Company (CFC) Tested Income (NCTI), formerly known as GILTI.

Here's the quick math on the tax environment:

Increased scrutiny from the Federal Reserve on non-bank SIFIs (Systemically Important Financial Institutions).

While AIG is no longer a SIFI, the Federal Reserve still oversees it as a large insurance holding company. The Fed's July 2025 proposal to revise its supervisory rating framework for large financial institutions, including insurers, shows that enhanced prudential standards (EPS) are still a focus, even if the 'too big to fail' label is gone.

The new framework focuses on an institution's 'well managed' status, which is determined by component ratings for capital, liquidity, and governance/controls. A poor rating could lead to limitations on activities. The scrutiny is now more tailored to insurance operations, moving away from the blanket, bank-centric regulation of the SIFI era. This means the compliance cost is ongoing, but more predictable than it was a few years ago.

Geopolitical conflicts raise political risk insurance demand but also claim volatility.

Geopolitical instability is a double-edged sword for AIG. On one hand, it drives significant growth in the political risk insurance (PRI) market, which is a high-margin specialty line. Demand for PRI rose by a reported 33% in the first half of 2025 due to trade disruption and global uncertainty.

AIG is a market leader in this area, offering coverage for events like political violence, expropriation, and currency inconvertibility, with industry-leading limits up to $150 million per policy. The overall Credit and Political Risk Insurance (CPRI) market has an aggregated premium base of approximately $50 billion and consistently delivers strong underwriting results, with trade credit net combined ratios in the healthy 70% to 80% range.

But, still, the increased demand means higher potential claim volatility. The 2025 Global Risk Forecast points to a high likelihood of increased episodes of unrest globally. This means AIG must be extremely precise in its underwriting models for political violence and civil unrest to manage the increased exposure that comes with a 33% surge in demand.

• Demand for PRI up 33% in 2025.
• AIG offers PRI limits up to $150 million.
• Trade Credit Net Combined Ratios are strong: 70% to 80%.

American International Group, Inc. (AIG) - PESTLE Analysis: Economic factors

The economic landscape in 2025 presents a two-sided coin for American International Group, Inc. (AIG): higher interest rates are a clear tailwind for investment income, but persistent inflation and a volatile yield curve create tangible margin pressure and claims risk. You need to focus on AIG's ability to translate investment gains into bottom-line underwriting strength.

Sustained higher interest rates boost net investment income on AIG's vast bond portfolio.

For an insurer like AIG, which holds a massive portfolio of fixed-maturity securities (bonds) to back its policy obligations, sustained higher interest rates are simply a huge benefit. As old, lower-yielding bonds mature and the proceeds are reinvested into newer, higher-rate instruments, the net investment income (NII) surges. We saw this play out in the first half of 2025.

Here's the quick math: AIG's General Insurance net investment income jumped 13% year-over-year to $1.1 billion in the first quarter of 2025. This momentum continued into the second quarter, where NII increased a massive 48% year-on-year to $1.5 billion. That's real, non-underwriting profit that provides a cushion against other economic headwinds. This is the simplest way AIG makes money right now.

Inflation drives up claims costs (Social Inflation), especially in General Insurance lines.

While AIG benefits from higher rates, inflation remains a major headwind for the General Insurance business. Inflation doesn't just mean higher prices for consumers; it means higher costs for AIG to settle claims. This includes material costs for property repair and replacement, and what we call 'Social Inflation' (rising litigation costs, larger jury awards, and expanding definitions of liability).

AIG's CEO has noted that tariffs and general inflation tend to drive claims costs up, particularly for auto and property replacement. Despite this pressure, AIG's disciplined underwriting has been effective at pricing for this risk, as evidenced by the General Insurance combined ratio improving to 86.8% in the third quarter of 2025.

Global GDP growth slowdown risks reducing commercial insurance premium volume.

A slowing global Gross Domestic Product (GDP) is a risk because it typically means businesses cut back, which in turn reduces demand for commercial insurance policies. However, AIG's execution in 2025 has defied this macro-risk, showing strength in its core commercial lines.

The company's Global Commercial Net Premiums Written (NPW) actually grew robustly in the first half of the year. This suggests AIG is capturing market share and benefiting from a hard market (rising prices) that is offsetting any volume-dampening effects of a potential slowdown.

• Q1 2025 Global Commercial NPW: $3.2 billion (a 10% comparable increase year-over-year).
• Q2 2025 Global Commercial NPW: $5.2 billion (a 3% comparable increase year-over-year).

US Treasury yield curve inversion (short-term > long-term) pressures Life & Retirement margins.

The US Treasury yield curve inversion, where short-term interest rates are higher than long-term rates, is a classic pressure point for life and retirement companies, including Corebridge Financial, in which AIG still holds a significant stake. This inversion compresses the spread income (the profit margin) because the cost of funds (what they pay policyholders, often tied to short-term rates) rises faster than the yield they can earn on new, longer-term investments.

Corebridge Financial's second quarter 2025 results reflected this, with a notable impact from the cumulative short-term rate environment. Specifically, Corebridge's base spread income decreased 18% year-over-year in Q2 2025.

This is a defintely critical margin headwind that AIG must manage through its investment strategy and product pricing at Corebridge.

AIG's 2025 capital return target is a strong $5.5 billion via buybacks and dividends.

AIG's clear focus on capital management is a strong signal to the market about its financial health and confidence in its core General Insurance business. The company has committed to a significant capital return program for 2025, which is a key economic action for shareholders.

The company is on track to meet its strong capital return commitment of $5.5 billion.

Here is a snapshot of the actual capital returned in the first three quarters of 2025:

AIG's Board also authorized a new share repurchase program of up to $7.5 billion starting April 1, 2025, which includes the remaining amount from the previous authorization. This aggressive capital return strategy, coupled with a targeted Core Operating Return on Equity (ROE) of over 10% for the full year 2025, shows a clear economic priority: disciplined underwriting combined with strong shareholder value creation.

American International Group, Inc. (AIG) - PESTLE Analysis: Social factors

Aging US population increases demand for AIG's Life & Retirement products.

The demographic shift in the US is a massive tailwind for AIG's strategic investment in the longevity economy. You're seeing a structural, permanent increase in demand for products that manage risk over a longer retirement horizon. Households headed by individuals aged 55 and above in the US now control nearly US$120 trillion in assets, which is a huge pool of capital seeking protection and growth.

This isn't just about life insurance anymore; it's about longevity risk-the fear of outliving savings. A survey showed 67% of investors are concerned about their income lasting their lifetime, pushing demand toward annuities and wealth transfer solutions. AIG's strategic stake in Corebridge Financial, Inc. (which was 22.7% as of year-end 2024) is directly positioned to capitalize on this need for retirement income and wealth planning products.

Public trust remains fragile, requiring transparent claims handling and communication.

In the insurance world, trust is your only defintely non-fungible asset, and it remains fragile, especially after high-profile industry events and the increasing use of opaque technology. Consumers are watching how claims are handled, particularly when Artificial Intelligence (AI) is involved; 64% say transparency is critical when AI is used to process claims.

AIG is addressing this head-on by scaling its GenAI solutions for Claims Assistance, aiming for faster, more consistent responses. For its high-net-worth segment, AIG Private Client Group already maintains a strong reputation, evidenced by its very low NAIC Complaint Index of 0.27 and a ranking of 9th out of 97 insurers on the CRASH Network's Honor Roll. That low complaint ratio is a key competitive advantage in a skeptical market.

Social inflation (rising jury awards and litigation financing) pressures P&C underwriting results.

Social inflation-the trend of rising jury awards (nuclear verdicts) and increased litigation financing-is a major headwind for all Property & Casualty (P&C) insurers, including AIG's General Insurance segment. Total tort costs grew at an average annual rate of 7.1% between 2016 and 2022, significantly outpacing economic inflation. For 2025, lawsuit inflation trend lines are moving well past 10% levels, which is a scary number for liability underwriters.

Here's the quick math on AIG's General Insurance segment in Q1 2025: The Calendar Year Combined Ratio was 95.8%, but the underlying underwriting performance was strong, with the Accident Year Combined Ratio (AYCR) at 87.8%-the best first quarter result since the financial crisis. This underlying strength, combined with $64 million in favorable prior year development (PYD) in Q1 2025, shows AIG's disciplined underwriting and reinsurance strategy is currently mitigating the worst of the social inflation impact, particularly in their Global Commercial lines.

Shifting work models (remote work) create new professional liability exposures.

The permanent shift to remote and hybrid work models has created a new class of professional liability (Errors & Omissions) exposure. Less direct oversight and a more dispersed workforce increase the risk of professional errors, plus a massive increase in cybersecurity exposure.

For AIG's commercial segment, this is a double-edged sword. It's a risk to underwrite, but it's also a new market for complex, high-limit coverage. While professional lines rates declined four percent globally in the second quarter of 2025, the US market remained flat, signaling that the underlying risk is keeping pricing firm despite market competition. AIG must continue to innovate its Professional Liability and Cyber insurance products to cover these new, complex risks, like AI-related errors and data breaches from home networks.

Increased demand for personalized, digital-first insurance experiences.

Customers now expect the same seamless, personalized experience from their insurer that they get from a tech company. This isn't a nice-to-have; it's table stakes. 89% of insurance companies have adopted or plan to adopt a digital-first business strategy, and 74% of executives name digital transformation as a top strategic priority for 2025.

AIG is responding by embedding technology deeper into its core processes. This includes scaling its Generative AI (GenAI) solution for Underwriter Assistance, which is already in production for select Financial Lines segments in the US. The goal is a frictionless trading experience for brokers and customers, with:

• Faster decision-making on complex policies.
• Prompt and Consistent Responses for quotes and claims.
• Improved Work Experience for employees, streamlining underwriting.

American International Group, Inc. (AIG) - PESTLE Analysis: Technological factors

AI and Machine Learning (ML) are crucial for optimizing underwriting and pricing models.

You can't run a modern insurance company without deep integration of Artificial Intelligence (AI) and Machine Learning (ML) anymore; it's the core engine for risk selection and pricing. AIG is aggressively deploying Generative AI (GenAI) across its core business, a move that's already showing up in the numbers. For instance, in Q2 2025, the company reported an adjusted EPS of $1.81 and a calendar year combined ratio of 89.3%, a clear signal that operational and underwriting improvements are taking hold.

The flagship tool here is underwriting by AIG Assist, which is accelerating speed and enhancing data analysis for underwriters. In the private, not-for-profit business, AIG Assist is now processing 100% of applicable submissions, which has directly boosted the submit-to-buy ratio. The goal is ambitious but clear: to make one human underwriter operate like five. This isn't just about cutting costs, but about turbocharging growth in specialty lines like Excess & Surplus (E&S) insurance. The firm projects that AI will help process over 500,000 E&S submissions to book at least $4 billion in new business premiums by 2030, by pushing the bind rate from 2% in 2024 to an expected 6% in 2030.

Here's the quick math on the AI-driven growth target:

Escalating cyber risk drives demand for cyber insurance but also increases AIG's internal exposure.

The dual nature of cyber risk is a key technological factor: it's a massive market opportunity, but also a significant internal threat. AIG is a major player in the global cybersecurity insurance market, which is a high-growth area. The global market is estimated at $12.74 billion in 2025 and is projected to expand at a Compound Annual Growth Rate (CAGR) of 33.8% through 2033. This explosive growth is driven by the rising frequency of attacks, especially ransomware, and increasingly stringent data privacy regulations like GDPR and CCPA.

However, this growth comes with a sharp risk. While the cyber insurance market is stabilizing in 2025 with competitive rates, the threat landscape is evolving rapidly. New vectors like supply chain attacks and the potential for losses related to Generative AI (GenAI) itself are keeping underwriters on high alert. AIG must balance the premium income from this growing line of business against the potential for catastrophic, systemic losses that could affect their own extensive digital infrastructure. It's a tightrope walk.

Digital distribution platforms reduce operating costs and improve customer reach.

Digital distribution is no longer a perk; it's a core strategy for expense management and client retention. AIG's multi-year transformation initiative, AIG Next, has been focused on streamlining operations and technology. This effort delivered $500 million in exit run-rate savings in 2024, a tangible result of becoming simpler and leaner. The company is targeting a parent company expense level of just 1% to 1.5% of net premiums earned by the end of 2025.

The push for digital platforms is a direct path to achieving this lower expense ratio. These platforms enable a better customer experience (CX) and operational efficiency by automating routine tasks. Key platforms currently in use include:

• myAIG Portal for North America: Allows brokers and clients to generate loss runs and download policy documents instantly.
• IntelliRisk Advanced: A tool for clients and brokers to file claims, manage risks, and access claims data across over 100 countries.

Digital investment is the only way to defintely hit those efficiency targets.

Legacy IT system modernization is a continuous, expensive operational challenge.

Despite the success of the AIG Next initiative, the challenge of modernizing decades-old legacy IT systems remains a continuous and costly undertaking. In the broader insurance industry, the main limitations of existing core systems cited in 2025 are the inflexibility to adapt to market changes (46.4% of respondents) and high maintenance costs (44.5%). For a global giant like AIG, this technical debt is a significant drag on agility and a barrier to full AI deployment.

The drive to integrate Generative AI has turned this modernization into a 'burning platform,' with a full 85% of senior leaders in the industry expressing serious concerns about their current tech estate's ability to support AI at scale. The risk is that if the underlying systems can't scale or integrate data properly, the expensive AI layer becomes a liability instead of an asset. AIG must continue to dedicate substantial capital to this foundational work, even as the immediate returns are less visible than those from new GenAI applications.

InsurTech partnerships accelerate product innovation and customer onboarding.

Recognizing that it can't build everything internally, AIG is strategically leveraging partnerships with specialized technology firms, a common InsurTech strategy. These collaborations allow AIG to leapfrog internal development cycles and accelerate the rollout of innovative tools for underwriting and claims.

The most prominent examples in 2025 are the partnerships with:

• Anthropic: A leading AI safety and research company, providing the advanced large language models (LLMs) used in AIG's GenAI ecosystem.
• Palantir: A data integration and analytics software firm, helping AIG deploy AI at scale and manage the vast datasets needed for complex risk modeling.

This external-facing strategy is reinforced by internal leadership, notably the board appointment of Juan Perez, the former Chief Information Officer of Salesforce, whose background is specifically expected to accelerate the company's digital modernization efforts. This dual approach-partnering with the best external tech and hiring top internal digital talent-is how AIG is cutting the time-to-market for new products and improving broker and client onboarding flows.

American International Group, Inc. (AIG) - PESTLE Analysis: Legal factors

You are navigating a legal landscape that is less about a single federal mandate and more about a fragmented, high-stakes matrix of state-level privacy laws, mixed tort reform efforts, and persistent long-tail litigation. The core challenge for American International Group, Inc. (AIG) in 2025 is managing the financial volatility of legacy liabilities while simultaneously building a compliant, data-driven business model across 19 states with their own privacy statutes and dozens of international jurisdictions.

New state-level data privacy laws (like CCPA expansions) complicate data management and compliance

The patchwork of state data privacy laws is defintely the near-term compliance headache. As of mid-2025, 19 states have enacted comprehensive consumer privacy legislation, which forces AIG to manage data under a divergent set of rules rather than a single federal standard. The most significant development is the finalization of new regulations under the California Consumer Privacy Act (CCPA) in September 2025, with key obligations starting in January 2026. This expansion mandates new requirements for cybersecurity audits, risk assessments, and the use of Automated Decision-Making Technology (ADMT) in areas like underwriting.

For AIG, this means a significant investment in governance, especially since California remains the only state among the 19 where the privacy law applies to both business-to-business (B2B) contact data and employee/job applicant data. Compliance is a cost center, but failure results in fines, like the $1.35 million penalty the California Privacy Protection Agency (CPPA) recently imposed on a company for violations, including failure to honor opt-out requests. You must ensure your internal data architecture can handle these granular, state-specific consumer rights requests.

Tort reform efforts in key states could reduce litigation frequency and severity

The impact of tort reform is a mixed bag, offering both a potential tailwind and a headwind to AIG's General Insurance segment. In April 2025, Georgia enacted sweeping tort reform (Senate Bills 68 and 69) aimed at lowering insurance costs by restricting negligent security claims and limiting compensation to the actual medical costs paid, which should reduce the severity of some claims in that state. This is a positive for AIG's North America Commercial lines, which have faced increased prudence in loss picks due to mass tort trends.

However, the trend is not uniform. Other states are moving in the opposite direction. For example, a legislative compromise in Colorado is set to raise non-economic damage caps in general liability cases to $1.5 million (starting in 2028, adjusted for inflation). This divergence means a state-by-state strategy is crucial. One state's victory in reducing litigation costs is offset by another's move toward higher jury awards (known as social inflation).

Increased regulatory focus on consumer protection and fair lending practices

Regulators and courts are increasingly scrutinizing the fairness of claims handling and underwriting practices, especially as insurers integrate more AI and algorithmic decision-making. The legal risk here is less about solvency and more about market conduct and brand reputation. One recent example from August 2025 involves a federal appeals court ruling that an AIG unit could face a jury trial over whether it acted in bad faith by delaying a fair settlement offer of $2.65 million on a personal injury claim, which a jury ultimately awarded at $7.465 million. That's a 182% difference and a clear signal that the judicial system is focused on prompt, fair settlements.

This scrutiny extends to the use of technology. The new CCPA regulations directly address Automated Decision-Making Technology (ADMT), requiring businesses to provide consumers with notice and opt-out rights for decisions that result in significant legal or financial effects. This directly impacts AIG's use of algorithms in pricing and claims, demanding transparency and auditability to avoid regulatory action.

Ongoing litigation related to prior-year reserves and asbestos claims still drains capital

AIG's legacy liabilities, particularly asbestos and environmental (A&E) claims, remain a material, long-term drag on capital, even as the company reports strong underwriting results. The General Insurance segment consistently reports on the volatility of these long-tail reserves (Loss and Loss Adjustment Expense Reserves). The Q3 2025 financial results showed $180 million in favorable Prior Year Development (PYD) for General Insurance, but this was partially offset by adverse development in areas like UK/Europe Casualty and Financial Lines-the very lines that hold a concentration of older, complex liabilities.

The severity of asbestos claims is a key driver of this risk. Industry data shows that the average dollars per resolved asbestos claim rose 12% in 2024, representing a cumulative increase of 191% since 2017. While AIG has ceded a significant portion of its long-tail reserves to Fortitude Re, the company still carries a substantial reserve base for these liabilities, and management has cited mass tort trends as a reason for 'increased prudence in our 2025 loss picks.'

International regulatory divergence requires complex, country-specific compliance frameworks

AIG's global footprint, which saw its International Commercial Net Premiums Written (NPW) grow 8% on a comparable basis in Q1 2025, is a source of strength, but it also creates immense regulatory complexity. The world is moving toward both harmonization and divergence simultaneously. On one hand, the Insurance Capital Standard (ICS), led by the International Association of Insurance Supervisors (IAIS), is nearing formal adoption in 2025 to unify capital adequacy measurement for internationally active insurance groups (IAIGs) like AIG. This is a move toward harmonization.

But the local implementation of these standards, plus country-specific rules on data sovereignty, taxation, and licensing, creates significant divergence. Your compliance team must manage a complex matrix of local requirements, which necessitates a dedicated, country-specific compliance framework. This is a major operational cost, but it's the price of global presence.

• Overhaul capital strategy to meet the forthcoming Insurance Capital Standard (ICS) requirements.
• Manage data residency rules across dozens of jurisdictions, especially where data sovereignty is a national security concern.
• Ensure local policy wordings and claims practices comply with country-specific consumer protection laws.

Next Step: Legal and Compliance should draft a 12-month ADMT Audit Plan by year-end to address the new CCPA and emerging state-level AI regulations.

American International Group, Inc. (AIG) - PESTLE Analysis: Environmental factors

You are defintely seeing the environment move from a peripheral risk to a core financial driver for insurance giants like American International Group, Inc. (AIG). It's no longer just about hurricanes; it's about the systemic repricing of risk across the entire portfolio-both underwriting and investments. For AIG in 2025, the challenge is translating its net-zero commitments into measurable, near-term financial actions that satisfy regulators and increasingly activist investors.

Increased frequency of severe weather events drives higher Property/Catastrophe (CAT) losses.

The escalating frequency and severity of secondary perils-like wildfires and convective storms-are directly hitting AIG's bottom line. The first quarter of 2025 provided a stark example of this trend, with total catastrophe-related charges soaring to $525 million, a massive increase from $106 million in the prior year quarter. This jump was largely driven by an estimated $460 million in losses from the January California wildfires alone, a single event that underscores how quickly climate-related risk can erode underwriting profit.

Here's the quick math: The higher catastrophe charges were the principal reason AIG's General Insurance underwriting income plummeted 59% year-over-year to $243 million in Q1 2025. This trend is industry-wide, with AIG's CEO projecting that global insured catastrophe losses could exceed $200 billion for the full year 2025, a level that would fundamentally recalibrate the entire insurance industry.

Regulatory pressure to divest from or reduce underwriting exposure to fossil fuel industries.

AIG faces mounting pressure to align its underwriting and investment portfolios with its net-zero goal, especially compared to global peers. While AIG has committed to phasing out existing underwriting and investments in companies generating 30% or more of revenue from coal or oil sands by 2030, critics argue this is too slow. For example, research in late 2024 indicated AIG continues to underwrite nearly 30% of domestic thermal coal production, a clear flashpoint for activists. The company's past stance has been that abruptly halting insurance for heavy users of fossil fuels is not in the public interest, but this position is becoming financially riskier as competitors tighten restrictions.

Investor demand for AIG to meet specific ESG (Environmental, Social, and Governance) metrics.

Shareholder advocacy is forcing AIG to provide more granular, actionable plans. Following a Green Century shareholder proposal, AIG published a climate transition plan in the summer of 2025. This plan is meant to detail progress toward its key long-term targets:

• Achieve Net Zero greenhouse gas (GHG) emissions across underwriting and investment portfolios by 2050.
• Source 100% renewable energy for its operations by 2030.

The market is demanding metrics, not just commitments. A June 2025 report on US insurers highlighted that only 29% of companies were disclosing metrics and targets related to climate risks, indicating a significant reporting gap AIG must close to satisfy sophisticated investors.

Climate-related transition risks affect the valuation of real estate and infrastructure investments.

The transition risk-the financial risk associated with the shift to a low-carbon economy-is significant for AIG's substantial investment portfolio. While AIG is now running a Global Climate Scenario approach that models orderly, disorderly, and hot house world narratives, the exact dollar value of its current exposure remains opaque to the public. As of 2022 data, AIG was estimated to hold $27.4 billion in fossil fuel investments and collect over $500 million annually in premiums from the fossil fuel industry, which represents a massive concentration of transition risk. Their own analysis from 2022 showed that investments account for 51% of AIG's estimated emissions, making this a larger lever for decarbonization than their underwriting portfolio.

Mandatory climate-risk stress testing from regulators is on the horizon.

The regulatory environment is rapidly moving toward mandatory climate-risk stress testing, moving climate from a disclosure issue to a solvency issue. The National Association of Insurance Commissioners (NAIC) Climate and Resiliency Task Force's 2025 charges include the explicit 'Evaluation and development of climate risk-related disclosure, stress testing, and scenario modeling.' The NAIC's Solvency Workstream is actively developing climate risk stress tests to evaluate the potential financial exposure of insurers to both physical and transition impacts. This means AIG must prepare for a regulatory environment where its capital adequacy will be tested against climate scenarios, similar to how banks are stress-tested for economic downturns. This is a material risk to capital planning.