AmazonScience/document-haystack

1Additionally, litigation related to climate change has increased in recent years. Many lawsuits center on enforcement or interpretation 2of environmental laws and regulations, often seeking to use litigation as a tool to influence governmental and corporate climate 3policies. Other cases seek damages for contribution to climate change or for insufficient disclosure around material financial risks. 4Increased litigation of this nature could trigger losses under liability policies, such as casualty and directors’ and officers’ insurance 5policies, increase our liabilities and affect the viability of certain of our business lines.  6In addition, severe weather and other effects of climate change result in more frequent and more severe damages, leading to 7lawsuits. Indirect climate change effects are also seen in litigation over flooding, mudslides and other severe weather that results in 8injury or damage, as well as in construction defect litigation, chemical release lawsuits, and workers’ compensation claims. Litigation 9related to climate change may, through increased claims from our customers and adverse impacts to the value of the securities that 10we hold, adversely impact our business and results of operations.11We have also faced and may continue to face business continuity risk as a result of climate change-related incidents that may disrupt 12business operations, including extreme weather events. We cannot predict the long-term impacts of climate change on our business 13and results of operations.14For information regarding risks associated with other catastrophic events, see Reserves and Exposures – “Our consolidated results of 15operations, liquidity, financial condition and ratings are subject to the effects of natural and man-made catastrophic events” above.16Concentration of our insurance, reinsurance and other risk exposures may have adverse effects.17We are exposed to risks as a result of concentrations in our insurance and reinsurance policies, investments, derivatives and other 18obligations that we undertake for customers and counterparties. Further, any risk management arrangements we employ to manage 19concentration risks, whether directly or through third parties, may not be available on acceptable terms or may prove to be ineffective. 20Our risk exposures under insurance and reinsurance policies, derivatives and other obligations are, from time to time, compounded by 21risk exposure assumed in our investment business. Also, our exposure for certain single risk coverages and other coverages may be 22so large that adverse experience compared to our expectations may have a material adverse effect on our consolidated results of 23operations or result in additional statutory capital requirements for our subsidiaries.  24In addition, the separation of our Life and Retirement business, if completed, could increase the materiality of these potential 25concentrations in the remaining portfolio. For additional information on risks associated with the separation of the Life and Retirement 26business from AIG, see Business Operations – “No assurances can be given that the separation of our Life and Retirement business 27will be completed or as to the specific terms or timing thereof. In addition, we may not achieve the expected benefits of the separation 28and will have continuing equity market exposure to Corebridge until we fully divest our stake” below.29Also see Part II, Item 7. MD&A – Business Segment Operations – General Insurance – Business Strategy and – Business Segment 30Operations – General Insurance – Industry and Economic Factors, and Part II, Item 7. MD&A – Business Segment Operations – Life 31and Retirement – Business Strategy and – Business Segment Operations – Life and Retirement – Industry and Economic Factors.32Fortitude Re may fail to perform its obligations and the accounting treatment of our reinsurance agreements with Fortitude 33Re leads to volatility in our results of operations.34As of December 31, 2023, approximately $27.6 billion of reserves from AIG’s Life and Retirement Run-Off Lines and approximately 35$3.0 billion of reserves from AIG’s General Insurance Run-Off Lines, related to business written by multiple AIG subsidiaries, had 36been ceded to Fortitude Re under reinsurance transactions. These reserve balances are fully collateralized pursuant to the terms of 37the reinsurance transactions. Our subsidiaries continue to remain primarily liable to policyholders under the business reinsured with 38Fortitude Re. As a result, if Fortitude Re is unable to successfully operate, or other issues arise that affect its financial condition or 39ability to satisfy or perform its obligations to our subsidiaries, we could experience a material adverse effect on our results of 40operations, financial condition and liquidity to the extent the amount of collateral posted in respect of our reinsurance receivable is 41inadequate. Further, as is customary in similar reinsurance agreements, upon the occurrence of certain termination and recapture 42triggers, our subsidiaries may elect or may be required to recapture the business ceded under such reinsurance agreements, which 43would result in a substantial increase to our net insurance liabilities and statutory capital requirements and may require us to raise 44capital to recapture such ceded business. These termination and recapture triggers include Fortitude Re becoming insolvent or being 45placed into liquidation, rehabilitation, conservatorship, supervision, receivership, bankruptcy or similar proceedings, certain regulatory 46ratios falling below certain thresholds, and, in the case of those reinsurance agreements made with Life and Retirement, Fortitude 47Re’s failure to perform under the reinsurance agreements, or its entry into certain transactions without receiving the consent of 48Corebridge.49As the reinsurance transactions between AIG and Fortitude Re are structured as modified coinsurance (modco) for the Life and 50Retirement Run-Off Lines and loss portfolio transfer arrangements with funds withheld for the General Insurance Run-Off Lines, the 51manner in which we account for these reinsurance arrangements has led, and will continue to lead, to volatility in our results of 52operations. In modco and funds withheld arrangements, the investments supporting the reinsurance agreements, and which reflect 53the majority of the consideration that is paid to the reinsurer for entering into the transaction, are withheld by, and therefore continue to 54reside on the balance sheet of, the ceding company (i.e., AIG and its subsidiaries) thereby creating a potential obligation for the 55ITEM 1A | Risk Factors5622 AIG | 2023 Form 10-K