US insurance industry heavyweight Bill Berkley believes AIG will raise rates at its rebranded property and casualty insurer Chartis in a move which could help turn the soft market around.

Mr Berkley, the founder and Chairman of WR Berkley, told an investor conference Chartis will need to push up premiums after announcing extra provisioning for adverse claims developments in some of its long-tail lines of business.

“AIG is going to have to raise prices because they’re not so well capitalised,” he said. “In order to maintain their business they were… a very aggressive price competitor in the past few years.”

Such a move may result in leading the whole US market up after pricing softness in property and casualty in recent years.

The comments follow the recent announcement by AIG that it will add $US4.1 billion ($4.09 billion) to the reserves of Chartis to cover adverse developments on prior accident years.

Four classes – asbestos, excess casualty, excess workers’ compensation and primary workers’ compensation – represent about 80% of the total charge.

AIG says most of the strengthening “relates to development in accident years 2005 and prior”.

But Mr Berkley says it is “a little bit surprising” that AIG hasn’t strengthened reserves for more recent years as well. “I hope they are going to address 2006 and subsequent [years] before they have their public offering,” he said.

AIG is anticipated to launch a share sale in 2011 which will see it sever its financial ties with the US Government, which bailed out the company in 2008.

Chubb and Liberty have previously claimed that AIG has been able to price risks below market rates because of its government support.

However, Pennsylvania insurance regulators investigated the claims last year and concluded that AIG’s rates were “not out of line” with competitors.