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Greenberg Gives IBANY CEO Forum an Industry Forecast

NEW YORK - Maurice R. Greenberg, chair and chief executive officer of AIG, addressed a crowd of nearly 200 at the Insurance Brokers'...
October 13, 2004

NEW YORK - Maurice R. Greenberg, chair and chief executive officer of AIG, addressed a crowd of nearly 200 at the Insurance Brokers' Association of New York's CEO Forum yesterday at the Down Town Association in lower Manhattan.

Maurice Greenberg
Maurice R. Greenberg, chair and chief executive officer of AIG, addresses a crowd of nearly 200 at the Insurance Brokers' Association of New York's CEO Forum at the Down Town Association in lower Manhattan.

"Greenberg undoubtedly is one of the nation's foremost voices on today's global economy and issues such as asbestos and tort reform that are of such vital importance to the insurance industry," stated IBANY President Donald Privett. "Providing a forum for an active dialogue between top insurance carrier executives and key producers is just one of the ways IBANY fosters collaboration in the industry."

Greenberg opened his remarks with a projection that the four recent hurricanes, impacting major regions of the United States and the Caribbean, would result in a poor third quarter for the insurance industry. He speculated it would mean higher premiums for those in devastated areas.  "Recent catastrophic losses exemplify the need for companies to put aside cash reserves in anticipation of natural disasters. It has been a struggle for the industry to impress this need on state and federal regulators."

Turning to legislative issues, Greenberg expressed concern that insurance does not receive adequate attention from its own committee in the nation's legislature, and suggested the Terrorism Risk Insurance Act is not likely to be renewed before the end of the year. "This is not an insurance issue, it is an economic problem," stated Greenberg. "Insurance companies cannot expose their entire balance sheet to address terrorism risks."

Addressing the need for tort reform, Greenberg stated, "The fear of litigation in the United States is paralyzing today's economy. Attorneys continue to reap significant benefit as they receive one-third to one-quarter of today's judgements. Awards for pain and suffering as well as punitive damages continue to escalate to levels that negatively affect insurance premiums."

Greenberg discussed additional issues impacting the insurance market. "The impact of asbestos is resonating throughout the industry," commented Greenberg. "There are three things that could be done to quell drastically the drain on reserves including the development of medical criteria to assist those who legitimately display the symptoms of contamination, centralize cases to the federal level to eliminate 'venue shopping' for the most sympathetic regions and place a cap on legal fees."

He also took note of the recent trend toward carrier insolvency and consolidation. "There is currently an entire graveyard for insurance companies who failed to understand the difference between cutting rates and having adequate rates. There are even a number of empty spots for those companies who will, over the course of the next few years, suffer from the same terminal illness without realizing that the cheapest rates are not always the best way to conduct business."

(From left to right) Dick Impastato, immediate past president of the Insurance Brokers' Association of New York, and Donald Privett, current president of IBANY, listen to Maurice R. Greenberg, chair and chief executive officer of AIG, discuss current issues affecting the insurance industry at the IBANY CEO Forum.

Greenberg told brokers they could help stabilize the industry by acting responsibly and in the best interests of their clients and the entire industry. "By adequately explaining coverages to their clients, brokers are able to impact the overall stability of the market in some small way. Dealing with carriers who are reputable in claims handling is another seemingly small factor that can have major impact on the health of the industry."

When asked about the current investigations by New York State Attorney General Eliot Spitzer into broker compensation, he stressed the need to educate authorities who are outside of the industry.

"We need to continue operating in an environment of financial creativity or more and more business will go overseas," said Greenberg. "There is a clear need to differentiate between a parking violation and a murder charge. This is where our industry can enlighten political figures who seek to advance to higher offices."

Greenberg wrapped his presentation with a dialogue on today's global economy, including United States relations with China and India. He indicated that both countries continue to expand their influence as major players. "Currently, there is a great deal of concern about outsourcing. However, we fail to recognize insourcing from these emerging economic leaders. Auto manufacturers are just one example of jobs coming into the United States."

Additional CEO forums will take place throughout the remainder of the year. John Cavoores, president and CEO, OneBeacon, is scheduled to speak Thursday, Nov. 11, 2004, and Michael Dury, chief financial officer and senior vice president, The Hartford, will speak Thursday, Dec. 9, 2004, all at the Down Town Association.

Founded in 1898, IBANY is a trade association representing commercial insurance brokers in New York state.

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