2014 Power Broker

Public Sector

Extraordinarily Effective

Regina Carter Managing Director Aon, San Francisco

Regina Carter
Managing Director
Aon, San Francisco

San Francisco is putting in its first new subway tunnel in decades, and the city and county relied on Regina Carter to structure and place the coverage.

“We did a very complicated transaction,” said Matt Hansen, director, risk management division, City and County of San Francisco. “This really put the city in a good position.”

In a marketplace that had a very narrow appetite for the risk, Carter, managing director at Aon, was able to create a program that provided capacity and favorable terms in a short amount of time.

Regina Carter has offered extraordinary support for Global Government Services for more than 20 years, said Sherri Bovino, president and CEO of its parent company, 1st Flagship.

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“She helps me protect my company in a proactive way, always anticipating our needs as laws change and risks/liabilities change,” Bovino said.

In a recent situation, Bovino’s company had to take responsibility for a ship that had been refurbished by a military organization. It had to be moved to an unfamiliar pier and maintained until it could be moved again and moored in a permanent location. 

Bovino said, “Any damage or malfunction while in our custody would present a huge risk or liability. Working 24 hours around the clock, Carter’s team was able to provide a complicated insurance solution that was acceptable to us and our subcontractors. The exposure for Global with its Navy customer went all the way to the Pentagon in this situation.”

Reaching Their Potential

Mark Goode, CPCU, CIC Executive Vice President Willis, Charlotte, N.C.

Mark Goode, CPCU, CIC
Executive Vice President
Willis, Charlotte, N.C.

The Texas Association of Counties may manage the biggest public risk pool in the country, but Mark Goode understood he was still “dealing with a fairly unsophisticated client with a very eccentric market,” said Gene Terry, a judge and the executive director of the organization.

“Mark has been just extraordinary to work with. He grasped the eccentricities and peculiarities of our business very quickly and I have relied on him a lot,” Terry said, who noted that the pool is owned by 254 counties in Texas.

“One of the things that has impressed me is he is aware of ethical considerations. They provide primary consulting services for us. If there is a consultation versus brokerage practice issue, he is the first to raise it, even when I might not recognize it,” he said.

“Our reputation is critically important to us and managing the pool in the appropriate way is important because we are expected to deliver services in so many areas,” Terry said. “They have helped us to realize the potential the pool gives us to provide more and better services to our members.”

Goode, executive vice president at Willis, has also been crucial in creating a property and casualty pool for the Mississippi Association of Supervisors.

“They helped us go through the entire process, from obtaining excess insurance, to meeting with the regulatory insurance department, local insurance agents and supervisors,” said Derrick Surrette, executive director of the group, which includes 82 counties in Mississippi.

Leading the Way

Tyler LaMantia, CLCs Area Vice President Arthur J. Gallagher, Itasca, Ill.

Tyler LaMantia, CLCs
Area Vice President
Arthur J. Gallagher, Itasca, Ill.

Since 2009, school districts in Minnesota had little choice but to enter the conventional marketplace for coverage. With the expert advice and leadership of Tyler LaMantia, area vice president at Arthur J. Gallagher, the districts may now take advantage of the Minnesota Insurance Scholastic Trust (MIST).

“It became clear that Minnesota Public Schools needed a member owned and controlled insurance cooperative by which they could control their own destiny to help deal with the reoccurring problem of the fluctuating insurance marketplace cycles,” said Paul Carlson, superintendent, New London-Spicer Schools, one of seven districts that joined the pool in its inaugural year.

“For property and casualty, we saved about $15,000,” he said. He anticipates an even greater savings when workers’ compensation coverage is added to the pool.

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DeeDee Kahring, director of finance and operations at Eastern Carver County Schools, saw her district’s involvement in the new pool result in a significant drop in deductible. It had been $25,000. It is now $2,500. Plus, the coverage was expanded.

“Tyler is an expert in school district self-insurance pools,” said Sandy Linn, director of business services at New Prague Area Schools, which also joined MIST.

“Tyler has been so great in leading us through this process and helping us. The average savings for districts on fixed costs was 25 percent to 30 percent,” she said, adding that “the pool allowed the districts to control variable loss fund costs through claims management.”

Succeeding for Clients

Deb Mangels Senior Vice President ABD Insurance and Financial Services, San Mateo, Calif.

Deb Mangels
Senior Vice President
ABD Insurance and Financial Services, San Mateo, Calif.

Transitioning from a pool to its own carrier, Piedmont Unified School District was able to offer revamped health care benefits at a lower cost with the help of Deb Mangels, senior vice president, ABD Insurance and Financial Services.

“It’s been an amazing year for us,” said Michael Brady, assistant superintendent, who had to oversee intense labor negotiations as employees saw a bump in medical benefit premiums. But they also saw that their premiums were $100 lower each month than what they would have paid in the pool.

In addition, Brady said, Mangels was able to save about “two years’ worth of premiums, which is huge for us,” following an audit that discovered the district had paid employer premiums over a multi-year period for a deceased retiree.

Mangels also initiated online enrollment for Piedmont and negotiated a 15-month plan year so the district could get on its preferred open enrollment cycle, Brady said.

“I have never felt that we were in a better place than we are right now,” Brady said.

Don Humphrey, finance manager at Livermore Area Recreation and Park District, said that “before we reached out to Mangels and ABD, the organization’s employee benefits were managed by HR with several different providers, each with their own point of contact.”

“With the Affordable Care Act, we realized we needed some help,” Humphrey said. The diistrict changed everything but medical, filled in some coverage gaps and saved $50,000 per year with Mangel’s help.

Passion for Innovation

Michael McHugh Senior Vice President Arthur J. Gallagher, Itasca, Ill.

Michael McHugh
Senior Vice President
Arthur J. Gallagher, Itasca, Ill.

With workers’ comp claims skyrocketing and with Illinois legislation overtly employee friendly, Michael McHugh has found ways to help his clients save money while mitigating exposures and claims.

“Michael and his team not only manage and make recommendations to us, but they also support us in a wide variety of ways,” said Mark Michelini, chairman of the Collective Liability Insurance Cooperative (CLIC) and assistant superintendent for business services at Stevenson High School in Lincolnshire, Ill.

“Michael and his team bring a level of professionalism and sophistication they have spent a whole career developing. I am very fortunate to have their support,” he said.

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McHugh has introduced several new programs to help the pool mitigate risks, including a company nurse program that provides more sophisticated triaging when claims occur; a claims advocacy group that offers a second opinion on claims; and a dedicated third-party administrator service unit, said Michelini.

“In these hard times,” said Jeff O’Connell, assistant superintendent for business services, Lake Park School District in Roselle, Ill., “they have been able to negotiate some good terms so that we are able to keep our costs in control and our members aren’t seeing huge increases.

“We are always looking for ways to better the pool. That comes at the direction of Michael and the Gallagher team,” he said.

BlueBar

LBR_ResponsiblityLeaderBLUE_logo-175Helping Those Less Fortunate

Michael McHugh gives extensively to those in need. His family sponsors three inner-city Chicago students so that they can receive a Catholic education. He also is involved with his church’s “adopt a needy family” program during the holidays.

“I am fortunate to have a loving family and that is why I feel it is important to reach out and help those that are less fortunate,” McHugh said.

He is also involved with his local church, serving on its finance committee for the past 10 years, and with the church’s fundraising committee and building committee to renovate the parish school and church.

Most recently, he came to the aid of two employees at his golf club who had lost their home in a fire. Over a period of weeks, he used his professional experience to counsel them prior to and during the claims process, reducing the anxiety they experienced during the stressful time.

McHugh is also very active in his organization’s college summer intern program. He interviews potential summer interns in the fall, is involved as they work with the company in the summer, and hires some of the young producers when they graduate.

“I am pleased to say that many of these young producers that began their careers in my business unit have been promoted within Gallagher to leadership roles, including branch managers,” he said.

McHugh is also active in other community programs, including youth baseball and soccer programs.

BlueBar

A Guide to Solutions

Nancy Sylvester, CPCU, ARM-P Managing Director Arthur J. Gallagher, Baton Rouge, La.

Nancy Sylvester, CPCU, ARM-P
Managing Director
Arthur J. Gallagher, Baton Rouge, La.

Nancy Sylvester is “like a toy solder that never unwinds. She’s dynamite,” said Dan Strange, administrator of the Louisiana Housing Association.

“We have a tremendous self-insurance program for the housing authorities, which number about 100. And it saves our agency a ton of money each year,” he said.

Sylvester, managing director, Public Sector, at Arthur J. Gallagher, goes “above and beyond,” said Steve Haynes, risk manager for the City of Plano, Texas.

“She’s technically very astute and very knowledgeable about not only insurance but risk management,” he said. “She is more of a business consultant, someone you can bounce ideas off of formally and informally.”

In Louisiana, she and her teammate, Butler Bourgeois, who was named a Power Broker® finalist this year, have helped guide Calcasieu Parish Sheriff’s Office “through the perils of the insurance industry,” said Al Allemond, risk manager.

“I can’t begin to tell you how valuable they have been to me in getting us on the right track and keeping us there,” he said, noting that when he took on the position, the office had a three-ring binder of claims. “I would consider our agency during those days as horrible.”

But Sylvester and Bourgeois persevered when Allemond insisted on being able to handle claims in-house, and they ultimately found a carrier who agreed. Things have been running smoothly ever since.

BlackBarFinalists:

Butler Bourgeois Area Vice President Arthur J. Gallagher

Butler Bourgeois
Area Vice President
Arthur J. Gallagher

Tony Abella Jr. Area Senior VP Arthur J. Gallagher

Tony Abella Jr.
Area Senior VP
Arthur J. Gallagher

Dave Marcus Area Chairman Arthur J. Gallagher

Dave Marcus
Area Chairman
Arthur J. Gallagher

Demetri Lembesis Executive VP Willis

Demetri Lembesis
Executive VP
Willis

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.

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Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.


R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.

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We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?

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Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.

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Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now and where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.

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More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]