2017 Power Broker

Marine

Possessing Wisdom

Wesley Bryan
Managing Director
Wortham, Houston

One client of Wesley Bryan’s charged him with the task of providing manuscripted coverage for its captive program.

“He knows our program, he knows our business practices, and he knows our captive,” said the client’s vice president of risk management. “He has already made some important adjustments, but we have a situation that cannot be turned on a dime. … He sat down with us and learned our priorities. He has been able to make the program more polished, then it will be more strategic. We know why some decisions were made years ago, but now he is helping us to revisit them in light of our current situation.”

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A couple of examples of how the coverage has already been adjusted include a 10 percent rate reduction from an already competitive expiring policy for marine hull package renewal. Bryan also obtained an underwriter’s agreement to include a $10 million cyber sublimit under the hull package program. Cyber previously was excluded.

The offshore business is weak with continued low prices for oil and gas, but Bryan gets credit for managing down as well.

“We have laid-up vessels,” said the risk manager. “The issue of credits for laid-up portions of the fleet has been handled well. He was able to negotiate for us while maintaining the relationship. He was strong, but not unkind.

“Wesley has a deep knowledge of things by which we benefit but for which he does not necessarily make a lot of money,”

A Difference Maker

Anthony DiPasquale
Senior Vice President
Aon, New York

When challenges arise, Anthony DiPasquale’s clients know who to call.

“We made a huge acquisition which doubled the size of our company,” said one vice president of risk management. “Anthony put together the combined program … we saw huge cost efficiencies. We were so pleased with the work he did.

“Anthony’s experience with the market made the difference, both working with carriers domestically and offshore. With the complexities of the integration, he had to go back to the markets several times, and each time he went back to negotiate we saw a better result.”

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The challenge for DiPasquale was that both programs worked well and, in general — if it ain’t broke, don’t fix it. The enlarged program proved to be a challenge for one carrier to write on a stand-alone basis. That was especially true of the probable maximum loss under catastrophe exposure. The key was shifting from an annual aggregate deductible to a single occurrence.

A separate client in the luxury market offered an interesting testimonial: “We have been changing our coverage to reduce costs,” said the client’s vice president of finance, crediting DiPasquale with accomplishing that without compromising the status of the company’s brand. Contrary to some public perception, he said, fiscal responsibility is just as vital in up-market sectors as in any other.

Risk Managing Upturns and Downturns

Hardie Edgecombe
Area Executive Vice President
Arthur J. Gallagher, Metairie, La.

Most clients have an expectation that their brokers understand the industries that they serve.

But Hardie Edgecombe stands out, consistently impressing clients with his keen understanding of their unique operations and business needs.

“Through the downturn in oil and gas, Hardie has helped us scale down our coverage with reduced cost but without inhibiting our ability to grow once oil and gas prices recover,” said the CEO of one client.

“In that process, he was also able to eliminate gaps that we had. He found things that others had missed.”

For clients scaling up rather than down, Edgecombe brings just as much value to the relationship.

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“Hardie has been our broker now for three years,” said the chairman for one client..
“We have been growing at a rapid pace and it took a while to get the plan together. But Hardie created a custom program for us, rolling most of our risks into one package that was placed domestically and in London. It was very competitive to past programs.”

The chairman recounted that Edgecombe won the business in no small part because “he has a very strong claims background.” “We had a large, unique claim and he helped ensure that the underwriters stood by their contracts. He kept their feet to the fire.”

Saving Millions in Premium

John M. Frazee, ARM
Senior Vice President
Marsh, Los Angeles

“The logistics of transporting raw materials from all over the world to our manufacturing and assembly plants, and then shipping the finished goods throughout the world with appropriate insurance coverage is a daunting task,” said the senior risk and insurance manager for one of John Frazee’s clients.

The client’s operations have grown and shifted among facilities, “so the exposure my office handles has tripled,” he said. “John essentially rebuilt our program to create seamless coverage among diverse regional operations, brought us closer to our insurers through direct relationships, secured better terms, pricing and coverage, and positioned the program so [it would] keep pace with our expanding logistics.”

Another client simply said, “John makes the impossible, possible. In 2016, we completed two very successful renewals for both our U.S. and Mexico marine programs due to John’s extraordinary effort. This was no small feat as our marine exposures are rather significant and there are a lot of moving parts.”

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In another situation, “a very large builder’s risk placement saved our port millions of dollars in premium, and the coverage was placed well in advance of need,” said a director of risk management.

“John used the assets of his firm efficiently to get the task completed on time, and [under budget]. The second placement was smaller, but involved out-of-the-box thinking. John researched the market, and developed a solution that was of great benefit to the port.”

Mastering the Insurance Manuscript

Mira Jacinto, ARM, AMIM
Senior Vice President
Marsh, Los Angeles

Several Power Brokers won their clients’ praise for revamping or completely replacing their programs after a complicated acquisition.

But in the reverse situation, a successful outcome is often no less of a feat.

“We broke out a piece of our business,” said the manager of risk and finance for a client of Marsh’s Mira Jacinto.

“From the start of the process and all the way through, we had to keep getting quotes both for the business being sold, and the business remaining. Mira managed a very thorough process with important implications for the rest of our company.”

Another client, a major global operation, came to its 2016 renewal with several large outstanding claims on their stock throughput program, the risk manager said.

The company was anxious about its premium and loss ratio, given the size and number of open claims.

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Jacinto worked with the company to create detailed underwriting specifications to highlight the firm’s loss-control protocols.

That helped satisfy the technical requirements of the insurer. Jacinto then arranged for the client’s loss-mitigation staff to meet in person with the underwriters.

Once carriers had believable numbers and a good sense of what the client was doing, Jacinto secured a multiyear program with manuscripted deductible terms.

Global Reach

Carolyn Roberts
Director
Aon, New York

A client of Aon’s Carolyn Roberts had been trying to get into a new region of the world for quite some time.

“We were getting a lot of resistance from our underwriters. They had concerns about security, tracking shipments, basically everything,” said the risk manager.

“We had been working on this for [nearly] three years. Carolyn came in and communicated with the underwriters. She was able to get them to back down from the fence.”

Clients trust Roberts implicitly — no matter whether a situation is routine or extreme.

“I was out of country on holiday,” said the risk manager of another client, “when we had a very unfortunate incident. It was a big deal, but I made one phone call to Carolyn and she got it all completely sorted. She dealt with everything. Took it all on board.”

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In another situation, Roberts was closely involved in an international collaboration for a global client, working closely with her colleagues in Europe.

The first challenge was overhauling a program that had been in place for more than a decade without much revision, the head of insurance said.

The gap analysis revealed more than a few holes, some of which required immediate attention, given the nature of the client’s business. The revised program had broader terms and higher limits, both at a lower premium. The scope of the overhaul was demonstrated when at inception, more than 2,000 certificates were issued in several languages.

Finalist:

Maren Dupont
Account Manager
Aon Risk Solutions, Hamburg, Germany

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 an 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]