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On April 3, Risk and Insurance® editors Jack Roberts and Cyril Tuohy traveled to New York City to interview Maurice "Hank" Greenberg on the 17th floor of his Park Avenue office. In a wide-ranging interview lasting more than 90 minutes, Greenberg shared his thoughts about his past as CEO of AIG, his future as CEO of C.V. Starr & Co. and where he stands on the industry's most pressing regulatory issues.

Greenberg on C.V. Starr & Co. Inc.

A: Well, there are really two major components. There's C.V. Starr & Co. as distinguished from C.V. Starr International. C.V. Starr has a number of general insurance agencies, and we'll be adding to those and possibly even acquiring a charter of an insurance company. And we'll take some of this business back that we are producing and grow both the agencies and the company.

Editors: So do you see your organization becoming more like a traditional insurance company, a property/casualty company, or still functioning in the specialty areas?

A: It'll be the specialty areas. We're not going to be, at least for the foreseeable future, in every class of business. We'll pick the areas that we want to be in. That's only one part of C.V. Starr. The other part is the investment side, and that's a very significant part.

Editors: And do you have a particular investment strategy for that side?

A: Yes. To make money.

Editors: I gather you've been pretty successful at that too?

A: I've been pretty good.

Editors: I know that when you were at AIG, your goal was an annual increase of 15 percent.

A: Yes, roughly. I think it will be better than that at C.V. Starr.

Editors: Now, you said that you possibly planned some acquisitions for C.V. Starr and the agency business . . .

A: Yes. We're going to create, or acquire, more general agencies. And probably we'll acquire the insurance company charter and grow from there. But I'm very busy on the investment side. I've just come back from a trip to Moscow and to China. I was gone about two and a half weeks.

Editors: And were you looking at direct investments over there?

A: Direct investments. You've read about starting a big real-estate development operation in Moscow, and I've a lot of things going in China.

Greenberg on Regulation

Editors: There are a couple of proposals now on the table and there have been a number of proposals for federal regulation.

A: Look, I've argued for federal regulation for years. It ought to be an option, not mandated. There are some companies that want to be either a single-state company, or a regional company, who want to have a state regulatory environment--fine. But if you're a nationwide company and you want to have a federal charter, you ought to have that option.

Editors: Just like in the banking business?

A: Right.

Editors: How about this movement right now in the wake of Katrina to eliminate the anti-trust exemption for the insurance business?

A: Yes, well, you know there's a good argument to that. The one thing I would argue, though, is the insurance industry has no congressional committee on insurance. There's a banking committee. There are securities. Where's insurance? It's a very large industry. In fact, you couldn't get along without it, and you don't have an insurance committee? If you think about insurance and its needs and how it ought to be regulated and some of the requirements that industry needs . . . where's the voice?

Editors: Isn't one of the problems with regulation of insurance, as opposed to regulation of banking, for example, that the thrust of regulation on a state basis is toward price rather than toward solvency? That issue is not going to change.

A: Well, I have no problem being regulated for solvency.

Editors: No, right, and that's what I'm saying, but the industry is not regulated for solvency.

A: Listen, by the time--think about it, state regulation--the books are supposed to be examined every three years. When do you think it happens? By the time it's done, it's about sometimes six or seven years. You could be broke and dead four years before they finish.

Editors: But solvency really isn't the issue, the issue of what the regulatory system does is an attempt to control pricing and keep premiums down because politicians are all worried about what the voters are going to say.

A: Of course, I would like to have a federal charter where you can have the highest capital requirements that your charter requires, that they set. No rate regulation and no guarantee fund. Corporate America is capable of choosing who to insure. What happens now in the state regulatory system is somebody comes along and picks the cheapest rate. So you lose your business to the price-cutter. Then that company goes broke. Now you have to contribute to the guarantee state fund. So you lose twice. You lose the business itself and now you lose (by paying to the guarantee fund).

Editors: Now you pay for it.

A: Right. Does that sound like a fair and democratic system? Not to me.

Editors: That's politics getting involved with business, I guess.

A: That's why I prefer a federal charter. The argument has been, well, now you've got a bunch of regulators, some are bad and some are good, but you have a mix. If you have a bad regulator on the federal side, then you're stuck. But I'll take my chances.

Editors: Getting back to the question of TRIA. So your position on TRIA has not changed?

A: No, no, no. Industry has no capacity to provide . . . it would be a fraud to say you can cover something which you cannot cover.

Editors: Well, if you looked at a hurricane hitting New York, for example, you're looking at a potential $100 billion loss.

A: OK.

Editors: But the industry could cover that?

A: That's right.

Editors: How about two?

A: It would be painful, but it could cover that.

Editors: So it's only the terrorist risk?

A: And some companies would go broke, as they always have.

Editors: And that's the cycle of the insurance business. Well, you've always argued when you were at AIG that AIG clearly had an advantage because of its financial condition.

A: Well, we didn't always have that. You know, how did we get there?

Editors: OK, how did you get there?

A: By growth, profitable growth and diversification.

Editors: Both in lines of business and across the world.

A: Yes.

Greenberg on AIG

Editors: Reading some of the other press clips that have appeared over the past couple of years, some people have said that you are bitter about the AIG experience. Is that true?

A: What I'm bitter about . . . maybe "bitter" is a strong word. . . . We go around the world preaching the rule of law and due process all over. We should be looking in the mirror about: do we have it here? Moreover, when a company gets threatened for whatever reason and a board simply caves, it doesn't make you feel very good about people. Courage is an important characteristic to have. And loyalty.

Editors: And so there was a sense that that was lacking?

A: You have to make up your own mind.

Editors: That continues to be an issue in American business, courage and loyalty?

A: In some companies, yes. When I say that, I don't mean that you defend against wrongdoing. But you had better prove wrongdoing before you walk away from somebody with whom you've been with for a long time.

Editors: Somebody once said to me that the difference between business and politics is that in business there's consequences to your actions. In politics, there's not. You may, in fact, get rewarded. But as you said, the chapter has yet to be closed.

A: You bet.

Editors: I'm anxious to hear what's next.

A: Stay tuned.

May 1, 2007

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