Maurice “Hank” Greenberg, the CEO of American International Group and Lloyd’s Chairman Saxon Riley met yesterday at a ceremony marking the opening of a new AIG-backed syndicate at Lloyd’s. They were expected to hold talks concerning the state of the global insurance market in general, and the Lloyd’s market.
Riley welcomed Greenberg to Lloyd’s, indicating he’d “been doing business” with AIG’s boss for “over 35 years,” and was greatly satisfied to see AIG’s “involvement in Lloyd’s. He noted that both entities had a common interest in offering “innovative insurance products to clients around the world,” especially after the Sept. 11 terrorist attacks.
Syndicate 1414, which underwrites general insurance, began operations on the first of the month with a capitalization of £100 million ($ 142 million). Greenberg said its establishment “enhanced AIG’s ability to offer innovative risk solutions to organizations around the world,” and to ” maximize the opportunities offered by the Lloyd’s market.”
One of the topics Greenberg will no doubt discuss with Riley is his call for a basic readjustment in the insurance market, and the need for the government to step in as “the insurer of last resort” in covering terrorist related risks. Greenberg and other industry leaders, including Berkshire Hathaway’s Warren Buffet, and Zurich Financial’s Rolf Hüppi, have observed that the industry’s capital is finite, whereas the risks from terrorism are not. Buffet has even warned of “a trillion-dollar loss,” if terrorists were able to get hold of a nuclear device.
While the general consensus in the industry is that increased demand and steep premium increases following Sept. 11 will help insurers reestablish their diminished capital, they could not weather another attack approaching the same magnitude without government backing. As a result many companies are seeking to exclude coverage of terrorist related losses, which jeopardizes the validity of many business deals that require broad insurance protection. If no solution is found industry leaders like Greenberg and Buffett have predicted that the already weakened global economy will have an even more difficult recovering.
Topics Excess Surplus Lloyd's AIG
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