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Greenberg predicts continued industry consolidation

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QUEBEC CITY — The insurance industry's challenges will inevitably force more consolidation, according to Maurice Greenberg, president and CEO of C.V. Starr & Co. Inc., who pledged his company would remain private for as long as possible.

The insurance industry is contending with a number of adverse factors, including excess capacity, a strong U.S. dollar that devalues premiums in other countries and low interest rates that have caused investment income to suffer, he told attendees of the 2015 RIMS Canada conference in Quebec City on Tuesday.

“It takes great discipline to run an insurance company successfully in this kind of environment,” Mr. Greenberg said.

Commercial insurance rates are under pressure, which has “made it impossible for some companies to survive,” he said.

These challenges will lead to more consolidation in the primary and reinsurance industries, but Starr will try to stay out of the M&A spectrum, he said.

“We're private,” he said. “We will stay private for as long as we possibly can. We have adequate capital.”

Mr. Greenberg's son Evan Greenberg is involved in one such merger as chairman and CEO of Ace Ltd., which is working to complete its acquisition of Chubb Corp. early next year.

“You can understand my reluctance to speak about that,” he said, before citing the synergies involved in that deal, including a global player merging with primarily a domestic company and the combination of strengths in personal lines and commercial insurance.

“But all mergers carry risks with them,” he said. “I'm sure they thought of all the issues they have to deal with before they agreed to merge. I have confidence that management knows what they're doing.”

Global concerns

Geopolitical uncertainty is a tough challenge, he said, citing the unrest in the Middle East and Iran and the tensions between the United States and Russia, which enhance the need for political risk insurance.

“We're living in very troubled times on a global basis,” he said.

Mr. Greenberg also highlighted last week's meeting between U.S. President Barack Obama and Chinese President Xi Jinping, where cyber threats to U.S. companies was a major topic. The U.S. and China agreed that neither government would conduct nor knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information, for commercial advantage, Mr. Obama announced in a news conference last week.

“The outcome is probably mixed,” Mr. Greenberg said.

China has become the second largest economy in the world, according to the World Bank.

“It's a growing market, but it's still an immature market in many senses,” said Mr. Greenberg, who predicted China would likely be the largest economy in about two and half years. “Many are dubious about the economy in China. I'm not. Of course, they've made some mistakes. I can't think of too many countries that haven't. China is trying to become a market economy. To be a market economy, you can't have the government interfere day to day with what happens in the stock market.”

Mr. Greenberg cited Starr's long history in the country, including its decision to gain controlling interest in a Chinese insurance company last year after owning a minority share of the state-owned enterprise.

“It's hard to have a minority interest in a Chinese insurance company,” he said. “It's very difficult to manage even though we had the management responsibility. We didn't have the last word in managing.”

Mr. Greenberg discussed the state of the insurance industry via a live video feed from New York City, because he is on doctor's orders not to travel after contracting Legionnaire's disease three and half weeks ago.

“I have no idea where I got it from,” he said, citing all the places he has traveled recently. “It's a bad disease. I'm well on my way to recovery. I expect to start playing tennis in a week.”