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A bitter dispute between American International Group Inc. and its chief architect, former Chairman and Chief Executive Officer Maurice R. Greenberg, appears to be over after a Nov. 25 settlement announcement.
Mr. Greenberg, who retired from AIG in March 2005 amid investigations by then-Attorney General Eliot Spitzer, and the company he built into a global financial services giant were engaged in an acrimonious battle almost from the moment he left the job he held for nearly 38 years. Included in the sparring was former AIG Chief Financial Officer Howard Smith, who joined Mr. Greenberg at C.V. Starr & Co. Inc. after both men left AIG’s employ.
Details on the settlement are available in an 8-K filing, but here are highlights:
In a joint statement, Robert Benmosche, AIG’s current CEO, said: “We are pleased that we have resolved our differences. The resolution of these long-running disputes will remove a significant distraction and expense and allow AIG to better focus its efforts on paying back taxpayers and restoring the value of our franchise for the benefits of all our stakeholders.” In the same statement, Mr. Greenberg said: “I too am pleased that these long-running disputes are now over, and I want to express my appreciation for Bob Benmosche’s help, and the help of the AIG Board, in resolving them. I look forward to assisting AIG in trying to preserve and restore as much value as possible for all of AIG’s stakeholders.”
After years of bitterness and considerable legal expenses for both sides, it’s good to see closure. A day before Thanksgiving, no doubt AIG investors have reason to give thanks.
The insurance industry since 1906 has seen and paid out its share of claims from catastrophic losses, but we fortunately have not yet experienced an insured-loss event greater than about $40 billion.
So imagine for a moment what kind of cataclysm would be required to top $1 trillion in total damage. Catastrophe modelers Arnaud Mignan, Patricia Grossi and Robert Muir-Wood at Newark, Calif.-based Risk Management Solutions have, and the risk, while rare, is quite sobering.
RMS recently published a study on the 1908 Tunguska explosion that devastated a remote area of Siberia. Scientists now believe that a comet or asteroid exploded several miles above the Tunguska River basin, leveling trees in an area of more than 700 square miles. Witnesses reporting seeing “a great fireball, bright as the sun.” The energy of the blast has been calculated as the equivalent of 10 megatons of dynamite, or about 1,000 times the force of the atomic bomb dropped on Hiroshima, Japan, in 1945. Fortunately, fatalities from the 1908 event were low as the blast area was sparsely populated.
Now imagine such a cosmic event occurring in a heavily populated area such as New York City. As one might expect, a Tunguska-type event centered over the Big Apple would be utterly devastating to people and property. RMS estimates that such a catastrophe would claim 3.2 million lives, injure 3.76 million more and cause more than $1.1 trillion in property losses. What that size loss would do to the insurance industry is pretty clear: never mind harden rates, it would virtually wipe out the global property/casualty industry.
The good news, if any, is that while asteroids and meteorites do impact Earth and occasionally damage populated areas, events of the Tunguska magnitude are rare. While historical data is lacking, particularly where comets or asteroids impacting Earth left no visible trace, RMS estimates a Tunguska type blast occurs once every 1,000 years.
I for one hope that Earth is spared, as managing risks from comets or asteroids is awfully difficult.
For centuries, seafaring European explorers sought a Northwest Passage through the Arctic as a shortcut to riches in the Orient. New research findings suggest that dream is becoming a reality.
The Catlin Arctic Survey, conducted earlier this year under the sponsorship of Catlin Group Ltd., took about 6,000 measurements of Arctic sea ice to gather data for scientists about whether, and to what degree, the sea ice is melting. Well, the results have been analyzed and released Oct. 15. The news is not good.
According to Professor Peter Wadhams, who leads a polar ocean physics group at the University of Cambridge, the Catlin team discovered that much of the Arctic ice is first-year ice rather than thicker, multiyear ice. That means it is susceptible to melting each summer and signals that the Arctic waters will be ice-free during the summer in perhaps 20 years, the professor indicated.
What stopped explorers including John Cabot, Jacques Cartier, Henry Hudson and Sir John Franklin from sailing through the Northwest Passage was pack ice. In 1906, Roald Amundsen succeeded, but it was not until 2007 that ice melt made such a voyage possible without an icebreaker.
Catlin sponsored the scientific survey to help answer questions about climate change, with the understanding that if climate change increases risks to people and property, the insurance industry will be looked at to respond. The jury is still out on the causes and effects of climate change, but it seems clear that change is occurring.
How should the insurance industry respond?
