Evan Greenberg Receives IFNY Free Enterprise Award

Evan Greenberg Receives IFNY Free Enterprise Award

400 Leaders and Top Professionals Hear NAIC’s Nelson and Supt. Lawsky  

The Insurance Federation of New York held its 99th Annual Luncheon to celebrate its 100th Centenial Year at Cipriani’s on Wall Street in November, attracting 400 insurance leaders and professionals for what amounted to a somewhat historic event. For one of the few, if any, times in insurance history, two major leaders and IFNY Free Enterprise Award recipients, a father and son, shared the stage at Cipriani’s: Evan Greenberg, recipient of the 2013 Free Enterprise Award was introduced by his father, insurance legend Maurice “Hank” Greenberg, Free Enterprise awardee from 1988. Other stars on the stage that day included former Senator Ben Nelson, Chief Executive Officer of the NAIC, and Superintendent of the New York State Department of Financial Services, Hon. Benjamin Lawsky. All in all it was a stellar luncheon which found the Insurance Federation and its members applauding Mr. Greenberg’s remarks—reproduced elsewhere in the issue—and Senator Nelson’s outline of NAIC priorities. The Messrs. Greenberg each lauded the insurance industry itself, offering some criticism (the elder Greenberg) of the Martin Act and setting out the challenges that would face professionals in the future. According to one veteran observer, it was one of those rare occasions when an attendee felt that they were witnessing a bit of insurance history as the two Greenbergs, the younger, Chairman and CEO of ACE Limited, the older, founder of AIG and now Chairman of STARR Group, shared the podium.

One highlight of the event was IFNY President Pearson’s re-commitment of grant monies to an organization called Boys Hope Girls Hope who’s mission is to address the needs of children whose potential is threatened by shattered neighborhoods, distressed families, endemic poverty, and other factors beyond their control. The IFNY Intern program works closely with Mary Lanning of Yes!Solutions Inc. to arrange internships in participating insurance offices for these students. Each student expressed how important this was in short remarks. It was a high point of the luncheon.

REMARKS

Evan Greenberg

Chairman & CEO, ACE Limited

99th Annual Free Enterprise Award Luncheon

November 15, 2013

Cipriani – Wall Street, New York City

Good afternoon. Thanks to my dad for those kind and personal words. What a great moment to have my dad give me an award, and one which he received 34 years ago.

I am honored to be accepting this year’s Free Enterprise Award. I am touched and truly grateful, so thank you.

I must tell you – I view this award as recognition not just for individual accomplishment but, importantly, for collective accomplishment.

So many of my colleagues whom I witness day in and day out over the years are deserving of such recognition. And as such, I want to thank the Insurance Federation of NY on behalf of my company, ACE, and our nearly 20,000 employees around the globe.

It is gratifying what my company has achieved over the last decade. What we have built and the financial results and industry contributions we have made speak to what can be accomplished in a competitive global market environment by a group of like-minded people.

From the beginning, we have had a clear set of principles and strategies, as well as the discipline and firm belief to never compromise or waiver in our pursuit. Greatness is built over a long period, not simply a decade, and we strive to achieve that quality. So keep an eye on us – we are hardly finished.

I would like to say a few words about our industry, which I think is generally misunderstood by the public. Many think of insurance as kind of bureaucratic, slow-moving, and not very dynamic. Nothing could be further from the truth.

We are a reflection of society globally. Regardless of what you think about the world today, it is a fast-moving place and in a constant state of change driven by politics, culture, technology, science, law, social currents, and of course, globalization. And all of that means risk.

As an industry, for us to remain relevant in an environment where risk is dynamic, we need to decisively assume relevant amounts of risk. We are expected to innovate in the areas where exposure is being created. Risks such as cyber, terrorism and flood all come to mind. Of course, we can only take risk to the extent that we understand it and we have the balance sheet wherewithal.

With that said, we shouldn’t be so quick to expect and accept government involvement, which should be limited to extreme and systemic type events truly beyond industry capabilities, which by the way are evolving and will continue to do so. For example, in the future, we will likely be able to spread more risk more broadly through the capital markets.

On a separate subject, our industry faces a difficult, politically-charged regulatory environment globally that is in a state of change following the financial crisis. It has never been more complex, demanding, and in my judgment, confused. It is one of the greatest challenges our industry faces today. In fact, it would be far more difficult to build ACE today in this environment.

Many of the regulatory bodies we report to around the globe do a reasonably good job and have a reasonably clear sense of mission. On the other hand, some important regulators and policymaking bodies, particularly at the national and multilateral level, are confused about mission and the issues. At the leadership levels, they are directed by those with banking experience and very little knowledge of or appreciation for our industry, and the important differences. This is deeply troubling, and to illustrate my concerns, I have three specific items I am just going to briefly mention.

First is the designation of certain large global insurance companies as systemically important. This designation, to the extent it impacts their traditional insurance business, in my judgment, is wrong-headed and simply not relevant. The failure of an insurance company engaged in traditional life or non-life insurance, while potentially a major event, does not pose a systemic threat to the global financial system.

The notion of requiring insurers designated as systemically important to hold more capital than other insurers, again for traditional insurance business, makes little sense. It would needlessly disadvantage them and for what benefit?

And to go further, and consider also requiring companies designated as internationally active insurance groups to hold more capital than other insurers, would be needlessly counterproductive. It would restrict fair competition, damage availability and raise cost. Who benefits and for what purpose?

The second concern is around fundamentals related to global industry capital standards. I am all in favor of minimum standards for capital that a company must hold to protect policyholder obligations in the event of an insurer failure. However, a number of proposals being discussed are more like Solvency II and require levels of statutory capital well beyond that singular purpose.

In debating capital standards, regulator proposals consider adopting accounting standards that don’t make sense to me from a statutory point of view. For example, the fair valuing of an insurer’s balance sheet based on market conditions at a moment in time makes little sense when we insurers are clearly long-term buy-and-hold investors with limited to no “run-on-the-bank” exposures.

Another example is fair valuing P&C loss reserves to require discounting as if P&C cash flows are predictable. This would needlessly weaken insurer balance sheets.

My third concern is legislative or regulatory efforts we see around the globe aimed at balkanizing capital and cross-border risk transfer flows. Behind these efforts are essentially two motivations:

One is the desire of regulators to force an insurer to retain more risk and capital in their country in order to fully control the capital backing the exposure the insurer is assuming for its own account.

And the other is protectionist – the desire to protect their own domestic insurance market at the expense of competition from global companies capable of assuming large amounts of risk at competitive prices.

This is a concern right here in our own country. I refer you to the Neal bill, which would thoughtlessly limit intercompany reinsurance to advantage a few domestic insurers.

There are consequences to these misguided efforts. Requiring global insurers to hold greater levels of capital locally will drive up prices and restrict the availability of capacity. Ironically, this is occurring as business continues to globalize with insured values and demand for coverage growing.

These proposals single out and discriminate against foreign insurers. They violate existing tax treaties and trade agreements because their real aim is to restrict competition.

They essentially threaten the very principle we are here today celebrating – free enterprise. And this would be to the detriment of society.

In summary, our future depends on preserving the entrepreneurial and free enterprise spirit that encourages innovation. Our regulators have a role to play in supporting the freedom to build businesses and to innovate for the benefit of society in a responsible manner.

Again, on behalf of all my colleagues at ACE, I want to thank the Insurance Federation of NY for this recognition. Thank you.