The private insurance market could stand to benefit if the federal government got out of the terrorism risk insurance business, according to Maurice "Hank" Greenberg, chairman and chief executive officer of Starr Insurance Holdings and chairman and CEO of C.V. Starr & Co.
Greenberg said the industry may be better positioned to provide coverage for commercial property/casualty liabilities caused by acts of terror than a government rife with "onerous" regulations. "Any time you can allow the private sector to do whatever it is able to do without the government, you should let it," Greenberg said during public remarks at the National Press Club in Washington, D.C.
Greenberg, the former chairman and CEO of American International Group Inc., was referring to the Terrorism Risk Insurance Act, which Congress passed in the wake of the attacks of Sept. 11, 2001 to provide a federal backstop for commercial property/casualty insurers writing terrorism risk coverage.
TRIA was designed to provide greater reinsurance capacity to insurers covering "trophy properties" against terrorist acts. The program, widely supported by the industry, is set to expire at the end of 2014.
Greenberg said he was speaking only on behalf of himself and that industry trade organizations should be consulted before the federal program is allowed to expire. But he said the industry should consider private-market alternatives to the federal program. Greenberg acknowledged his companies write terrorism risk coverage.
"We shouldn't let the program expire without hearing from the industry as a whole," Greenberg said. "As far as I am concerned, we write that coverage, but we have limited capacity. We can't write everything in the United States. We write what we think we can handle with our reinsurance." But the private insurance market could provide the additional capacity, Greenberg said.
Greenberg's position on the federal terrorism risk insurance program differs from that of many insurance trade organizations. Property/casualty trade groups have put the program's reauthorization at the top of their legislative priorities. Earlier this month, the U.S. House of Representatives introduced legislation that would extend the program through 2019.
Greenberg's stop at the National Press Club was part of a national tour in support of his new book, "The AIG Story." Greenberg's book, co-authored with George Washington University law professor Lawrence Cunningham, lays out his thoughts on the 2008 financial crisis, why occurred and what AIG's role in it was.
The book places most of the blame at the feet of former New York Attorney General and Gov. Eliot Spitzer, who Greenberg says led an overly aggressive investigation into the company. The investigation, which led to Greenberg's resignation in 2005 amid allegations of accounting irregularities at the company, resulted in new management that bet heavily in flawed credit-default swaps that created a liquidity crisis at AIG. Greenberg said AIG did not engage in the type of risky CDS products that brought down AIG when he was at the company.
Greenberg writes in his book that had he been at the company, he would have pressured government officials, including then-Treasury Secretary Henry Paulson and then-President of the New York Federal Reserve Timothy Geithner, into propping up AIG without the $182.3 billion bailout or going into bankruptcy. The government ultimately took control of 79.9% of the company. Greenberg and Starr have filed suit against the federal government, alleging AIG stock was unconstitutionally seized without compensating investors. In December, the last of the government-owned AIG stock was sold, and the Treasury and the Federal Reserve said they had fully recovered the amount they committed to AIG, plus earned an additional $22.7 billion positive return.
Last month, AIG decided not to join Greenberg's lawsuit, saying the company had "executed our fiduciary and legal obligation" to repay the federal government for the capital injection into the company.
Greenberg told Best's News Service he viewed AIG's decision not to join as part of its effort to rebuild its public image. He said he couldn't comment beyond that because he was no longer at AIG, and he does not follow the company any longer.
Greenberg also discussed the relationship between China and the United States. He said China is one of the most important expansion markets in the world for insurance companies. The United States and President Barack Obama have made a mistake by not pursuing a free trade agreement with Chinese officials, Greenberg said.
"It wouldn't be easy. But it could be done," Greenberg said. "I think the U.S. government, particularly Obama, waited way too long to pursue a meeting with the newly elected Chinese political regime, which would start the process of creating a free trade agreement."
Greenberg added the United States has hurt its relationship with China in recent years. He said former Massachusetts Gov. Mitt Romney, the Republican candidate for president in 2012, had been "not very smart" by suggesting that, if elected, he would declare China a currency manipulator on the first day he was in office.
"The United States needs to rethink its approach to China," Greenberg said. "Is a trade war better than a trade agreement?"