Garry Booth comment: Benmosche bio on AIG - FREE

Garry Booth comment: Benmosche bio on AIG - FREE

If Carl Icahn is looking for a book to take on holiday with him he might consider ordering the recently released autobiography of the late Bob Benmosche, the former head of MetLife who was credited with saving American International Group (AIG). Icahn, the outspoken activist investor who’s been trying to break up the unwieldy global insurer, might find he has something in common with the tough talking CEO who died from cancer last year.

Benmosche (pictured) had been retired for three years and was living at his vineyard in Croatia when he got the call in 2009 to ask if he was willing to right AIG. “I was drunk when I said yes,” he later said.

No shrinking violet, he makes it clear in his book, that he did what he set out to do – and more. By the time Benmosche stepped down in 2014 after five years in charge AIG had paid back $94bn of emergency loans to the central bank and had released the US government from its $68bn equity investment at a profit of $22.7bn. He died from cancer aged 70 in February last year and was still talking to his ghostwriters the week before he passed away.

Benmosche, who grew up one of four children in a poor family in the rural Catskills, calls a spade a spade. He didn’t go to business school, he’s pleased to announce, and he clearly dropped out of charm school early on.

Benmosche rowed with government overseers, controversially railed against pay caps on his staff, threatened to quit and then succeeded in forcing out then-chairman Harvey Golub after a boardroom showdown.

His High Noon with Golub is recounted in gory detail in the memoir. During a discussion about not seeing eye-to-eye, Golub tells Benmosche, “I think I need to work on my relationship with you.”

“What the f–k?” Benmosche recounts replying, “Harvey, we don’t have a relationship. We’re not going to have one. All I can tell you is that the board needs to make a decision today where we’re going. But I think only one of us can be here tomorrow.”

It would be fascinating to hear his thoughts on the push by Icahn to break up AIG. Although Benmosche reduced AIG to half its size in his tenure, he strongly resisted selling off units early on, fending off “the Wall St sharks” that were circling. Importantly, it was Benmosche that introduced AIG’s embattled CEO, Peter Hancock in 2010, originally as head of risk. And according to his son Ari Benmosche the pair shared a vision of “One AIG”.

Good for the Money: My Fight to Pay Back America, Bob Benmosche, with Peter Marks and Valerie Hendy, St Martin’s $27.99/£19.67

Thinking outside the cat-in-a-box

It sounds more like a tech babble story for the RISKbitz page - the Risk Management Solutions (RMS) Cat in a Box app, which operates on the RMS Miu Insights web platform. But events give the story a reality check. The idea of the new app is to simplify the design of parametric insurance linked contracts to democratise their use among insurers, reinsurers, investors – and maybe big businesses.

Cat-in-a-Box deals are so called because they provide cover for a particular type of catastrophe in a given geographical “box”. Parametric deals are attractive to buyers of protection because they provide quick payment when it’s most needed, without a drawn out claims process.

Those benefits might be interesting to businesses affected by the recent earthquakes in Japan and Ecuador. A number of Japanese manufacturers have suspended operations after two powerful quakes hit Kumamoto, a manufacturing hub. Sony, as well as auto makers Honda and Toyota cited damage at their plants.

Some businesses would benefit from a capital injection immediately after an event to help mitigate the financial effect of a break in the supply chain. Insurers and reinsurers trying to provide regular risk transfer struggle to get their arms around the data needed to underwrite in the conventional way. Maybe this is a more elegant solution for all parties?

FCA killjoys target hospitality

Here’s some news to chill the hearts of insurance people: the Financial Conduct Authority  (FCA) has completed a thematic review of inducements and conflicts of interest in the investment advice business.

It found that, “hospitality provided or received did not always appear to be designed to enhance the quality of service to the client”, referring to individuals from firms participating in or spectating at sporting or social events. It also found that evening dinners, “which were not themselves designed to enhance the quality of service to clients, were also provided to local attendees after conferences”.

Moreover, hospitality logs did not always record relevant detail or were not well maintained. For example, logs did not always capture how the benefit was designed to enhance the quality of service to the client. The horror.

The FCA said that when providing or receiving a non-monetary benefit, firms should consider and assess whether all aspects of the benefit are designed to enhance the quality of the service to the client, including the location and nature of the venue, and those activities which are not conducive or required for business discussions.

Brokers don’t appear to be in the FCA’s sights, but it’s enough to give them nightmares anyway.

By Garry Booth - zigzagpublishing@btconnect.com

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