has also mirrored the U.S. gross domestic
product, rising and falling almost in
tandem over the same period.
BY MARK E. RUQUET
EUROPE’S sovereign-debt crisis could impair the U.S. property and casualty industry’s ability to change
the course of the soft market—if
it results in the economy falling
into another recession, according
to one industry consultant.
Commenting on the current
state of the insurance marketplace,
Charles Ruoff, president of CR
Market Strategies Inc., says in a
Nov. 28 report that recessions
have historically put a damper on the
industry’s ability to “alter the direction of
soft-market cycles on its own initiative.”
From 1967 through 2009, periods of
recession have dramatically affected pretax
operating income, Ruoff says, noting that
it has fallen as much as 10 percent during
these recessionary periods.
The rise and fall in operating income
United States. Despite an unusually active
global catastrophe year, insured losses were
“widely spread,” making capital reductions
modest and “not market-
turning events,” he adds.
“The largest global reinsurers
are on track to good earnings in
2011 despite the catastrophe
losses,” says Ruoff. “That is a
credit to the shock-absorbing
ability of the market resources
and the fact that much of
the catastrophe costs are
ultimately absorbed directly or indirectly
by government programs.”
Considering how unstable the eurozone
remains financially, if Europe pushes the
United States into another recession, then
“the P&C underwriting market will have
to wait possibly until sometime in 2013
before a cyclical-type pricing change in
commercial rates can be realized.” NU
What we are witnessing now in the
market has more to do with a leveling off
of further historic rate reductions, rather
than a broad and sustained upward
movement in pricing.”
Charles Ruoff, president of CR Market Strategies Inc.
Spending on U.S. commercial
insurance, he notes, “is directly influenced
by economic conditions as commercial
and institutional buyers will adjust
risk-retention/transfer decisions in
direct relation to economic realities and
Ruoff says excess capital remains in the
foreign reinsurance markets and in the
Greenberg’s Starr International Sues U.S. Over AIG Bailout
BY CHAD HEMENWAY
STARR INTERNATIONAL Co., run by former American International Group Inc. CEO Maurice “Hank”
Greenberg, has filed a lawsuit against the
United States, claiming the government
violated the Constitution when it took
majority ownership of AIG without compensating the company’s shareholders.
The suit, filed Nov. 21 in the U.S.
Court of Federal Claims, asserts the federal
government violated the Fifth Amendment
when it assumed an 80 percent stake
in AIG while making $182.3 billion in
bailout funds available to the insurer to
avoid its collapse.
Starr seeks $25 billion from the lawsuit
for the company and a class of AIG
shareholders. The amount is based on the
value of the government’s stake in AIG as
of Jan. 14, according to Starr. On that date,
AIG finalized a recapitalization plan with
the federal government. The government
now holds a 77 percent stake in AIG.
AIG, named as a nominal defendant,
declined to comment.
THE GOVERNMENT IS NOT
empowered to trample shareholder
and property rights, even in the midst
of a financial emergency,” states the
lawsuit by Starr International Co., run
by former AIG CEO Maurice Greenberg.
person of property without due process of
law and cannot appropriate private property
for public use without compensation—
which Starr alleges happened when the
government funneled billions of dollars to
foreign entities, using AIG as a vehicle.
Though AIG’s rescue to preserve the
country’s financial system may have been a
“laudable goal,” the “ends could not and did
not justify the unlawful means employed by
the government to achieve that goal.”
In 2008 AIG faced liquidity issues
related to its exposure to debt from credit-
default swaps. Starr says the government
could have ended its AIG involvement
with liquidity support it provided to other
institutions, but instead it took majority
control of AIG.