‘Road to Oblivion’
Starr’s Greenberg lobbies Congress to shield insurers from uncovered business interruption claims.
- Kate Smith
- June 2020
When airline insurers struggled to find reinsurance in the wake of the 9/11 attacks, Maurice “Hank” Greenberg flew to Washington and lobbied then-President George W. Bush to establish a government-backed reinsurance program. The industry was struggling, and it needed the government to step in. And Greenberg took action.
Today, the insurance industry again is under enormous pressure. And again, Greenberg is taking action.
As states introduce legislation retroactively forcing insurers to cover COVID-19 business interruption claims, the chairman and chief executive officer of C.V. Starr has been working with U.S. senators to ensure the government has the insurance industry's back.
“I've talked to several key people in the Senate and in the government,” Greenberg said. “Many members of the U.S. Senate are opposed to killing the insurance industry. They believe the intent and language [of policies] are critical. My guess is that the Democrats feel the opposite and this will wind up in the courts.”
Seven states have introduced legislation that would require insurers to pay business interruption claims stemming from COVID-19, in some cases overriding exclusions. Greenberg said these measures, if passed and upheld, would “put the industry on the road to oblivion.”
Greenberg's issue is not with legitimate losses, but with legislators creating liability coverage where none was intended or paid for or where coverage was contractually excluded.
“Many insurance companies were either silent or negligent in what they were covering,” he said. “They're going to have some problems. It's a mixed bag right now. But if the Democrats have their way, it could be the end of the insurance industry.”
Greenberg stressed that legislative actions related to insurance coverage should be “realistic” rather than political, and decisions should be made “intelligently, not emotionally.”
These times, he said, remind him of post-9/11.
“At that time, reinsurers refused to cover the airlines,” recalled Greenberg, who ran American International Group Inc. at the time. “They had no knowledge whether the bombing of the World Trade Center was the beginning of something or end of something, and they refused to reinsure the airline industry. I called the President of the United States. I took about four or five CEOs from the insurance industry with me and we went down to see him. In a matter of an hour, he authorized the establishment of a reinsurance company owned by the federal government, and it went into business.”
The Air Transportation Safety and System Stabilization Act was introduced in Congress on Sept. 21, 2001 and signed into law the next day. Among other things, it allowed the U.S. Secretary of Transportation to provide insurance and reinsurance for American aircraft or foreign-flag aircraft while in the United States, and to reimburse an air carrier for any increase in the costs of insurance since Sept. 11, 2001.
Greenberg expects the Trump administration to stand with the insurance industry, when appropriate.
“There will be a fight,” Greenberg said. “But my guess is the administration will ultimately back the insurance industry. That doesn't mean the language in some insurance companies' policies won't hang them. If they thought at the time this wouldn't be a problem and they covered it, they can't back away from that now.”
On April 10, Trump called on the nation's insurers to pay for COVID-related business interruption claims on policies that do not contain coverage exclusions blocking payments for pandemic-type events. “I would like to see the insurance companies pay if they need to pay, if it's fair,” Trump said during an April 10 White House press conference. “When I was in private, I had business interruption.”
Greenberg expects the battle over business interruption coverage will drag on through the legal system. As such, he said, the industry should “absolutely” be prepared to fight these measures all the way to the U.S. Supreme Court.
“Hopefully it will get to the Supreme Court,” he said. “I don't believe the Supreme Court would rewrite the policies to include liability when there was no intention to have liability and you never collected a premium for it. It will be a while before that happens. It's going to be a long fight.”