The Royal Gazette                                                                                                         ...
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AIG In Bermuda.First 50 Years.Royal Gazette


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AIG In Bermuda.First 50 Years.Royal Gazette

  1. 1. The Royal Gazette Page 1 of 5 Lifestyle Bermuda, Saturday, January 2, 2010 Contact us Published: October 2. 1997 12:00AM Search Articles Today 50 years in Bermuda: A brief history Home News of the American International Group Business Sport Opinion Lifestyle Gazette Video Death & Funeral Having served his country in the Great War, American entrepreneur Notices Cornelius Vander Starr journeyed to the Far East in search of new horizons. In 1919, at the age of 27, he arrived in Shanghai, legend has it, Special Features with 330 yen in his pocket. Very much at home in the Far East, Starr and Campaigns prospered. In November 1919, he formed a fire and marine insurance Special Sections agency in Shanghai which he called American Asiatic Underwriters, the Year in Review first of a series of companies that eventually became the American 2009 International Group (AIG). Right up until his death in 1968, Mr. Starr Xmas Short continued in his entrepreneurial fashion to sow the seeds of capitalism Stories throughout the world. In the 78 years since 1919, only two men, Mr. Green Pages Starr and his nominated successor Maurice R. Greenberg, have ever Career Fair managed the American International family of companies, which has Other Lifestyle Stories > Right to Know grown into one of the major insurance and financial services providers in Historic day for Anglican Campaign the world. Church Ship sinking survivor Recipe Guide Everything AIG has become - one of the world's largest companies, with Writa's amazing life Quick Search assets in excess of $148 billion and 1996 net income of $2.9 billion - can Add Recipe be traced to young Starr's first international venture in Shanghai, and the Esther Trott honoured at subsequent vision and energy of Greenberg. From the outset, the school and church Photo Albums energetic and resourceful Mr. Starr sought to expand his interests. He EXHIBITIONS Today's Photos was the first to insure the lives of Chinese citizens in the early 1920s. Spotted on the Lacking the sophisticated forecasting skills and actuarial tables in WEEKEND MOVIES Rock widespread use today, Mr. Starr relied instead on his unfailing business sense. Within ten years, his firm had established offices and agencies ANNIVERSARY CLUB Weekly across China and the Far East. By the end of his second decade in the Body & Soul region, C.V. Starr had become one of Shanghai's leading businessmen, a laopan. World War II might have dealt his endeavours a fatal blow had Related stories > Shipping Mr. Starr limited his enterprises to Asia. But in 1926, he had opened a US Best years for AIG lie in Young Observer the future company to represent US insurers overseas, bringing geographical Religion diversification to his growing organisation, and in 1939 he relocated his Senior AIG Bermuda companies' headquarters to New York. When war broke out in Europe, executive fired Classifieds Mr. Starr was well-positioned to respond to the opportunity which arose Classified AIG set to launch when the European insurers who had hitherto dominated the Latin American market contracted their overseas business. The sudden Bermuda-based insurance Community shortage of capacity enabled Mr. Starr to move strongly into the region. subsidiaries Weather In 1940, he opened offices in rapid succession in half a dozen South AIG shutting down Bermuda Calendar American countries and established a regional headquarters in Cuba. By Richmond unit Links the end of the War, premium income from Latin America had surpassed that earned in Asia. In the immediate post-War years, Mr. Starr continued Spitzer takes aim at AIG Newspaper to expand his operations into new markets. He entered Japan and execs Services Germany in 1946 by insuring American soldiers. A year later, he formed a About Us new life insurance company in the war-ravaged Philippines. While his Contact Us interests continued to grow immediately after World War II, Mr. Starr and Subscribe his closest advisors took the time to completely reorganise and rationalise Electronic Edition their world-wide operations. In five short years, the firm was completely Advertise restructured. In 1947, a decision was made that henceforth all US business would be managed and serviced from New York. The non-US Online Services business would be run from a single offshore headquarters, to be located, Mr. Starr decided, in Bermuda. Searching for a stable environment from Advertise Online which to manage the group's international interests, Mr. Starr was Registration attracted to Bermuda for several reasons, among them its use of British RSS feeds law, with which he was familiar from his days in Shanghai and Hong Email Alerts Kong, the tax holiday Bermuda offered and would later extend, and the Help/FAQ Island's comfortable living conditions and proximity to the United States. Mid-Ocean News That American International was embarking in Bermuda upon a path no Code of Practice insurance company and few other companies had trodden did not deter Policy Mr. Starr, always a pioneer. Fifty years ago, today's sophisticated Privacy Policy international business community did not exist in Bermuda or in any Copyright Policy other offshore jurisdiction. Captive insurance, a practice by which companies or associations insure their own and related risks, was non- Archive existent in Bermuda at the time. Mr. Starr and his Bermuda staff were the Yesterday first managers of that industry, which now boasts close to 4,000 captive Thursday companies world-wide. Wednesday Tuesday Bermuda retains to this day better than 40 percent of the global captive 1/2/2010
  2. 2. The Royal Gazette Page 2 of 5 Monday insurance market, a dominance it has held since American International Sunday established some of the very first such companies in Bermuda in the mid- Custom 1950s. Rather than transfer employees to Bermuda en bloc from elsewhere in the group, Mr. Starr's customary practice, to which Mr. Greenberg has always subscribed with equal vigour, was to hire, train and promote local people to managerial positions. Negotiations with the Bermuda Government went well, and on 16 December 1947 The American International Company, Limited, Act, 1947, an Act of Parliament (Bermuda 1947:68), came into force. Be it therefore enacted by the Governor, Legislative Council and Assembly of the Bermudas or Somers Islands...the Act stated, that the subscribers become shareholders of a body corporate under the name of American International Company Limited.The company held its first Board meeting just one month later, on 16 January 1948. At the heart of Mr. Starr's thinking lay two companies managed entirely from Bermuda. American International Underwriters Overseas, Ltd. became the parent for all the general insurance agency interests Mr. Starr had established outside the United States. American International Reinsurance Company (AIRCO) would own the life insurance companies in the Far East, manage real estate investments, and act as a professional reinsurer for both American International group companies and third party risks. Just about everything Bermuda's international insurance industry has become -one of the world's leading markets, with assets in excess of $100 billion and 1995 capital and surplus of $36.9 billion - can be traced to Starr's 1947 decision to headquarter his non-US global interests in Bermuda. It took time to rearrange the various American International companies and to establish the Bermuda office in the Woodbourne Building on Pitts Bay Road. In 1951, a further Act of Parliament allowed American International to be the only exempted company at the time to have the right to purchase land in Bermuda, which it would not choose to exercise for close to 20 years. A small staff was hired, and in its first few months the Bermuda office concentrated as much on the necessary structural legal work as it did on insurance. By 1951, American International's Bermuda operations had grown to the point where additional office space had to be leased in the Outerbridge Building next door. In 1953, Mr. Starr chose Ernest E. Stempel to manage his Bermuda-based insurance operations. Mr. Stempel had joined one of Mr. Starr's companies in New York in 1938 as an Assistant Manager and held a succession of positions while attending law school at night. Mr. Stempel's contribution to the development of American International and to Bermuda's international business industry was significant. Mr. Stempel was responsible for American International's Bermuda operations for three and a half decades. Not a single decision of importance was taken without his approval. The American International companies have always maintained a low profile, which meant that for many on the outside, Mr. Stempel was American International in Bermuda. He was the leading force in the formation of the International Division of the Chamber of Commerce in Bermuda and served for many years as its first Chairman. Until his recent retirement at the age of 81, he had served AIG from Bermuda in various senior capacities, including the office of Vice Chairman responsible for the group's world-wide Life Division and that of Chairman of many of its life insurance subsidiaries, among them American International Assurance Company, Ltd. in Hong Kong, the Philippine American Life Insurance Company and AIRCO. Almost as soon as the Bermuda operations were launched, Mr. Starr's policy of allowing local people to manage his overseas operations bore fruit when Bermudians Hal Dale, Jack Lancaster and Joe Johnson joined American International. Mr. Dale would see stalwart accounting service with the group, and Mr. Lancaster went on to become a top AIG executive who made a significant contribution to the general insurance group's success in Bermuda and other parts of the world. By the mid- 1950s, American International had as many as 300 employees on the Island. In 1963, reflecting his central importance to the group's Bermuda operations, Mr. Stempel took over the management of AIRCO's life business and was appointed President of the company, responsible for its world-wide life insurance operations. AIRCO had become a linchpin in the group's corporate structure. A Panama-registered company with its shares traded over the counter in New York and its headquarters in Bermuda, its business was largely comprised of life insurance and real estate holdings. AIRCO was the first major international publicly-owned operating company managed entirely from Bermuda, and had a number of attributes found today in the very largest, Bermuda-based insurance companies. For some years, the Bank of Bermuda made a local market in AIRCO shares. In 1967, great changes took place in American 1/2/2010
  3. 3. The Royal Gazette Page 3 of 5 International's corporate structure world-wide, including Bermuda. American International Group, Inc., in which AIRCO would hold a controlling interest, was formed to hold the shares of the American companies. Founder's foresight led to company's success life insurance company to insure Hong Kong lives when that colony's stability was threatened by riots. At around the same time, continuing instability in the Bahamas triggered the migration of a handful of very large oil-related insurance companies to Bermuda, which American International managed, giving a dramatic boost to the Island's insurance industry. Then as now, American International provided a range of insurance, fronting and management services to the captive market. Also in 1967, Mr. Lancaster was elected President of American International Company, Limited in Bermuda and a young J.C.H. Johnson was elected Assistant Secretary of American International Underwriters Overseas, Ltd., his first appointment as an officer of an American International group company, but by no means his last. American International simultaneously made a formal announcement of its intention to erect its own building in Bermuda, in which to house all its local operations. Following the consideration of several alternative sites, a location on Richmond Road was decided upon, and the company began the purchase of four small, adjoining parcels of land which together totalled three acres. An American architect, H. Beckwith, was selected to work alongside Onions, Bouchard & McCullough, the Bermudian architects on the project. Early in 1968, Mr. Starr's health was deteriorating. Having given the nod to Mr. Greenberg to succeed him, Mr. Starr died later in the year, leaving Mr. Greenberg in charge to oversee the beginning of a new age of exponential growth and the consolidation of the group's widely-dispersed enterprises. Mr. Greenberg, who had joined American International in 1960, instigated a period of acquisition and took AIG public in 1969, its shares initially listed over the counter. At that point, the modern structure of AIG was established; in 1984 its shares were listed on the New York Stock Exchange, where today AIG has the largest market capitalisation of any listed insurance and financial services organisation. In 1969, the Bermuda companies marked their 21st year of operations as the entire company celebrated its golden anniversary. Also in that year, changes in US tax law permitted AIG to repatriate its life insurance function to the US. The Bermuda presence, which had reached 300 people, was scheduled to be cut back by about a third, with a number of Bermudians transferring to the United States along with the companies they managed. Less than a year later, on 15 October 1970, Mr. Stempel presided over the roof- wetting for AIG's impressive new building on Richmond Road, which has remained its Bermuda home ever since. Late in the summer of 1971, the building was opened and the American International employees in Bermuda transferred to their new Bermudian home. The building included living accommodations at its penthouse level and had tennis courts below, which visiting executives could enjoy at the end of their working day, a signature of Mr. Starr's lifestyles in many countries throughout the world. In 1972, Mike Murphy, a naturalised Bermudian, joined American International in Bermuda to act as a Director and General Counsel of AIRCO; he was appointed to similar positions in the other Bermuda companies shortly thereafter. Mr. Murphy is known within the Bermuda insurance industry for having assisted the Bermuda Government in several insurance-related legislative endeavours over the past 25 years, which included the preparation of the earliest drafts of the Bermuda Insurance Act and assistance with the negotiation and ratification process of the United States-Bermuda tax treaty. Throughout the periods of change, the Bermuda companies continued to write professional third party insurance, to insure and reinsure the property, casualty and life business of AIG companies, to act as commission agents, and to administer a range of AIG investments. In 1978, AIRCO, the publicly-traded parent company, was merged into AIG, with the effect that the Bermuda companies became wholly-owned subsidiaries of AIG. At that time, Mr. Stempel became the Chief Operating Officer in charge of all AIG's life insurance operations world-wide, and Mr. Dale retired. Mr. Johnson was appointed President and Chief Executive Officer and Treasurer of American International Company, Ltd., which managed all the other Bermuda entities on behalf of AIG. Mr. Johnson continues to serve the Bermuda community in various capacities. He holds the distinction of being the only representative of the international business sector to have been President of the entire Bermuda Chamber of Commerce. He was appointed an independent member of the Bermuda Senate from 1988 to 1993 and has served on a number of Boards and committees within the community and the international business industry. 1/2/2010
  4. 4. The Royal Gazette Page 4 of 5 Also in 1978, Inter-Hemispheric Reinsurance Co. Ltd., a joint venture formed by American International, was established in Bermuda as the first Bermuda company devoted to writing finite risk insurance, some ten years before the formation of Centre Re. Inter-Hemispheric was later succeeded by Richmond Reinsurance Co. Ltd. (named for Richmond Road), which continues to write finite risk to this day as a joint venture with a major European partner. In the 1980s, Bermuda again played a pivotal role in American International's development when AIG penetrated previously untapped markets in communist and socialist countries. A series of joint ventures - with companies Island's operations vital concept of private insurance did not exist - were incorporated in and administered from Bermuda, underlining once again the importance of the Richmond Road operation to the AIG group. In the early 1990s, the move of several large property catastrophe reinsurers to Bermuda created for the first time a truly professional third party reinsurance market in Bermuda. AIG was instrumental in the formation of, and took a significant shareholding in Starr Excess, which writes excess liability insurance, and International Property Catastrophe Reinsurance Company (known as IPC Re), which writes property catastrophe reinsurance. Mr. Johnson is Chairman of both companies, which provide market capacity at the highest layers on a world-wide basis. As the number of AIG staff grew consistently though the 1990s, it became apparent that the Richmond Road headquarters would no longer provide adequate space. Work on an extension was commenced for completion on the occasion of American International's 50th anniversary in Bermuda late in 1997. The enlarged building will also house the Bermuda Commodities Exchange, an electronic marketplace for the trading of insurance contracts. The Exchange is due to open by the end of 1997. AIG has spearheaded the establishment of the Exchange in Bermuda to remain at the forefront of innovative attempts to securitise We all benefit administrative services to mutual fund and third-party direct investment funds established by other AIG compan ies. These include at least two of the world's largest infrastructure equity funds investing in emerging markets. During their first half-century in Bermuda, the AIG companies and staff have left their mark. Many of the best-known Bermuda insurance executives learned their skills at AIG. In addition insurance-related scholarship awards have been made to more than ten outstanding Bermudians, most of whom are working within the Bermuda insurance industry in executive positions. Beyond that, AIG has become synonymous in Bermuda with the many advantages the Island enjoys from the presence of its international business sector, now the largest contributor to the Island's foreign exchange earnings. As AIG reflects on its 50-year partnership with Bermuda, and the dividends the relationship has yielded to both the company and the country, it also looks forward to another 50 years of innovation, and to continuing to enhance Bermuda's reputation around the globe. PHOTO American International Group (AIG) founder, C.V. Starr, c. 1964 An architect's image of the future American International building before the company transferred to its present Richmond Road location in 1971 American International moved from Pitts Bay Road to Richmond Road in 1971. Shown at the building opening with company executives is Sir Henry Tucker The newly-renovated American International building, on Richmond Road Commemorating between 30 and 40 years each of service at American International Company Ltd. are (from left), longserving employees Karen Hurdle, Marie Rance, Amanda Sousa, June Famous and Julian Grant. Each employee has been with the company for greater than half its 50 years of existence on the Island. Missing are Vernall Adderley and Leroy Pyke American International Company Ltd. has received between 25 and 30 years of dedicated service from each of the following persons. Front from left: Glenda Montague, May Smith, Leeann Paynter, Jane-Ann Henneberger and Sharon Trimingham. In the rear, from left: June Dill, Antwanette Flood, Carmen John and Pamela Fields. Absent is Michael Murphy Celebrating between 25 and 30 years at American International Company Ltd. are (from left), Judith Gardner, Zelma Thomas, Cynthia Law, Marilyn Lawes and Ethel Curt. Missing from the picture is Rochelle Jones With each having spent 15 and 20 years at American International Company Ltd., the following employees have lots to celebrate. Seated, front from left: Justina Wharton, Barbara Antonition, Marionette Simmons, Alanda Joaquin. Standing from left: George Cubbon, Sandra Spanswick, Kenneth Dill, Margaret Barnes, Donna Tucker, Kathleen Bromby, Suzanne James and Stuart Osborne. Missing from the group are Marchelle Brangman, Cherrie Hayward and Donna Smith ABOVE: Giving 10 to 15 years at AIG. Seated from left are Linda Ellis, Mary Burke, Rowena James and Jannet Bancroft. Standing from left are Sylvia Savery, Shalene Trott Brown, George Jovanovic, Pamela Bartley, Bruce Abrams, Mary McCallan and Pandora Clemons. Absent is David Mason LEFT: Having given between 5 and 10 years of service each at American International Company Ltd. are, (seated from left), Janeigh Trott-Fadda, Sonia Swan, Coral Correia and Nichole Bean. 1/2/2010
  5. 5. The Royal Gazette Page 5 of 5 Standing from left, Jenny Barclay, Gina Wilkinson, Robert Gillies, Brain McNamara, H. Bernice Tucker, Joanne Flood, Rhonda Paul, Moira Viera, Malodie Julio, Thomas Leishman and Donna M. Clarke. Absent are Janis Dunstan and Karen Packwood Other features: » Print this article » View related stories Tip a friend Message: 5 Your name: Your e-mail address: 6 To e-mail address: Send Copyright ©2010 The Royal Gazette Ltd. For more info or comments please contact 1/2/2010