AIG Restructures Management

Ever since Peter Hancock took over the role of Chief Executive Officer of American International Group, Inc., there have been some profound management changes. His most recent alteration included having the company’s Chief Financial Officer, David Herzog, leave the company. Herzog is being replaced by the Chief Risk Officer, Sid Sankaran. Another recent change is the stepping down of the Head of Commercial Insurance, John Doyle, with CEO of the Americas, Rob Schimek, taking over.

The reason that the leadership began to be dramatically restructured when Hancock took over last September had to do with AIG’s results. For years, the company has had high claims costs, and the company was forced to recover from a bailout around the year 2008. Hancock announced during that time that he wanted to dismiss at least 23% of the people in leadership positions.

He is following through with the plan, but whether or not the restructuring will be beneficial to the company as a whole is still a question.

Herzog’s departure was more of a shock than that of Doyle. Doyle was not getting expected results in his position, but Herzog was a real asset to the company. He was recognized as a great CFO by the United States Treasury Department, and helped pull AIG out of their bailout. Many experts believe that asking Herzog to leave was a mistake by Hancock. However, the rumor is that Herzog will take the millions he made in his position at AIG and retire, although he has not commented on the matter

Activist investors are trying to force Hancock to break up the company into smaller parts, and that is exactly what Hancock is trying to avoid. The investor Carl Icahn has been especially vocal on this matter. He has the idea that AIG should have a life insurance sector, a property coverage sector, and a mortgage sector, all separate from one another. Hancock has not adhered to this demand.

Many other changes are taking place on the leadership level of AIG. The leadership team as a whole is becoming a lot smaller, and those already in leadership positions are taking on more responsibility in the United States and overseas.

Will this leadership overhaul help AIG in the long run? Only time will tell. It is my opinion that AIG has been suffering, so large change is necessary to pull the company out of its slump. Whether or not Hancock is taking the right approach remains to be seen.

For more information on Hancock’s plan, check out Insurance Journal.

London Market Sees Potential Use for Blockchain

The London Market, which is the major international insurance market in the United Kingdom, is undergoing plans to modernize. Part of that plan may include the use of blockchain technology, the main innovation behind Bitcoin, to improve data access and reduce the costs that come with administrative paperwork.

Lloyd’s, a key participant of the London Market held a seminar last week in London to highlight several technologies, including blockchain that could improve or otherwise innovate areas of the insurance market. It’s all part of their plan to modernize the experience of insurance market participants called the Target Operating Model.

Blockchains, which record transactions and protect Bitcoins from double spending, could be used to increase risk-recording abilities, transparency, accuracy and speed in the insurance markets.

Shirine Khoury-Haq, Lloyd’s director of operations told CoinDesk in a statement: “Blockchain has the potential to improve the way insurers record risk, increasing the speed, accuracy and transparency of our processes. As part of the TOM consultation we will be interested to see how blockchain could help us resolve some of the challenges facing our industry.”

Two use-cases for blockchain were floated at the seminar. The first was for blockchain-powered “deal rooms” wherein documents would be securely shared and logged. The second was for a permissioned ledger for insurance markets. The ideas were presented by Michael Mainelli, executive chairman of Z/Yen, a think tank and venture capital firm and a professor at Gresham College.

The so-called “deal rooms” would completely revolutionize the way business is done in the London Market. Currently, markets rely on physical proximity to one another, personal relationships and paper documents to get deals done. The use of a digital deal room could make the London Market more attractive to international business, which would drive significant growth for both Lloyds and the market itself.

“If we were sitting in Hong Kong right now and decided to create a global insurance market,” Mainelli added. “We could build a quick deal-room and we would automate it from the start.”

A deal room based on blockchain would take out the need to trust an intermediary while providing an accurate record of the documents shared by all participants. The database would be unalterable and owned by nobody. It’s simply an accurate ledger of who sent what to who and when.

Other technologies were presented at the Lloyd’s seminar including peer-to-peer lending and alternative cross-border payments. The goal of the seminar was to simply debate the risks and rewards of technological disruption. The Target Operating Model is a five-year plan to “support the ease of doing business” in the London Market and technological innovations like this could be an important step.