In “Alice In Wonderland,” Alice fell down a rabbit hole, thus beginning a bizarre, surreal journey. Now we all know how Alice felt, after a week that began with the death of Lehman Brothers, quickly moved on to the nationalization of American International Group, and ended with the initiation of a hastily drawn, massive federal bailout plan before Congress, with warnings that inaction could mean a global economic meltdown.
As insurance journalists, our focus is on the AIG component. How did the biggest impact player in the industry end up on the edge of a cliff this week? Maurice “Hank” Greenberg–the company's legendary builder, who got booted out as chief executive over an accounting scandal in 2005–had it right, blaming it on a breakdown in risk management.
An insurance organization, he professed, is naturally risk averse, and if he had been there, he would have made sure this didn't happen. AIG, he acknowledged, had a small amount of subprime investments on its books while he was there, but he would have seen the danger and never let this happen.
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