Join The Financial Reform Battle In D.C. McGavick Tells Execs

NU Online News Service, Nov. 12, 2:22 p.m. EST

NEW YORK -Michael McGavick, chief executive officer of XL Capital urged insurers who believe in American-style capitalism to take part in the "profound debate" about financial reform now underway in Washington.

He told a meeting of executives here that industry representatives need to propose their own corporate governance proposals, and should start with real transparency and clarity, said Mr. McGavick.

His remarks came at the National Underwriter/Ernst & Young 21st Annual Executive Conference for the Property and Casualty Industry.

Mr. McGavick said the free enterprise system dominated in America until this global economic crisis. Now, he said, there is "deep doubt" about whether the country's style of capitalism can endure.

Mr. McGavick tied the issue to five principles that he said CEOs should use to guide their companies in general, and through the economic crisis specifically: a narrow focus on an organization's strengths, direct accountability and public action for mistakes made, acting every day "like you only get one bite at the apple," investing in the future, and communicating effectively.

While the industry should adhere to these principles, Mr. McGavick noted that it is the government, and those who believe in government-centric solutions particularly, who are effectively adhering to these five principles while private enterprise executives are in disarray.

Regarding a government focus, Mr. McGavick said those lawmakers now proposing big government solutions have been planning them for 29 years, and they are not wasting any time moving forward with their plans.

The insurance industry, by contrast, is pushing no plan and is lacking focus in the debate, Mr. McGavick said.

On accountability, he said the government has effectively forced the free enterprise system to take "an enormous amount of medicine." The insurance industry in particular, he stated, is being threatened by proposals in Washington, but is not acting like it.

The industry is instead trying to act like this is not their fight because they did not cause the financial problems at issue, he said.

But the industry should be getting out the truth that it has performed well, and that proposed solutions should be based on knowledge learned from the successes in property & casualty insurance rather than the failures of banking, according to Mr. McGavick.

Discussing companies performing as though they have only one bite at the apple, Mr. McGavick said this is insurance executives' chance to stand up for themselves, but instead they are cowering. He said executives should be unafraid in Washington. Members of Congress, he stated, pounce when they sense a witness is scared. Those types of witnesses "invite a feeding frenzy," he said.

But in reality, members of Congress are "scared to death," he said, because they know the witnesses generally know more than they do on a given subject. "Their risk is being embarrassed," Mr. McGavick said.

With respect to investing in the future, those in the government who want to change financial services are ahead again, according to Mr. McGavick. They have made proposed reforming or creating many regulatory agencies. The industry, by contrast, is "just reacting."

Concerning insurers' communication abilities, Mr. McGavick said, "We get an F." No executives want to go to Washington, he said, and executives in general are afraid to lend their voices to the defense of the industry.