Spitzer Nominates Dinallo as Insurance Chief
Insurance Fans,
I know one and all have anxiously awaited word of Eliot Spitzer’s choice for New York insurance superintendent. ITP certainly has.
Actually, most non-Notes! ™ readers probably don’t care, but the choice of Eric Dinallo suggests an interesting national political confluence on insurance that, if I am the insurance industry, I am keeping an eye on. (Cue ominous string music, tracking shot of lone woman walking down shadowy, rain-swept street, trash blowing around.)
An alumnus, like Spitzer himself, of the office of legendary Manhattan D.A. Robert Morgenthau, Dinallo polished his back-stabbing skills at the white-shoe firm of Paul Weiss before being named by Spitzer to head the AG’s Investment Protection Bureau, the office that turned upside down such lightweights as Merrill-Lynch, Citigroup, Credit Suisse, Lehman Brothers, Morgan Stanley, J.P. Morgan and the rest of Wall Street. Spitzer, of course, would also take on Putnam and the many-trillion-dollar mutual-fund industry, Dick Grasso and the New York Stock Exchange, not to mention Midwestern polluters and the music industry. After Dinallo left in 2003, the office tore through the insurance industry, including the world’s largest commercial brokerage, Marsh & McClennan Cos., forcing the ouster of Jeffery Greenberg, scion of industry legend Hank Greenberg, then Greenberg himself from A.I.G., the largest, most successful and most politically powerful insurance company in the history of the world, and I’m not kidding. Also put in Spitzer’s schvitz, Warren Buffett himself.
Now, whatever you think about Spitzer(FB), put it this way: the guy now running Marsh is Spitzer’s former boss at Morgenthau’s office, and Hank Greenberg had to have his Asian art collection shipped to him in boxes from A.I.G. headquarters at 70 Pine Street.
While Dinallo did not take part in the insurance investigation, I assume he read the papers (hopefully, The Washington Post’s gritty coverage of the scandal) from his office at Willis Group Holdings, the third-largest commerical insurance brokerage, where he was general counsel, learning all about insurance.
The point: the insurance regulatory revolving door is jammed in New York State. Someone has entered through the skylight, and he’s no dummy and neither is his boss.
What’s that got to do with Katrina? Actually, nothing. But as regular Notes readers know, big things are also brewing in Washington. Rep. Gene Taylor, the Mississippi Democrat, decorated U.S. Coast Guard search-and-rescue commander and Robert Redfored look -alike, is leading insurance reform efforts in the House. You doubt ITP? Check out the first four items on his Congressional home page:
“1. Investigate the Katrina claims practices of insurance companies that contract with the National Flood Insurance Program.
2. Repeal the federal antitrust exemption as it relates to price-fixing, bid-rigging, or market allocation in the market for property insurance.
3. Establish all-perils disaster insurance coverage (ITP says: yes!) backed by the federal government (ITP says: ‘don’t do it!).
4. Establish stronger federal oversight of property insurance practices.”
Meanwhile, Trent Lott, who, like Taylor, is also suing his insurance company, is now Minority Whip.
Finally, a big chunk of the industry iself is looking to gut state regulation via the National Insurance Act of 2006.
And ITP War Eagle wheels in the sky above, turning in a widening gyre.
FB=”False Balance.” You had to be there to appreciate how an office that traditionally dealt with coop disputes and bogus phone cards was enlarged to challenge and overturn some of the most longstanding and lucrative practices in U.S. finance, practices that everyone knew were unkosher, but no one, including, I’m sorry to say, my business, the business press, did anything about until Spitzer made it safe to pile on. These include Wall Street’s bogus, research; favored treatment for some mutual fund customers at the expense of others; excessive secrecy, log-rolling and ineffective oversight at the Big Board; and legal and illegal payments by insurers to brokers (like Marsh) in return for steering them corporate business. In any case, Spitzer’s winning margin in the governor’s race makes him formidable nationally, too.