9/11 Impact on Marsh & McLennan Cos. Nothing Short of Devastation

Jeff Greenberg

Marsh & McLennan Companies Chairman and CEO Jeff Greenberg remembers all too well those images of Sept. 11, 2001.

Greenberg knew something had gone terribly wrong in New York City that Tuesday morning. He recently chatted in an e-mail interview with Insurance Journal about that day, how Marsh families were impacted, and how the company has rebounded despite the terrible losses, as the third anniversary of the attacks approached.

Insurance Journal: Where were you on 9/11 and what were your first reactions when you heard the news?
Jeff Greenberg: On 9/11 I was at MMC’s midtown headquarters, which has an unobstructed view of lower Manhattan. I saw the smoke rising from One World Trade Center and the fireball erupt from the second tower. My initial reactions were shock, horror, and what the meaning of the attacks would be for MMC. Were people getting out of the buildings? Had we lost people? Which clients were affected? These questions and many others were on my mind at a time when our communications were down and news from the outside world was confused and contradictory.

IJ: How many Marsh employees were lost and was everyone accounted for?
Greenberg: Two hundred ninety-five MMC colleagues were lost in the attacks of Sept. 11. On that day, 1,908 MMC colleagues worked in or were visiting our offices in the twin towers of the World Trade Center. We had one employee who was a passenger on one of the hijacked planes.

IJ: How did Marsh respond initially to the event in assisting loved ones of Marsh employees killed or injured in the towers?
Greenberg: After the attacks, MMC responded to the immediate needs of families in the following ways:

* We converted a part of one floor of our headquarters into an emergency communications center to gather and disseminate information about who was safe and who was missing.
* MMC colleagues went to major hospitals and the city’s family registration center to get information.
* We arranged for grief counselors to be available at MMC headquarters and elsewhere.
* We established a family assistance center at a hotel near our headquarters to provide information, emotional support, and benefits counseling to families of missing colleagues.
* For out-of-town families, including some from overseas, MMC arranged for hotel accommodations, transportation, and, when necessary, translators.
* We established an online message board on our Web site, which enabled families and friends of lost colleagues to share information and emotional support.
* We held a memorial service at Saint Patrick’s Cathedral, which was attended, in person or by broadcast, by some 25,000 people.
* Longer-term support for families of lost colleagues is discussed later.

IJ: As great as the human loss was for Marsh, what kind of financial impact did 9/11 have on the company?
Greenberg: The sudden death of 295 friends and co-workers was the worst loss in our 133-year history. But because we are a very large company—we had 58,000 people around the world in 2001—the purely business impact of Sept. 11 was largely confined to our offices in downtown Manhattan and did not have a large effect on our global operations. As we reported in our 2001 annual report, MMC recorded a pre-tax charge of $126 million for costs related directly to Sept. 11, which were not covered by MMC’s insurance program.

IJ: How has Marsh rebuilt since 9/11 and what has the company done for survivors of those who were killed?
Greenberg: Rebuilding” the company was really not our challenge. Although disaster recovery plans and our dedicated technology staff helped us restore data, critical applications, and telecommunications, we did make operational changes—e.g., not placing critical facilities on the same power grid. We have also made substantial investments in security programs to protect our colleagues.

Longer-term support for families of lost colleagues included:

* Assigning a relationship manager to each family who served as the single, primary point of contact. These family relationship managers helped people get answers to questions and access to benefits, financial, and legal resources from within MMC and through other private and public resources. We still maintain a small, dedicated team at Marsh to help family members with any issues. We have remained in contact with most of the families.
* Providing unlimited psychological and emotional counseling from September 2001 to September 2004 and referrals to appropriate longer-term resources for families of victims.
* Enhancing benefits—e.g., providing a special payment equal to each lost colleague’s salary for October through December 2001 and other cash benefits. Families received full health insurance coverage for three years, after which they will have access to participate in MMC’s plans at their own expense for as long as they wish.
* Contributing $20 million to establish the MMC Victims Relief Fund for families of lost colleagues. The Fund attracted an additional $5 million in donations from employees, clients, and others. The contributions were dispersed to families early in 2002.
* Retaining an outside specialist company to provide financial counseling on investment, tax and related issues.
* Petitioning the U.S. Justice Department and members of Congress regarding various proposed regulations under the Sept. 11 Victim’s Compensation Fund of 2001 for the benefit of the families.
* Preparing for each victim’s family an individualized report that contained information on position responsibilities and extensive details on compensation and benefits. This information was required for anyone who made an application to the Sept. 11 Victim’s Compensation Fund of 2001.
* Complementing MMC’s online message board for friends and families on its Web site with a virtual memorial for posting personal tributes and remembrances.
* Dedicating in 2003 a permanent memorial to the victims in the plaza adjacent to MMC’s headquarters in New York City.

IJ: Overall, how do you think the insurance industry came out of 9/11, and, God forbid, could it survive another event of such proportions?
Greenberg: The insurance industry came through 9/11 very well. The period of disruption was relatively short, and capacity returned to most markets fairly quickly. In order to analyze the impact of 9/11, you must distinguish between changes in the last three years that were directly related to 9/11 versus the other factors (prolonged soft market, tough loss environment leading up to 9/11, asbestos and environmental issues, corporate governance scandals, poor investment climate, etc.). In that context, 9/11 might be seen as the capstone to what was already a market in trouble and that in many lines was already in transition.
What 9/11 showed is that the industry dynamics mean that a large loss can be absorbed because it will be spread throughout many insurers and reinsurers, and no single insurer will bear the entire brunt. As a result, another $30 billion loss would certainly be withstood, although the market has not yet returned to financial health.

IJ: Despite economic rivalries, do you think 9/11 helped bring the industry closer?
Greenberg: I don’t think 9/11 changed the competitive dynamic of the industry; it is still as fierce as ever. In the immediate aftermath of 9/11, the industry (particularly in the United States) did pull together. We received tremendous cooperation from senior executives in the industry when we asked for assistance given our loss of files and the disruption that the event caused. They held cover and extended policies and generally were supportive and flexible until we were fully operational.

IJ: Where do you see Marsh in the coming years as far as its position in the industry?
Greenberg: In the coming years, we expect MMC to strengthen its leadership position in risk services. The mission of that business is to help clients reduce the total cost of risk to their enterprises. Helping clients to affect risk transfer remains fundamental to managing risk, and it underlies much of Marsh’s work for clients. But our strategy has evolved to encompass a much broader set of services around risk management. We see attractive growth opportunities in all client segments and geographies.