“But my dear Sir, we are all centre left!” Raymond Barre told me in Paris, in his apartment in Rue de Bagatelle. I was absolutely astounded. I had just told him that I knew Altiero Spinelli, a member of the European Community Commission in Brussels, well during the period when he was its Vice President. Raymond Barre then proceeded to sing the praises of the intelligence of the Italian Commissioner who had founded the European Federalism Movement in Italy, and who, before the war, had been imprisoned by the fascists, as an executive of the communist youth. It had been his friends in Nenni’s socialist party who had presented him as a candidate to the Commission in Brussels. Raymond Barre’s tone of voice was firm and sincere and I looked at him in awe which must have been very evident, given his reputation as a moderate right winger and Gaullist. Hence the unexpectedness of his statement.
It wasn’t only the indirect confession of my European federalist radicalism that was at stake. There was me, a contributor to the Club of Rome, facing the man, who at the time of the controversy brought on by the report on the Limits to Growth, had publicly taken sides in Brussels against the Club’s theories. My diplomatic instinct getting the better of my courage, I decided it wasn’t the appropriate moment to refer to this matter.
It was the spring of 1973 and in principle I had accepted the offer to become Secretary General of the Geneva Association. The founders had also suggested to Raymond Barre, who had just returned from Brussels, that he become President. His agreement, as much as my final commitment, depended on that meeting.
The discussion lasted more than two hours and ended with another sentence that I’ve never forgotten: “Very well, dear sir, I think I’ll accept and it’s clear that ours will be a frank collaboration. We will truly discuss every important problem without hiding anything from each other”. I rejoiced at such a declaration of commitment to work, seriously accepted, and at the obvious rectitude, balance and good sense of the individual who from that day on I have always considered one of the most remarkable men I have had the good fortune to meet in my lifetime. One who, three years before becoming the French Minister of Foreign Commerce, and then Prime Minister, followed with constancy, friendship, knowledge of men and things, and with lively and sound judgement, had seen all the early ups and downs of the Geneva Association.
Once a month on average he came to the Association’s little office (50 square metres) in Chemin Rieu, in Geneva, to discuss various problems, not counting the telephone discussions or my visits to Paris. It was he who suggested the publication of a series of texts on our research which, following the example of the “Princeton Papers”, was quickly transformed into a quarterly magazine, the “Geneva Papers on Risk and Insurance”. It was he who immediately offered to convene at Geneva the first meeting of the European Risk and Insurance Economists, attended by 8 participants. This initiative carries on today, each year in a different city, with almost 50 European and American participants, chosen from among many candidates.
There were many difficult battles which we had to fight side by side.
1. Risk Management: Key to Economic Development
The Geneva Association, officially known as the “International Association for the Study of Insurance Economics”, had been founded by half a dozen CEOs of large European Insurance companies who felt the need to explore the evolution of insurance faced as it was with great economic, social and technological changes. They realised that something important and new had happened.
Given my experience in industry and at Battelle I had two reference points: on the one hand the economy would favour service activities while on the other risk and vulnerability management would become a key to economic development tout court. When they suggested this work to me, I saw in it a confirmation of my own personal analysis: services plus vulnerability led to “insurance” or – at a more general level – risk management. From my point of view, it was an unmissable opportunity, given my own ideas. But, especially at the beginning, I curbed my enthusiasm: it wouldn’t do to frighten those who wanted to engage me and who could have thought that I was an ambitious “theoretical” intellectual. At Battelle I had learned that one should always understand well the motivation, the level of readiness of one’s sponsors and their ideas. Industry already had a good experience of serious research. I often spent a whole day at Battelle with top executives of IBM or other large companies discussing a proposal on a specific and apparently clear topic in order to be sure of the sense of every single word. Often some of their opinions could be questioned. Insurance – as I soon learned – did not have much experience in professional research. It was necessary to proceed slowly and have patience, lots of patience. But it was a completely new adventure, even though the ground being explored was based on a centuries-old professional tradition.
On the one hand I felt like Buffalo Bill, on the other I didn’t have to deal with a tribe of Indians but with much more refined gentlemen than those in industry, from the economic point of view very conservative – and with good reason. For a very long time they had been used to representing a “secondary” economic activity, outside the great industrial adventures, untouched by the great changes and great whirlwinds. The Geneva Association would rightly become the symbol of this prudent but inevitable movement, which pushed, and today still pushes insurance to the centre of the economic storm zone. It is a real revolution.
Now, on the one hand I observed with great interest the birth of a new institution in some senior insurance executives, on the other it was necessary to remain prudent so as not to finish up just like Buffalo Bill as a clown in a circus. It was necessary to make the new economic facts talk, to carry out investigations, to bring out new challenges. The Geneva Association started out with a great President, full time work, a part time secretary. It was meant to come to an end automatically after three years, unless there was a unanimous decision on the part of the members to continue. This time limit was moved back three times before being finally removed.
All around therefore, there was justifiable scepticism, beginning with the President of Doxa in Italy. At that time this was the leading pollster company and was run by the ex-Dean of Trieste University Pierpaolo Luzzatto Fegiz. The Italian founder of the Association Fabio Padoa had given him the task of interviewing me in order to assess my aptitude. I later read his report: he considered me qualified to carry out the work but didn’t think I would accept such an apparently vague assignment, with so few resources: to organise a “think tank”, a centre of thought on European (later to become world) insurance. I had not revealed all my ambitions to him.
Two months after the start of my work, a French member, Bertrand Percy, invited me to lunch in his company’s premises, and while drinking a glass of excellent Sancerre, he said to me: “My dear sir, you should know that I agreed to take part in the group promoting the Geneva Association out of friendship for the person who asked me. But I see nothing useful in your work and I fear that you won’t have it for long”.
He was a very dynamic and intelligent CEO on financial matters and I am sorry that the implicit challenge did not go well for him and that he had to retire from the insurance sector in recent years.
In a German company at that time they told me that after all the Association cost each partner as little as the cost of a small fire. It was a little depressing to listen to this kind of comment. In compensation there were others like that which I heard from the mouth of an English member, Julius Neave, during a seminar on insurance at Cambridge. In concluding his speech he mentioned the fact that insurance had to open up to the outside world and that the Geneva Association represented an important step in this direction. At last.
With another German member the risk that all would end badly was worse, but all in all it ended in the best of fashions. He too invited me to lunch to tell me, basically, that given its limited means the Association should limit itself to occasionally asking some university experts to intervene for the purpose of supporting some interesting points on behalf of insurance. I obviously thought that he was deluding himself if he believed that I had accepted my employment with the intention of limiting myself to this type of activity. I was aware that what I was doing was taking the correct direction for insurance, an industry that had the good fortune of finding itself in a period in which the economy needed its services, even at the level of economic theory. Making this situation known in some concrete cases was worth more than all the high priced television or other advertising contracts when it came to improving the “image” of this sector. What I gave my attention to was the decisive card that would leave a unique mark in the history of insurance. A card not to be wasted.
In the 1970s the business sector, particularly in the United States, had begun to be aware of the need to keep a close watch on the vulnerability of production and the use of new products. The designation “risk manager” was increasingly more widespread to indicate the function of one who established the balance of a business’s risks, evaluated the totality of existing insurance contracts, decided, or suggested to the Chief Financial Officer – in the majority of cases – how to manage these risks. He also dealt with all matters of security management. This “Risk Manager” could cover part of the risk using external insurance, increasing precautionary and preventive measures; he could also decide to accept some risks without insuring them, or still again create a so-called “captive” company to self-insure their own risks. Often in the latter case the captive companies could reinsure so as not to keep the risks to themselves, something that could create difficulties in the balance sheets in negative years.
Among my first initiatives there was a study – which in part I carried out myself – to assess the state of development of risk managers and risk management in European industry especially in the chemical sector. The insurers’ fear was that risk managers would end up pushing companies increasingly away from external insurance. Along with others I thought that a part of the risk managers’ profession would have developed within industry (they were already organising conventions with 6,000 participants every year in the United States). On the other hand a more refined analysis of businesses would show increasingly greater risks to cover. In any event, it’s true that in the United States half of all insurable industrial risks were dealt with within the industrial companies themselves.
In this, to be truthful, rather modest study, the new situation, in full evolution began to be better identified. It was discussed at a small meeting at which Raymond Barre, President of the Association, and the insurer who had defined my task as that of passing on the orders for texts supporting insurance interests, both took part. The latter was in a bad mood because of this initiative of mine. Later in a restaurant, serving traditional Valais cuisine, in Geneva, he exploded violently against Raymond Barre and me. We were sitting next to each other, literally elbow to elbow. After a quarter of an hour he calmed down and it was possible to finish dinner. The president listened politely, without showing the least sign of impatience and we never spoke about the incident later. Four or five years later, however, that same insurer told me: “I must congratulate you, you did a better job than I could have ever done”. What a satisfaction! I appreciated the fact that often those who criticised us, even ferociously so, took a deep interest in our work from close up and in a certain way helped us to be more responsible. At times it is unpleasant but much more constructive than the attitude of those whose appreciation simply means that they consider it neither useful nor important to read or understand what we do.
2. Studies on Industrial Vulnerability and Risks
Right from the start of the Geneva Association’s activities I set up a series of studies on industrial vulnerability and risks. Japanese and European statistics indicated that the premiums and damages in this sector had been increasing for years, around twice as fast as the rate of growth.
To get down to details I turned to the great research centres of the world such as Battelle, Stanford Research Institute, Arthur D. Little, Diebold and others, saying that they should help me open up a new market for them. In this way I was able to obtain studies at a fairly low price, taking into account the promotional value of what I was asking. In any case it was simply a matter of suggesting that they should make good use of the knowledge they had in certain sectors and review it under the aspect of an analysis of its vulnerability.
The first study of this kind was carried out on vulnerability and the risks linked to computer use. During my time at Battelle, I had met Olaf Helmer in the United States. With his “The Future Institute” he had made his name for having developed the “Delphi” method. This consisted in bringing together a group of some tens of acknowledged experts in a particular sector who were asked some relevant questions. The answers gathered in this way were then passed back to them once or even twice, to give each of them the opportunity to reflect on, and to modify their first analysis. Changes of opinion were frequent and showed that the questions had been considered in depth. Helmer had just carried out a study on computer risks for a Swedish insurance company (Skandia) in the United States. Having come to an agreement with them I entrusted an analogous study to the Diebold office in Paris: they knew the sector very well, had at their disposal the questions prepared in America and the results to compare with. It was the first study in Europe in this field and 3,000 copies of the Geneva Papers in which it was published were distributed, in most cases on request.
This study also suggested the imminence of the great expansion of new computers, particularly of the small and very small ones.
When a member of the Lloyds of London secretariat invited me to lunch, curious to know what this strange Geneva Association was, I had a copy of the Diebold study under my arm. He gave it only a passing glance. He didn’t really know much about professional research. He had never heard of Battelle. He judged people in the old manner, on the basis of their culture and style. He concentrated on the subject of slavery. Fortunately a year earlier I had been to a meeting of the Club of Rome in Dakar in Senegal, and I had visited the building from which the slaves were sent to the Americas. I tried to bring the discussion back to computers and the risks connected to them, but in vain.
Shortly after, it came out that someone at Lloyds had supplied insurance cover to a company that rented out computers to safeguard them against obsolescence, i.e. the danger that the machines bought for hiring would soon be replaced with new, more advanced machines, and they would find themselves with a stock of unusable computers. A reading of our study would have been of help. I was very upset by the lost opportunity, but I didn’t labour the point as I did not want to appear arrogant. In the world of professional research it is not enough to recognize an isolated fact: a mind-set and organization suited to making use of the information are needed. At the end of the day the lunch at Lloyds had been excellent and the gentleman was very courteous and friendly. I would have caused embarrassment over a problem that required maturing over a longer term.
On the other hand, Lloyds completely redeemed themselves in my eyes a few years later, when I had launched some studies on space activities. We had organised a seminar in London with Jim Bannister, with whom we would carry out many initiatives for more than twenty years, on the risks of satellite launchings. A representative from NASA also took part.
I remember a very professional and able Lloyds broker, who had contributed to the cover on a satellite that had been badly placed in orbit. The insurance was paid, but he had the idea and the courage to invest in the recovery of the satellite, thus making a subsequent gain.
Later on, the Association dealt every year with the subject of risks in various fields such as robotics, superconductivity, the packaging industry, storage, and the transportation of liquid gas, even industrial cooking systems and biotechnology.