From the small knoll on which it commands about three acres of land, the AIG Building at 29 Richmond Road has presided over one of Hamilton's busiest junctions for nearly 40 years.

Over the decades, this intersection of Richmond, Bermudiana and Par-la-Ville Roads has undergone drastic changes that are emblematic of Bermuda's own transformation. The area was once a peaceful crossroads on the periphery of the City. It was chiefly distinguished in earlier days by a train station and a car showroom, and later a cinema-now all vanished, essentially without trace. The area, like so much of Hamilton, would today be simply unrecognisable to older generations of Bermudians.

At the crossroads of Church Street and Par-la-Ville Road, the world's largest offshore law firm is now headquartered. Bermuda's two biggest banks have significant buildings nearby. An insurer now operates in a new building where a much-loved Chinese restaurant stood for ages. The only open space is a concrete field occupied by the petrol pumps of the '24/7', a gas station and convenience store, to the west of which sits the AIG Building, behind a well-manicured garden.

Although it still abuts the City's western boundary, the junction now leads into Bermuda's equivalent of Wall Street. In the capital of what were once described as the "Isles of Rest", hard work and enterprise are now the watchwords. In the past 60 years, Bermuda has indeed become a '24/7' economy, delivering a standard of living unequalled, on the average, anywhere in the world. The AIG Building has overseen this astonishing metamorphosis both physically and literally.

Predecessor companies of American International Group, Inc. (AIG) arrived in Bermuda in December 1947, at a time when Bermuda's partnership with the financial services industry was not yet dreamed of. The private use of motor cars had only just become legal on the Island. Taxation and the regulation of business were on the increase in many quarters of the globe, as politicians sought to raise the capital necessary to resurrect their economic charges; this was especially true of Britain and of Bermuda's closest neighbour, the United States.

As the rules of the game grew stricter following the War, Bermuda caught the attention of Cornelius Vander Starr, or C.V. Starr, as he was universally known. He was the founder of the insurance group that became AIG. Starr had headquartered all of his American business in New York City and was in need of a similar focus for his international operations. By opening an office in Bermuda, Starr once again demonstrated that his thinking was ahead-in this case by decades-of everyone else's.

Starr's choice of Bermuda can be said to have inaugurated the Island's international business financial services sector, although no other company kept pace with Starr's early development of the Bermuda insurance market, and it would be 40 years before Bermuda became more than a secondary market.

The company's present-day site at Richmond Road was selected after 20 busy years in Bermuda. The original AIG Building was treated to a proper Bermudian roof-wetting ceremony commemorating its completion in 1970. And, like the crossroads nearby, AIG's Bermuda operations became a landmark by which to measure the pace of Bermuda's progress. During the past six decades, AIG has enjoyed an informal partnership with Bermuda, based on the notion that what is good for one is good for the other. So it has proved.

AIG today

Not only is it, by some measures, one of the half-dozen biggest companies in the world, but AIG is distinguished globally as one of the very largest insurance and financial services organisations.

For the year ended December 31, 2006, on a consolidated basis, the company reported net income of $14 billion on revenues of $113 billion, or $310 million a day. Total consolidated assets at December 31, 2006 stood at $979 billion, representing a nearly 15 percent increase from the prior year-end. Total consolidated shareholders' equity stood at $101.7 billion.

Today AIG has operations in more than 130 countries and jurisdictions. No other financial services provider possesses such all-encompassing property/casualty and life insurance networks. AIG companies command a global lead in retirement services, financial services, and asset management. The list of market segments in which it competes from a leadership position is extensive.

Origins

And yet, "shoestring" is a word that could be applied to the global giant's origins in Shanghai, where C.V. Starr opened a small insurance agency in 1919. AIG is unique in this respect amongst American corporations: it was the first "reverse" US multinational, and the only one with exclusively Chinese roots.

Very quickly after his arrival in Shanghai, Starr linked up with a fellow Californian by the name of Frank Jay Raven, then a businessman running a real estate company with a banking and insurance division. At the age of 27, Starr bought the insurance arm from Raven and founded his own business, American Asiatic Underwriters, in Shanghai.

Starr then began to persuade US insurers to employ his company as their representative in China. Within 10 years his enterprises would run established offices and agencies across China and Southeast Asia.

C. V. Starr

A definitive portrait of the AIG method in the early decades emerges from Starr's business conduct.

In 1921, in a typically unorthodox undertaking, he established the Asia Life Insurance Company to sell life insurance to the people of China. It was a soundly calculated demonstration of Starr's innate business sense, and became quite successful. There was barely any competition in this enormous new market, since other foreign insurers, playing it safe, had either not noticed it, or had chosen to ignore it.

When he founded Asia Life, Starr generally hired individuals with little or no insurance experience but with an indefinable business sense that he recognised when he saw it.

Similarly, he followed his instincts when he opted to hire locals, including, and especially, management.

These tactics presaged AIG's methods in Bermuda a quarter of a century later: the company practiced Bermudianisation long before the term was invented, and, in the process, schooled individuals who would go on to become some of the best-known and highest-achieving local insurance executives.

In 1926, Starr opened his first office in the United States, when American International Underwriters (AIU) set up shop in New York. To begin with, Starr concentrated simply on building and diversifying his domestic presence.

Finally, in 1939, with the long-simmering conflict across the Far East now erupting into global war, American International prudently located its headquarters in New York.

Two seemingly disparate developments in Bermuda in the mid-1930s provided the ingredients necessary for all that was to follow.

In 1936, the first "exempted" company was formed on the Island, using a formula that would allow companies not majority-owned by Bermudians to do business from, but not in, Bermuda. The "exempt company" has been the building block of the financial services sector ever since.

The other key step forward was Bermuda's foray into air travel, which began in 1937, with service to and from the Island starting with New York City. The New York to Bermuda mail and passenger service drastically cut the travel time between the two down to a matter of hours, rather than the days taken by steam-liner. Tourism was on the rise and Bermuda was attracting more American notice generally.

Although the war would throw a severe damper on tourism, it brought large numbers of Americans to the Island, in the form of US troops and the American bases; an international airport would soon follow. Bermuda's potential as a business centre was gradually becoming apparent to a few smart people, the leaders of the then relatively small group of companies that did business around the globe, principal among them the oil companies.

The isles of rest

When Starr visited Bermuda, he found the island comfortable and convenient. The tax holiday Bermuda offered, combined with the security of English law, in a land just a few hours flying time from New York City, made for an irresistible environment.

This new air service effectively made Bermuda just a stone's throw from the United States-and the Island's seemingly guaranteed political and economic stability was something of a rarity in the world at that time. Best of all, Bermuda offered foreign businesses an exemption from most of its regulations, with the proviso that they conduct no trade within the Island itself. Hard on the heels of an office established by Shell Oil, American International was the first international insurance company to set up an offshore base in Bermuda. Starr and his Bermuda staff were the first managers of a brand new industry for the Island.

That American International was embarking in Bermuda on a path no other insurance companies had trodden did not deter Starr. Rather, it encouraged him. His enterprise had always made a point of pursuing business in places others either didn't want to explore or didn't know about to begin with. His decision to run American International's non-US business from Bermuda was a key moment in the Island's history, though it was not seen as such at the time, if it was noticed at all.

In contrast to the present day, when the activities of giant insurance companies are topics of discussion in every corner of the Island community, and the daily newspaper has a section devoted predominantly to international business matters, it is doubtful whether, in 1947, anyone other than a few legislators would have even noticed that American International had arrived.

Foundation

At the heart of Starr's thinking was the need to pull together what had rapidly become a far-reaching collection of enterprises. The organisation needed to consolidate. The New York headquarters was to handle the North American affairs of the business, while international operations would be headquartered offshore. Negotiations with the Bermuda Government proceeded smoothly, and on December 16, 1947, Parliament enacted The American International Company, Limited, Act, 1947.

Ordinarily, foreign ownership of Bermuda-registered companies was restricted to a maximum of 40 percent, but the Bermuda government granted exemptions that eventually gave birth to an offshore insurance industry, with ramifications for the global economy. The new company held its first Board meeting on January 16, 1948.

Starr planned for two companies to be managed entirely from Bermuda. American International Underwriters Overseas, Limited (AIUO) would act as the parent for all the American International Underwriters (AIU) agencies selling insurance outside the US The life insurance companies, meanwhile, fell under the administration of American International Reinsurance Company, Inc. (AIRCO), which would also manage their investment portfolios, and act as a professional reinsurer for both AIG companies and third-party risks.

Just as he had done elsewhere, Starr's practice was to hire, train and promote local people. Initially, a small Bermuda staff was hired, and in its first months the fledgling office concentrated as much on legalities as it did on the prospects for insurance. Three hundred new jobs would be created by the middle of the 1950s, an extraordinary growth pattern that would see American International become one of Bermuda's largest private sector employers.

It took time to consolidate American International's extensive agencies, and to establish the Bermuda office in the Woodbourne Building on Pitts Bay Road, west of Hamilton. A further Act was passed by Parliament in 1951, making American International the first and only exempted company at the time with the right to purchase Bermudian real estate. Though it would not choose to exercise this option for close to 20 years, American International's Bermuda operations began to expand quickly from this point forward, and additional office space soon had to be leased in the Outerbridge Building next door.

By 1953, the Bermuda operations had grown to the point that Starr nominated Ernest E. Stempel to manage them. Stempel would stand at the helm of American International's Bermuda business for the next three and a half decades, making him one of the most significant figures both for the company and for Bermuda's developing international business industry.

He was a leading force in the formation of the International Division of the Bermuda Chamber of Commerce, and served as its chairman for several years. He would head many of AIG's Bermuda operations in various senior capacities, among them the office of vice chairman, in charge of the group's worldwide Life Division. He also chaired a number of life insurance subsidiaries, including American International Assurance Company, Ltd. in Hong Kong and The Philippine American Life Insurance Company, as well as AIRCO.

Starr's policy of hiring local management was applied vigorously. Bermudians Hal Dale, Jack Lancaster and Joseph C.H. Johnson were among the first to join the company in the 1950s, unknown youngsters who would go on to become men of legend in Bermuda's corporate history.

American International was still the only insurance operation of any scale to be based in Bermuda, and would remain so until well into the 1970s. It became the template for many other Bermuda-based insurance companies.

AIRCO was integral in pulling together the American International Companies. The company's domain was the management of life insurance. However, since it was also legal for a life company to bring its cash reserves from other countries into Bermuda, AIRCO quickly accrued significant liquid resources.

In 1952, AIRCO took a majority interest in Globe & Rutgers Fire Insurance Company. Included in the package were American Home Assurance Co. and The Insurance Company of the State of Pennsylvania. The latter was a prestigious name: the company was the second-oldest of its kind in the US, having been founded in 1794.

In 1962, Maurice Greenberg was appointed president of American Home, putting him on the path that would see him elected president and chief executive officer of the Starr companies five years later. Stempel assumed the presidency of AIRCO in 1963, by which point the company had become central to the group's corporate structure.

The AIG Building

1967 ushered in a sea change for American International's global corporate structure: the wholly-owned American International Group, Inc. was created by AIRCO to hold the shares of the American insurance companies. AIRCO held the controlling majority of shares in AIG.

Meanwhile that year, Jack Lancaster was elected president of American International Company, Limited in Bermuda, while Joe Johnson, who had first joined AIG as a trainee accountant, took on the position of Assistant Secretary of American International Underwriters Overseas, Limited. Johnson would go on to become president in 1976.

1967 was also the year in which American International publicly declared its intention to erect a building of its own in Bermuda, with all local operations to be combined under one roof. AIG turned its attention towards the western edge of Hamilton.

The Richmond Road site was chosen, and with the acquisition of four adjacent lots, the company now owned three acres of Bermudian land, on a little hillock overlooking what would, some decades later, become one of the city's prime slices of real estate.

Management transition

C.V. Starr, in declining health, turned over the presidency to Maurice Greenberg in 1968. Starr died in his Fifth Avenue apartment on December 20 that year, at the age of 76. AIG then embarked on a new phase of acquisition and consolidation. The company went public in 1969, with its shares initially listed on the NASDAQ Over-the-Counter market.

Bermuda's exempted company business was then starting to gain impetus, with what were now known as "captive" subsidiaries being formed in droves, following the introduction of the concept in the early 1960s.

Captives are essentially vehiCaptives are essentially vehicles for self-insurance, an arrangement whereby corporations can finance their own risks, bypassing the traditional insurance market.

Having been honed in Bermuda, captives were in the early 1970s poised to become a major growth industry. In the late Sixties, however, the specialised use of offshore bases as captive domiciles remained a little-understood novelty.

1969 also marked American International's golden anniversary, with the Bermuda companies celebrating their 21st year of operations. At this point, AIG was able to repatriate much of its life insurance management to the United States, which reduced the Bermuda staff by about a third. Many Bermudian employees transferred to the US along with the companies they managed. Once again, AIG led the way in establishing a trend that today we take for granted: exporting Bermudian talent to the larger world.

In 1972, L. Michael Murphy, who had previously worked in the field of international tax, joined American International in Bermuda as Director and General Counsel of AIRCO. His appointment led him to become another instrumental figure in the partnership between AIG and Bermuda, not least in key alterations to the Island's evolving business legislation.

Murphy's advice, under the auspices of the Insurance Advisory Committee, was crucial in the drafting of the Bermuda Insurance Act of 1978, which made the Island highly favourable to overseas insurers.

AIG, AIRCO merge

In 1978, AIG decided that AIRCO and AIG were to be merged; the subsidiary, in effect, would consume the parent. The Bermuda companies were henceforth wholly-owned subsidiaries of AIG, with Stempel assuming the post of chief operating officer of AIG's worldwide life insurance network. At this time, much of the administration of the overseas property and casualty business was relocated to New York.

Most recently named president of American International Underwriters Overseas, Ltd., Johnson now found himself promoted to president and chief executive officer and Treasurer of American International Company, Ltd., which held the reins of all the Bermuda entities on AIG's behalf. He would hold his new position for a further 27 years.

In 1980, Johnson was also appointed a member of the Insurance Advisory Committee (IAC), consisting of senior executives working in the Bermuda insurance and reinsurance industry. It advised Government on Bermuda's insurance regulations and the background of companies applying to join the Bermuda community, as well as representing the Island's insurance industry locally and internationally.

Johnson remained on the IAC until the end of 2001. He also chaired the Insurance Admissions Committee, which advised on the suitability of applicants to carry on insurance business in Bermuda, from 1983 to 1988.

Johnson also chaired the International Companies Division of the Bermuda Chamber of Commerce, and subsequently served as president of the Chamber-becoming the first representative of an international business to hold the title. He was invited to join the Board of the Bank of Bermuda in 1985 and was appointed chairman of the bank in 2000.

On stepping down as president and chief executive officer of the AIG companies in Bermuda in 2004, Johnson became chairman. Another Bermudian, S. George Cubbon, succeeded Johnson at the helm. Johnson retired from AICO in 2005 after 50 years of continuous employment with AIG companies.

In the 1980s, Bermuda had again played a pivotal role in American International's development when AIG penetrated previously untapped markets in communist and socialist countries. A series of joint ventures-with companies in such countries as China, Hungary, Poland and Romania, and others where the concept of private insurance did not exist-were incorporated in and administered from Bermuda, underlining once again the importance of the Richmond Road operation to the AIG group.

IPC Re

After the widespread damage caused by Hurricane Andrew in Florida in 1992, a shortage of capacity arose in property catastrophe reinsurance worldwide. Inside a year, eight major property catastrophe companies were formed in Bermuda, including International Property Catastrophe Reinsurance, or IPC Re for short, which was incorporated in Bermuda on May 20, 1993, by AIG and other investors.

AIG also agreed to provide the office space and support facilities in Bermuda, and James Bryce, an AIG veteran, hired the underwriting staff and led the new company.

AIG held its investment in IPC Re until 2006.

Starr Excess Liability

Also in June 1993, AIG was instrumental in the formation of Starr Excess Liability Insurance Company, Ltd. Aside from providing general liability excess insurance, Starr Excess was to become a prominent global supplier of professional liability insurance, such as directors' and officers' (D&O) insurance, coverage that has become increasingly crucial in a highly litigious world.

With the incidence of lawsuits in the business world on the increase, corporate executives needed financial protection against performance-related lawsuits. AIG became a world leader in this line of coverage, which had become an accepted requirement following election to a directorship. Most other insurance companies were reluctant to take on professional risk at that time, but AIG had historically pursued innovative coverage, such as kidnap and ransom insurance, and D&O and other professional lines proved no exception.

In 1998 AIG acquired the remaining shares of Starr Excess, which in 2007 is known as AIG Cat Excess.

The AIG Building grows

Throughtout the 1990s, the environs of American International's main office in Hamilton underwent a remarkable set of changes. Par-la-Ville Road had originally been constructed to facilitate the Bermuda Railway. In the early 1990s, the AIG Building overlooked what was still a fairly sleepy back road of Hamilton. It has since undergone a complete transformation. Times had been good for Bermuda's financial services industry for quite some time, and in the mid-1990s, it overtook tourism to become the dominant pillar of the economy.

Office buildings were sprouting so quickly that it was possible even for locals to lose track of them. White exposed limestone, fenced off with plywood partitions, would suddenly appear in an allotment by the side of a road; equally as suddenly, it seemed, the pits would be filled with concrete, and a metal framework would shoot up, to be clothed over in a matter of months by a new office development.

To maintain the spirit of Hamilton, its Corporation made an attempt to focus development on Par-la-Ville Road North, an attempt that was abandoned only a few years ago, when the entire city was declared fair game for commercial, and more recently residential, development.

American International was not immune to the change. As AIG's staff numbers increased over the course of the 1990s, it became apparent that the Richmond Road headquarters needed to expand. Instead of erecting a new building, it was decided to extend the existing structure to the north, using an identical façade to maintain the building's integrity

Set a good distance back from the main road, the extension of the AIG Building was unobtrusive. The revamped building also by now housed The Bermuda Commodities Exchange, an electronic marketplace for the trading of insurance contracts, which American International played a key role in developing.

The newly extended building was reopened by then-Premier of Bermuda Pamela Gordon in September 1997, to commemorate the forthcoming 50th anniversary of American International's presence in Bermuda.

9/11

On September 11, 2001, hijacked commercial airliners were crashed into both towers of the World Trade Centre in New York and the Pentagon building near Washington, D.C., and into a field in Pennsylvania. The New York attacks collapsed three buildings in the World Trade Centre complex, including both towers, killing almost 3,000 civilians from around the world.

The insurance industry was The insurance industry was especially hard hit that day. Two Bermudians were among the dead, and everyone in the industry lost friends. The events sent shock waves throughout the insurance and reinsurance industry and constituted at that time the largest single loss in the history of insurance.

Shortly afterward, AIG led a group of investors in the formation of Allied World Assurance Holdings, Limited (AWAC), a new insurance company with $1.5 billion in capital. Almost a dozen other companies were formed in Bermuda at around the same time.

AWAC, headquartered in and operating from Bermuda, was created to underwrite worldwide commercial property and casualty insurance and reinsurance. In order to take advantage of the anticipated fierce demand during the forthcoming January 1 renewal season, AWAC declared its intention to start operating no later than December 3, 2001.

By end of 2001, the City of Hamilton was home to insurance assets in excess of $135 billion. The events of September 11 redefined the industry's understanding of risk and brought some $18 billion in new and recharged capital flooding into Bermuda. The Island would meet all its share of the claims from 9/11, some $6 billion in total. Its re/insurance marketplace had passed its sternest test and been reconfigured in fewer than 100 days.

Changing of the guard

Near the end of 2004, Joe Johnson stepped down as president and chief executive officer of American International Company, Limited. He continued his association with AIG for a further year as chairman of the Board of the American International Companies in Bermuda.

Like his predecessor, Ernie Stempel, Johnson had done more than manage AIG in those 50 years. He had become a leading member of Bermuda's international business community. From his arrival at the time of American International's first great wave of Bermuda activity in the 1950s, to his departure with the world of insurance treading uncharted waters with a new sense of the importance of risk management to the world's well-being, Johnson spanned perhaps the most exciting era in Bermuda's history.

His successor was S. George Cubbon. Born on the Isle of Man, he married a Bermudian and became a resident of her native land. Cubbon was hired by AIG and joined the company in August 1981 as Accounting Manager in the Joint Ventures Department.

In 1987, he was promoted to vice president and comptroller of American International Reinsurance Company Ltd., the AIG flagship company in Bermuda. In 1990, Cubbon took the same title at the management company, American International Company, Ltd.

On Johnson's departure, Cubbon took over the role of president of AIRCO and AIUO Limited. In his first quarter-century with AIG in Bermuda, Cubbon has seen AIG grow significantly in Bermuda. The group he joined in 1981 had just over 100 employees. Today, AIG has about twice that many people working in Bermuda.

A new CEO for AIG

In March 2005, Martin J. Sullivan, who at one time managed the company's foreign general insurance business, was appointed president and chief executive officer. He had been named AIG's vice chairman and co-chief operating officer in May 2002, when he was also elected to the AIG Board of Directors.

Sullivan is another life-long AIG employee. He began his career with AIG at age 17 in 1971 when he joined the Finance Department of AIU, the company's non-life operations in the US, as an accounts clerk. Three years later, he joined AIU's Property Department and held a succession of underwriting and management assignments in the US and Ireland. Sullivan steadily moved up through the ranks until 1996 when he was appointed chief operating officer of AIU in New York. He became AIU president in 1997, and executive vice president, Foreign General in 1998. In 2005, Sullivan became only the third chief executive officer of AIG in 82 years.

A second building

In late 2006, AIG demonstrated its commitment to the Island when a second building was erected as an extension to the American International property on Richmond Road, following the style and form of the original.

A people business

By the close of 2006, AIG employed more than 100,000 people in 130 countries and jurisdictions around the globe. The Bermuda office is a linchpin in one of the world's largest insurance and financial services organisations. AIG has about 200 employees in Bermuda, three-quarters of whom are Bermudians or spouses of Bermudians.

AIG's policy of attracting and recruiting Bermudians has always been well known. The Group's Bermuda office has served as a training-ground for the Bermudian insurance and reinsurance industry; many senior members of other Bermuda re/insurance businesses first cut their teeth as AIG employees.

Since 1979, AIG has also made a policy of awarding scholarships for qualified Bermudians to attend the College of Insurance in New York. This institution, of which AIG is a major sponsor, was subsumed in 2002 into St. John's University. The two-year university package includes an offer of an internship with AIG, and recipients have included many well-known Bermudians. In 2006, in line with others, the company transferred the administration of its annual scholarship programme to the Bermuda Foundation for Insurance Studies, of which it had been a founder.

Although its business leadership has been AIG's most obvious contribution to Bermuda, the support, encouragement, training and opportunities it has offered Bermudians, not to mention its employment down the generations, has probably had a greater impact. With AIG's financial and moral support, many Bermudians have been able to gain professional designations and enjoy rewarding and satisfying lives for themselves and their families.

At 60

And so, American International reaches its 60th anniversary in Bermuda.

The company has always been the local market leader, as it has in the larger risk pool beyond Bermuda's shores. AIG was the foundation stone in Bermuda of what has become one of the world's most active insurance marketplaces. More than any other company, AIG characterises what insurance must mean if it is to fulfil its purpose: it is solid and reliable, consistent and steadfast.

Through the visionary leadership and determination of two strong chief executives, and now a third, supported by an army of more than 100,000 dedicated employees and many thousands of agents worldwide, AIG marches on. With a market capitalisation in excess of $165 billion, the company somehow retains the flexibility and continuing focus on innovation of a smaller enterprise.

As Bermuda reinvents itself for the 21st century, AIG is proud of its partnership with Bermuda and the leadership role it has taken in developing the world-beating Bermuda insurance and reinsurance markets, in support of the booming economy of Bermuda and its people.