Martin Sullivan

Martin Sullivan was a long-time insurance industry veteran when he was named CEO of AIG in 2002.  The insurance business that Sullivan started in as a 16-year old clerk in AIG’s London office in the 1970s bore no resemblance whatsoever to what AIG had become in the 2000s.  Rather than investing insurance premiums in conservative stocks paying good dividends, AIG – particularly the AIG Financial Products (AIG FP) group in London – routinely made highly leveraged speculative “bets” on investment outcomes via financial derivatives.  Sullivan – who was well-liked wherever he worked and seemed to have an easy going nature – was too willing to defer and delegate to so-called experts.  The most fatal example of this deference to “experts” was Sullivan’s almost complete reliance on complicated financial models developed by Gary Gorton (#27) of Wharton.  These models incorrectly showed that the risks AIG FP was running in its derivatives trades were actually quite mild.  It was an enormous miscalculation and resulted in the sinking of AIG.  

Additional Information:

See Joseph Cassano (#9) for the head of AIG FP.  See Tim Geithner (#24) for the size of AIG’s enormous losses.  See Gary Gorton (#27) for more information on AIG’s trade in derivatives.