Chief Legal Officers

CLO Perspectives
February 23, 2018

AIG's CLO Lucy Fato on the Importance of Leadership in the Modern Regulatory Environment


In October 2017, AIG CEO Brian Duperreault hired now-Executive Vice President & General Counsel Lucy Fato to help the company move past legacy issues impacting the business. Duperreault joined AIG in May 2017 and was already charting a new course for the company with the ultimate goal of growing and strengthening AIG.

"It was one of those offers that you just can't say no to," she explains. "It was an exciting opportunity to get AIG back to being the go-to insurance provider in the world and an opportunity to partner with Brian, someone I worked closely with during the turnaround of Marsh & McLennan Companies."

Prior to joining AIG, Fato had already amassed a wealth of experience in navigating particularly challenging legal and regulatory environments. For more than 25 years, including 12 years in-house, she has successfully assisted many global organizations overcome some their most difficult and complex issues.

After spending 14 years at the law firm Davis Polk & Wardwell advising multinational companies on a range of corporate matters, Lucy was hired by Marsh & McLennan Companies (MMC) in 2005 as deputy general counsel and corporate secretary. The company had just reached a settlement with then-New York State Attorney General Eliot Spitzer who had targeted MMC and other global insurance brokers for alleged bid rigging and abuse of contingent commissions. During her tenure, Fato helped to reshape the global legal department, led a complete overhaul of the company's governance practices, and oversaw a legal operations department that reduced legal expenses by over 50 percent.

In 2014, she left Marsh & McLennan Companies to become executive vice president and general counsel at McGraw Hill Financial (now known as S&P Global). Fato's primary mandate was to resolve significant financial crisis-related and other regulatory issues with the U.S. Department of Justice, 22 state attorneys' general and the US Securities and Exchange Commission. She achieved this goal just one day shy of her six-month anniversary allowing the company to move forward and substantially reduce its outside legal spend.

After a year in a dual business and legal role at leading global private investigative firm Nardello & Co., Fato is now part of a senior management team at AIG that is laying the groundwork for long-term profitable growth at one of the world's most iconic companies. Looking to the future, Fato hopes that the company will not only return to its place as the leading insurance company in the world, but that it will continue to find innovative ways to reach its global clients and business partners.

First steps

Since the financial crisis, AIG has become a smaller, more focused insurer, selling 14 of its businesses, with one more in wind-down. Now almost 10 years later, Duperreault, Fato, and other AIG executives are looking for ways to grow.

Fato, in particular, sets the tone that the legal, compliance and regulatory groups she oversees are key assets to the organization. To successfully navigate a stringent global regulatory regime, she believes that her department must be a prudent yet collaborative business partner — and it starts from a project's inception and continues through execution and conclusion.

A primary focus is AIG's General Insurance business, which is the largest portion of AIG's global operations and provides insurance coverage for corporations, including many of the largest in the world, and individuals. AIG does business with nearly 90 percent of the Global Fortune 500 and 83 percent of the Forbes 2000, so providing confidence in their product offerings is top-of-mind.

"It's critical that we instill trust in our customer base, from the individual seeking personal insurance to the Fortune 500 company seeking property and casualty insurance. In addition, it is just as critical to our success that our regulators trust us and have confidence in the company's management team. In my view, this is where my team plays an important role," Fato notes.

To build and maintain trust, regulatory and compliance are key issues for Fato to get her arms around — as AIG operates in 80 countries worldwide. With such an expansive network, Fato maintains that relying on local resources to be the "boots on the ground," is essential to ensuring that nothing slips through the cracks.

"A lot of regulators also require it," she adds. "They want people in their regions that can be accountable, and sometimes that means a business person, sometimes it means a compliance professional, and sometimes it's a lawyer. It takes a lot of collaboration and communication, which is one of the things I'm trying to get up to speed on and encourage."


At AIG, Fato explains that an important measure of success has simply been to be "proactive and not just reactive." For a company with nearly 50,000 employees, getting ahead of potential hazards before they arise is critical.

"There are a lot of times when you see organizations react only when something goes wrong. If someone sues the company, they go to litigation. When something happens with an employee, they go to the employment lawyers. What I want to do is create an environment where everybody in the organization is aware of at least one person in the legal, compliance or regulatory department who can assist them day to day, before issues arise," Fato explains.

While Fato asserts that ethics and integrity have always been an important part of the fabric at AIG, she hopes to bolster the culture and find new ways to make colleagues feel comfortable raising issues or concerns.

"It is important for every employee to understand the ethical considerations of their day-to-day job. I try to ensure that ethics and integrity considerations are a part of regular employee communications, especially if that messaging comes from senior leadership," she notes.

And, considering that AIG is launching more innovative initiatives (e.g., data analytics and artificial intelligence), maintaining compliance in uncharted legal territory is more important than ever been before.

"I'm learning that AIG has always been an innovator. It's not something I would have guessed given that it's an established insurance company that has been around for decades, but it's always been innovative, particularly with regard to the types of insurance policies it provides," she says.

A good example of this is cybersecurity insurance. AIG not only considers its own data protection, but it also provides state of the art cybersecurity insurance and mitigation services to its clients. With 70 percent of respondents to the ACC Chief Legal Officers 2018 Survey stating that data breaches remain a top issue keeping CLOs up at night, Fato maintains that she is thankful for the focus that AIG places on the growing data protection threat.

"The rapidly changing risk and regulatory environment and the strong growth in cyber insurance underscores a deeper understanding by company boards and management of the threat posed by cyber risk. With that has come a growing acceptance of cyber insurance as a critical part of managing and mitigating the risk," Fato says.

Product offerings like these have been an excellent way to showcase the legal department working with business leadership to move the company forward, as opposed to focusing solely on risk mitigation. Fato believes that displaying an outward strategic voice is a surefire way to break the stigma that legal and compliance departments are simply "no" centers.

"I think that there's a common misconception that legal, compliance and regulatory departments just say 'no.' In fact, I think it's very rare that my department would ever give an outright 'no.' It's important for us to show the business that we are flexible, creative and looking to provide viable alternatives," Fato argues.

To that end, AIG created a legal innovation hub comprised of interested lawyers who, in addition to their day jobs, advise the business on the latest developments in technology and innovation. As the hub matures lawyers will be dedicated full time to advising on these issues.

Displaying leadership inside a rapidly expanding company undergoing a transformation is no simple feat, yet Fato does so with ease. In her short time with AIG, she has managed to solidify her department's position by using her strategic voice — coupled with years of experience — to help the company navigate a complex regulatory environment and set long-term strategic objectives for success.

"The future is bright at AIG," Fato predicts.

—by Matthew Sullivan, Editorial Coordinator, ACC Docket

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