Dear Friend,

My old boss used to observe wryly that it’s a strange and endearing human characteristic that we all end up believing what we think we need to believe when we need to believe it.

Let me explain — the dotcom investor buys shares in a company valued at a thousand times paltry sales because he is so sick of seeing the prices of dotcom shares double and quadruple that he finally gives in. Even though he doesn’t have a clue why he’s doing what he’s doing, the guy somehow convinces himself that this is a new era and that in any case, “stocks always go up in the long run”.

The same can be said of a property investor buying house at the height of a speculative bubble — believing that “property always goes up”. Even though history will show that rapid price rises are almost always unsustainable and followed by painful falls. Buying into such bull markets may be a 100% gold-plated sucker’s strategy, but it doesn’t stop people believing all sorts of strange things when it suits them.

Such popular beliefs are transient and almost always evaporate in a puff of smoke once they are shown up for the wishful thinking that they really are.

So on to the reinsurance game — and we’ve got our own fair share of wishful thinkers out there — in fact in reinsurance we probably have quite a lot more than our fair share.

In the reinsurance version of popular beliefs and delusions, a reinsurer who has been badly hurt by a large loss always says that there will be no new start-ups coming in to compete with him (but in the same breath always adds that rates are sure to skyrocket now that capacity has been dented).

Why does he do this? Because he needs to — no-one in a recovery phase, having to pay out and replace 20-30% of capital wants to see legacy-free competitors sharking in on juicy-looking business. Hence the cries this autumn of “no class of 2005”.

Well, surprise, surprise, there is a class of 2005 — four so far — Don Kramer’s Rosemont Re II, Safe Harbor (or Chubb Re II), Amlin Bermuda and Lancashire — the new reinsurer to be headed by Richard Brindle. And there are five if you count Jeffrey Greenberg’s as yet unnamed and unconfirmed new venture.

Brindle was previously one of John Charman’s star underwriters on Lloyd’s syndicate 488/2488 and was reported to have pocketed £20m when Charman’s agency Tarquin was bought by ACE back in 1998. He then retired and I have no knowledge of what he’s been doing since then.

If I ever had £20m, I’d retire too — but I suppose after seven years I’d probably get bored, especially if I was as good at what I do as all accounts of Richard Brindle’s underwriting prowess suggest.

Maybe he bumped into John Charman in a departure lounge and felt a sudden pang of regret that he hadn’t joined the class of 2001 when he had the chance?

Well, he’s taking his chance now — and good luck to him. In fact, good luck to everyone — this market is looking more complex by the hour.