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Sidewalk analysis

Dear friend,

Here we sit, professional observers of the global reinsurance industry.

Like cheap tourists in a Parisian café, we repose, tenderly eking out our coffee and anisette and watching the world go by.

Like aging uncles, we occasionally tut, tut at the foolishly optimistic exuberance of youth on display, but smile benevolently as we are reminded of our own long-spent passions and follies.

And like quack doctors, we trap a vein and listen to the industry’s lifeblood coursing below, hoping the sound will tell a story to aid our diagnosis.

What a colourful and happy world it is we inhabit — we know we are privileged and humbly serve.

Here’s this week’s diagnosis and prescription:

The life-affirming tip of the week has to be German-speaking run-off. There’s gold in them there defunkten policies — according to KPMG it turns out the Germans, Swiss and Austrians have been harbouring €66bn in non-life run-off business. Apparently their non-life liabilities in run-off make up about 19% of the market – the same proportion as found in the UK.

Now I had always thought that the UK, and the London Market in particular, had earned its reputation as run-off capital of the world because we were global experts in the sort of insane underwriting that lead to run-off in the first place!

It is therefore heart-warming to find that venerable old Europe is just as doted in this area. Although we are tinged we sadness as we see yet another of London’s perceived unique selling points eroded.

At the moment these guys keep the lion’s share of business in-house to protect relationships, but apparently all that is set to change with the onset of solvency II. Time to get on the plane.

I’m sure Bermuda and the US will all present similar opportunities for UK teams to export their expertise — and how about France, Holland and Italy for that matter?

Mark Geoghegan

PS. By the way, the consensus is that SCOR will win the Converium battle and that no other bidders will emerge. Of course, bitter experience suggests such thoughts are usually the signal for a frenzied bidding war!

But there is plenty of logic involved here — no old Europeans are in the mood and the classes of 2001 and 2005 are too small (sorry I got a bit excited earlier in the week). That leaves the big Bermudians — but since SCOR has already got almost a third in the bag and can easily up its offer, no-one is likely to have a go just to make Mr Kessler overpay.

But then, soft market takeovers are hardly ever about logic, are they?

Garçon, du vin!

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