Dear friend,

We've all known it exists for years, but now a fabulous Sigma study from Swiss Re has proven it beyond all reasonable doubt.

(Re)insurers underreserve when markets are soft and money is tight.

Then (presuming they survive) they rebuild reserves in harder markets when more cash is available.

Read this from the blurb accompanying the study:

“Insurers are increasingly recognising that they have to pay more attention to reserving” explains Rudolf Enz, the author of the study. “Shareholders are becoming more reluctant to accept that blocks of business originally identified as being reasonably profitable could instead trigger substantial losses. At the very least, they want to understand when and why such revisions take place.”

Too right Rudolf!

(Go shareholders!)

Now for the picture that illustrates the whole sordid spectacle in all its glory (I've had to squash it a bit):