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July 25, 2008

The King is dead, long live the king

Alex Ferguson writes....

I ran into a Lloyd’s broker on Wednesday who told me this wonderful story.

“I told a client that the broker was the best in the business. He then promptly left to a competitor. I received a call from the client who asked: “Now that this chap’s gone to a competitor, is he still the best in the business?” I replied: “Yes”. I’ve still got the business today – 23 years on.”

I also remember a conversation with two chaps outside a hostelry in EC3. “Johnny X (we’ll keep him nameless for charitable purposes) was such a nice chap when he was with us.”

What? You mean that just because someone leaves you they are not a nice bloke, even if they’ve gone to a competitor.

You see, dear reader, I write this because our editor Mark Geoghegan is off to better-paid waters. At the time of writing, he was last seen trying to digest a 300g steak from the Gaucho Grill. And we wish him all the best – not only the digestion part, but also his career.

For me personally – and all at Reinsurance Towers – has been an inspiration and great fun to have around the office. As an ex-broker, he can tell a great underwriter from one that’s, let’s say, less mecurial, and he knows a good broker from one that talks about as much bull as he eats.
As they say in Mark’s favourite country- Spain – “Adios, amigo”. I couldn’t think of a better way to put it.

July 22, 2008

Hello Dolly

Dear friend,

In theory a Cat 1 Hurricane landfall shouldn't hurt Brownsville too much - nor should tropical storm force winds make any dent in the Citgo and Valero oil refineries up the coast in Corpus Christi.

But theories have a nasty habit of being wrong, don't they?

Fingers crossed everyone.

Pic courtesy of Tropical Storm Risk

July 18, 2008

The man with only one arm

I’d better be quick today – I’ve spent far too long tracking down rogue reinsurance premium numbers from the four corners of the world and dithering about who I should put on (or more poignantly, who should I knock off) our Reinsurance Power list for 2008.

So here goes.

A funny thing happened on the way to work this morning.

I was cycling merrily along when a man stepped out on into the road with his back to me, utterly oblivious to my two-wheeled presence.

I swerved to avoid him, braked hard and then gave him my best backwards glare before pedalling off.

There’s nothing unusual about this — London is full of tourists who have left their minds on vacation, or are unused to our peculiar method of left hand side road usage — and anyway, bicycles are almost silent and can easily sneak up on you.

But what was different about this guy was that he only had one arm.

I’m not naturally mischievous, but as I rode off I couldn’t help thinking that if he kept crossing the road in such a dopey fashion it wouldn’t be long before he lost his other arm!

Then I thought about it from an underwriting point of view.

Here’s a risk with something of a loss record. Well, I suppose you could call it a PML hit, of 50% of the total sum insured.

I hate the phrase “glass half full or glass half empty”

— to me the answer is entirely logical — it just depends — if you’re filling the glass up, it’s half full and if your emptying it, it’s half empty!

But here is a real optimists vs pessimists risk.

Optimists will write it because they know the guy really doesn’t want to lose his second arm and will put all the necessary risk management in place to make sure it doesn’t ever happen — a good write and you get a decent price too.

But my experience shows that there are some dopes out there who never change.

Show me a man with one arm and I’ll show you a man well on the way to having no arms at all!

PS. The massive gold ring I mentioned yesterday belonged to Charlie Crist, Governor of Florida. Presumably this hefty lump of gold is a hefty percentage of the collateral for the FHCF!

July 16, 2008

Competition - who wears a ring like this?

Dear friend,

A bit of fun for a Wednesday morning.

Who in our world wears a ring like this?

Perhaps he is an Archbishop?

Or is he a rock star?

I'll tell you the answer on Friday, but the first correct guess posted below wins a bottle of Rioja


July 14, 2008

Don't drive the moped to work

Dear friend,

Hopefully Bertha is not being too nasty - but still, I'd rather be here in London than over in Bermuda right now.

Maybe it's been fun for surfers the last week but it can't have been much fun for anyone else.

At least it should all be over by tomorrow morning


July 11, 2008

Winning words

Dear friend,

They say that truth is stranger than fiction.

It must be true — after all, I can testify that the life of a journalist is sometimes a strange one.

Take this week — on Wednesday night the great and the good of the UK’s insurance sector once again thronged the palatial surroundings of London’s Royal Albert Hall for the annual British Insurance Awards.

These awards are organised to the company that publishes Reinsurance and so we get to bring guests along to our own private box to witness the night’s entertainment.

It’s a lavish evening, with everyone in black tie and best evening dresses, top musical acts and a stand-up comedian booked as the London Philharmonic plays the tunes.

But it’s never that easy is it?

There’s always some sort of payback, and we end up having to sing for our supper.

Being the journalists on hand we are each allocated a prize winner and forced to interview them for a special printed magazine supplement that we publish a week later.

It’s all a bit of a rush.

The official advice is to grab your winner early — before he or she has had the customary none or ten too many celebratory drinks.

Interviewing a befuddled and tuxedo’d CEO in the middle of the Royal Albert Hall at midnight while an orchestra is belting out top show tunes from yesteryear is not an experience I’d wish on anyone.

I’m not saying that such a thing happened to me exactly, but let’s just say that after four such galas, I have learned that it’s usually best to grab your quarry’s business card and arrange an interview in the more sober and subdued climate of the morning after.

And speaking of the morning after the night before, have you read the SEC sub-prime report into S&P Fitch and Moody’s?

As the Feds pumped the credit and spiked the rum punch of global capitalism, oh how the party swung.

The people were flipping condos like burgers in a fast food joint and realtors and mortgage brokers were doing the conga down every main street. Bankers were shaking their booties and filling their boots while the hedge fund floosies were dancing on tables and baring their assets to random strangers.

The ratings agencies were the nerdy waiters handing out the drinks and breaking bar-tab records.

But all good things come to an end.

Just as nobody who was at the Royal Albert Hall on Wednesday could face a drink yesterday, we bet no-one at S&P Fitch or Moody’s was in the mood for dancing.

But those guys over at AM Best were probably feeling right as rain. It seems they had overslept and arrived at the party far too late!

Now let’s get onto the news before we do something we regret.

July 7, 2008

Bertha for Bermuda?

Dear friend,

I've learnt that writing about hurricanes before they hit anywhere is a hit and miss affair to say the least.

Storms make a fool of anyone who puts himself in their way especially journalists.

But look where I found Bertha's arrow pointing this morning...


Whichever way it ends up turning, it doesn't like it's going to be beach weather this weekend.

July 4, 2008

Pass the parcel

Dear friend,

As a father of three children under the age of seven, I seem to spend an awful lot of my spare time picking my kids up from birthday parties.

These days we seem to be in more and more of a moral panic about our younger generation.

Hardly a day goes past in the UK press without a lurid story about feral youth out of control, mugging, drinking, smoking, vomiting, injecting and procreating their way around our filth-strewn streets.

I’m sure it’s the same in other developed countries around the world.

But anyone at all worried about the future moral uprightness of our youngsters would do well to spend some time at a kids’ birthday party.

Just five minutes will set your mind at ease.

Everything is as it has always been – neat rows of sandwiches on paper plates, bottles of fizzy soda, jellies, balloons, and those really annoying things that you blow into that unfurl a paper tube whilst emitting a decidedly off-key parp.

Nothing much has changed — and that goes for the party games too.

One game that doesn’t seem to go out of style is ‘pass the parcel’.

(Just in case you’ve forgotten a circle is formed and a package that has been enveloped in multiple layers of wrapping paper is passed around the group from hand to hand as music plays. Every time the music stops another layer is peeled off, a small gift is handed out to the child who was the package when the music stopped and the music starts up again. Eventually the final layer is removed to reveal what is usually the star prize.)

And it looks like the market is once again busy playing its usual version of the pass the parcel game, but in reverse of course.

In the underwriting version, risk is bundled up, wrapped up in pretty paper and passed around the market. In this game when the music stops it is a big retro writer or an exposed net player who ends up holding the ‘star prize’ which is usually something pungent and decidedly unhygienic.

Nothing ever changes, so don’t worry about the kids — worry about the big punters!


PS. I loved the news this week of Marsh resurrecting the Bowring name from the scrapheap of history.

What’s next? A new Sedgwick division?
Maybe they should go the whole hog and rebrand everything as Johnson & Higgins?

And think how many brands Aon has got lying around — Bain Clarkson, Hogg Robinson. Leslie & Godwin, LeBlanc de Nicolai, Jauch & Hubener, Alexander Howden and A&A and I haven’t mentioned my old shop yet.

The possibilities are endless!

Happy Fourth of July!

Alex Ferguson writes

Happy Fourth of July, America.

In the first seven months of the year, it hasn’t been easy for you.

Hopefully the Budweiser, baseball, and burgers will take your mind on what has been a heady seven months for the Stars and Stripes.

While Wall Street is being battered by subprime problems – an issue that’s taking thousands upon thousands of jobs with it. Share prices are falling off a cliff, with the world’s reinsurance industry and your 401(K)s going the same way.

Administrators in Florida have had to go cap in hand to Berkshire Hathaway just in case the hurricane season costs Floridians more $25bn. If it does, then Warren Buffett’s Omaha-based behemoth will lend them $4bn- all for a ‘small fee’ of $224m (plus interest, of course).

You’ve had upheavals at AIG, the world’s biggest insurer. The Brit’s out and the American is back in charge - Independence Day indeed. Bob Willumstad, we wish you the best of luck.

And to boot, America’s had to bear the brunt of a series of catastrophes, that have cost hundreds of milions of dollars worth of damage and heartbreak in equal measure.

The Mississippi’s flooded its banks and cities in Iowa are underwater. EMC – an Iowan insurance company – has already said this would hammer operating profit – and we can probably expect more to follow suit. Tornadoes have ripped through the Mid-West – as well as Atlanta, and everyone will hope that the Atlantic ‘windy season’ doesn't arrive in Florida and the Carolinas with the same frequency that the tornadoes did.

Otherwise, you can all expect higher premium prices next year.

July 2, 2008

Another summer day at Lloyd's....

Alex Ferguson writes....

While standing around Lloyd's in the beautiful summer London weather on Wednesday (read: rain), I noticed a couple of things that I thought important to communicate to you.

When the clock chimes 1pm on the Lloyd's floor, the place to be is not inside: it's outside. The rush out of one of the world's biggest insurance exchange's is something I'm sure only Moses and the boys saw following him across the Red Sea. And instead of the Red Sea closing on the Lloyd's underwriters, brokers and work experience types like it did the Egyptian army, the flood kept on coming.

The Lamb, based in Leadenhall Market, wasn't packed today - despite the rain and the thirsty looks exiting Tower 1 today - so where is everyone going for their lunchtime pint?

Answers on a postcard please.....the first round's on us!

Secondly, I was stunned by the dress wear around Lloyd's. Apart from this scabby journalist who didn't bother wearing a tie for his contact (sorry, sir!), I noticed a group of well-dressed American students 'hanging out' outside Tower 3. They were wearing the usual shirts and ties, but one messy-haired student was wearing a pair of 'Jesus sandals' and holding his 'dress shoes' (American word for 'smart shoes).

Let's hope he didn't walk into Lloyd's showing his (rather grimy) feet. In the old days he would have been thrown out on his ear, wouldn't he? Or would it have been a somewhat despairing frown?

Sorry - how much was that again?

Alex Ferguson writes:

Martin Sullivan seemed to outdo Michael Cherkasky on the outgoing CEO stakes when it emerged that he had been given a $47m payout after "resigning" from his position atop floundering behemoth AIG.

I'm sorry - how much?

That's right, dear reader. $47m.

The SEC letter splits it up as such: "Mr. Sullivan’s arrangements include severance of $15m, a pro rata bonus of $4m and the continued vesting of outstanding equity and long-term cash awards valued at approximately $28m".

Well, we can expect the $28m to shrink if AIG's share price gets any worse, can't we?

Don't get us at Reinsurance wrong, though. After meeting Mr Sullivan not only at the World Insurance Forum in Dubai but also at his plush offices in New York City, Reinsurance decided that he is - or should we say was one of the insurance world's nicer CEOs.

Mind you, he might be the nicest guy in the world, but his credentials as a CEO took a monster hit while he was in charge at AIG.

During Sullivan's reign, AIG marked down around $23bn in unrealized assets thanks to subprime mark. And more markedly for AIG's shareholders, during his tenure AIG's share price dropped from around the $70 mark to around the $30 mark.

Not to say that he's in at fault for all of this, but if the manager of Manchester United - also the brilliantly-named Alex Ferguson - won half as many games now as he did five years ago, he'd probably have lost his job - and certainly without a $47m payoff!

Editor's blog, photo of Mark Geoghegan

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