blog-re

Happy Thanksgiving

Thu, 27 Nov 2008 11:25:33 GMT

Alexander Ferguson wrote: Happy Thanksgiving! In the USA, people across the nation are crowding round their Thanksgiving turkey and waiting to expend more energy eating than they probably did cooking the darned thing. See you all on the running machine on Saturday, chaps. But the spirit of thankfulness is what everyone talks about. Some talk about being thankful for their jobs. Others their families. Some both. But right now, thank God you're not an American or British citizen staying at the Taj Mahal Palace Hotel in Bombay.

Never been one to take advantage of a bad situation but....

Thu, 20 Nov 2008 10:26:44 GMT

Alexander Ferguson writes: Only days into hijack talks between Somalian pirates and the owners of the stricken supertanker The Sirius Star, one very quick (it has to be said) broker (Benfield, cough! cough!) is offering "a dedicated and exclusive kidnap and ransom policy" with a $10m per event limit, indemifying the policyholder against kidnapping and extortion, lost ransom, and costs incurred resolving the situation. Couldn't you have offered this at the start of the year, lads? But if the money comes in, methinks that the new people at Beano (that's an anagram of Aon Benfield Re, according to City wit Roger Foord (nope, he doesn't know why his last name is spelt like that, either!) will be saying: "Better late than never".

Quack! Quack! Something to impressed about with Aflaaac!

Tue, 18 Nov 2008 10:38:58 GMT

Alexander Ferguson wrote: If you've ever seen a big American sports event (by that we mean NFL, Baseball and College Football), there is always the Aflac trivia question. With the most annoying duck on the planet quacking away, the scream of "Aflaaaaaaac!" is something that will forever stick in the mind. So here's my Aflac triva question for you: "Which CEO has just made himself $26m poorer by forgoeing golden parachute provisions in his contract?" Here's the answer: Daniel Amos, chairman and CEO of Aflac. I'm serious. In a world where investment banks CEOs are struggling to put their hands in their own wallet and making sure that they aren't paid to the hilt at a time where the world is collapsing around their ears and they are begging for bailouts, Mr Amos has done a pretty darned good thing. Listen, we realise that the shareholders aren't too happy about the monster fall in revenues in the third quarter, and there would have been absolute outrage HAD he taken the money and run, but you know what? We can name a couple of US CEOs who have taken more while helping to implode their companies. Now let's hope that when we get through all this rubbish Mr Amos won't become the 'Bad Duck' and demand $60m worth of golden parachutes, eh?

Goodbye, dear friend...

Mon, 17 Nov 2008 14:40:41 GMT

Alex Ferguson writes..... I've never met Roy Harris, the founder of Reinsurance Magazine. If I had, I would have said: "Thank you". He wanted to create a journal of the reinsurance industry 40 years ago - we celebrate the big '40' in 2009 - and it's been going strong ever since. I hope that this upcoming issue - and the tens after it, will have you still reading in heaven.

Happy US Election Day!!

Tue, 04 Nov 2008 16:35:04 GMT

Alexander Ferguson writes: Happy Election Day, America! And if (and quite possibly when) Barack Obama gets voted in, the Bermudian reinsurance industry may well worry. Why? If all the "sabre-rattlilng" comes to the fore, then Bermudian reinsurers could see themselves heavily taxed on their US premiums. Ouch for companies such as Axis, XL and Flagstone, but ouch also for the American people as they see insurance prices rise as a result of the levy. Anyways, the world sits and waits. Have a very Obama (or McCain) Tuesday....

Reinsurance.....rock solid

Mon, 27 Oct 2008 10:57:26 GMT

ANTHONY GOULD WRITES..... Well, as third quarter results have rolled in this week from the reinsurance sector it has been interesting to read the different interpretations of why, in a nutshell, despite the understandable fall in profits, be they operating or otherwise, they will all be solid going forward. With investment returns squeezed and the likes of hurricanes Ike and Gustav draining the coffers, you might expect rate hardening in both reinsurance and the primary market to be a fait acomplis. Yet, premiums in the primary market continue to fall in most classes according to not only anecdotal evidence from reinsurance brokers, but that supplied by North American risk managers via the latest RIMS survey. According to RIMS, there was an 8.5% fall in average property premium in the third quarter whilst general liability fell 9.6% - the largest single quarterly drop since 2005. It may seem self evident that with the fall-out from the sub-prime crisis, and with global recession looming - or already having started - this can’t go on, but to date, it still is. The primary market has a reputation for talking a good game, playing up its focus on technical underwriting, and then chasing volume and price regardless. Will the reinsurers do the same come renewals in the New Year? Will they continue to talk a hard market and then drop their trousers at the nearest sign of losing the business? Well, this is one individual who believes their word should be their bond - so let the games begin. And now, on with the news....

Let me be your casualty?

Thu, 16 Oct 2008 16:24:00 GMT

Alex Ferguson writes..... The (re)insurance industry has never been slow to spot an opportunity. When there's blood, limbs and bodies on the street, then the (re)insurance industry moves. Well, now carnage is everywhere with financial insitutions and commercial insurance business, everyone and his wife seems to be starting - or increasing - their casualty business. In recent days we've seen WR Berkley start BerkleyPro, Torus appoint a new head for its global casualty business, and Lockton hire three brokers to head up its financial institutions business. Add to this Ace deciding to offer commercial D&O from Lloyd's, and you've got an increasingly booming sector. Wasn't this the same sector that Aon's head of America's Mike Bungert said that the only way it could be resurrected was for journalists to put out the headline: "Toothpaste causes cancer?" And there was me thinking that all financial institutions had to do was to go to the US government if they needed a big insurance deal....

We are so, so sorry....

Mon, 06 Oct 2008 15:39:00 GMT

Alex Ferguson wrote: To all you fans of Reinsurance’s weekly email, we're so sorry. We couldn’t think of anything. So we thought we'd have a drink. But we didn't know who to toast. Should we salute the (re)insurance industry because at last they look like the Masters of the Universe compared to their Financial Services brothers in Canary Wharf or St Pauls? Should we wonder how many hedge funds -- some of them who have been accused of ramming up the capacity in the reinsurance market - might be there after they’ve finished paying hurricane claims from Gustav and Ike (“And more’s the case, will the hedge funds tell anybody that their diversification plan has gone awry? Will they reload for next year?” one senior underwriter told us lunch.”)? Should we have a drink and think of the staff in AIG's offices in the USA, who must be wondering about their jobs after Edward Liddy's speech? Or should we have a drink to try and forget one of the worst weeks ever for the Dow Jones Industrial Average, which plunged over 700 points IN ONE DAY this week? One thing’s for certain: it’s been one heck of a week for news.

One person's point of view on AIG's bailout...

Wed, 17 Sep 2008 11:05:34 GMT

Alex Ferguson writes: One of our colleagues here at Reinsurance Towers' sister magazine, the brilliant Insurance Age, made me giggle after directing me to the magazine's forum. One of the more priceless comments? "It's the Dragons Den: "I'll give you your $85 Billion but in return I want 80% of your company" Quick scrum in the corner - "ok it's a deal" Much shaking of very sweaty hands "

Wow....two hurricanes at once!

Tue, 16 Sep 2008 15:09:53 GMT

Alex Ferguson writes: Wow. Two hurricanes, one weekend. The first was the force of God, moving through the Texas and up through the US, causing widespread damage. Parts of Galveston, an island off the coast of Texas and reportedly one of the jewels in the crown on the state, are underwater. Billions of insured damages are expected to be reported by insurers and reinsurers alike. The second was the force of man, bringing down Wall Street and London in one fell swoop. With one breath investment bank Lehman Brothers became no more, with the Federal Reserve Bank refusing to be a Florida Catastrophe Fund to this self-caused catastrophe. Thousands of jobs were lost all over the world. Merrill Lynch -which could have suffered the same fate- was sold to Bank of America for $50bn. And speaking of the force of man, AIG- the world's biggest insurer, also seems to be teetering on the brink of collapse. In boxing terms, the behemoth had $18bn worth of subprime hits, and seems to just need one more knockout punch (credit agencies or the US Federal Reserve - your choice!!) for a catastrophe. The price of AIG stock - at around $2 a share at the time of writing - is virtually worthless. The world is waiting to hear AIG's plans - if any - to sell its non-core subsidiaries. We've heard nothing....have you?

The weather is still upon us....

Thu, 11 Sep 2008 16:37:12 GMT

Alex Ferguson writes: Hurricane Ike's thumping of Cuba didn't seem to interrupt the Monte Carlo Rendez-Vous in 2008, but it's certainly got people thinking about the State of Texas, which is thought to be right in the path of an ever-strengthening Hurricane Ike. Fans of University of Texas football were pretty upset that their game against hated rival Arkansas has been called off, but there you go. Oh, and can we advise people with property or business in Galveston to rediscover religion and start praying about this storm, because according to maps from modelling company First America, a major storm surge will put the town underwater.... The movie of predicted damage won't make viewing any easier, though....

How to check out the hurricanes from the comfort of your desk...

Tue, 02 Sep 2008 10:02:21 GMT

Alex Ferguson writes: Here at Reinsurance Towers, we like to talk about the hurricane season as much as the next person. For the months of June, July, August and September, we -- like the rest of the reinsurance market, it seems - go from our normal jobs to amateur metereologists. And we wouldn't want it any other way. "You talking about Gustav? That's soooooo earlier this week," says this writer, snootily namedropping about Hurricane Hanna, Tropical Storm Ike, and a Tropical Depression "Ten" which has just formed off the coast of Africa. But there are some great ways you can get ahead of the game: The National Hurricane Center: Does what it says on the tin. The maps on the front page are so easy to use that even a caveman would understand what's going on. They also update everything once an hour, making it addictive reading. Tropical Storm Risk Priding itself on being the "leading" forecaster of risks from tropical storms worldwide, TSR - as its known by wannabe metereologists like us who are "in the know", we can actually see where a hurricane's headed via a map. Pretty cool huh? Well, it's great for our office. For the guys in the Bahamas as Hanna approaches, not so much. My Fox Hurricane Now it's got messageboards, the wonderful people at Fox have managed to turn hurricane-chasing into a specetator sport. With all the smells, bells and weather maps you could want - as well as a messageboard just in case you want to boast about how much you won because the eye of the storm didn't pass over New Orleans - this is for the premier storm lover. Hope this helps.

Now Gustav has landed....what's next?

Mon, 01 Sep 2008 17:00:23 GMT

Alex Ferguson writes: Now Hurricane Gustav has made landfall - there are pictures on the BBC of water already breaking over the levees - what is next? Well, dear reader, even when Gustav is over there are still three more potential hurricanes to worry about. Oh, and we're not even in the middle of September, which is supposed to be the "high season" for wind-related US coastal events....

A storm brewing....

Fri, 29 Aug 2008 17:24:45 GMT

Alex Ferguson writes: If you’re a reinsurer who suddenly becomes a meteorologist in these turbulent times, can I suggest you take a quick peak at the activity of Tropical Storm Gustav, which is headed towards the Gulf of Mexico and could plough through oil fields on the way to the coastline by Monday? The people of New Orleans are nervous – but probably not as nervous as the people living on the Cayman Islands – which is due to be hit anytime soon. “Hurricane warnings remain in effect for Jamaica and the Cayman Islands. Preparations to protect life and property should be rushed to completion,” said the US National Hurricane Centre. And you’ll also notice that Tropical Storm Hanna is right behind Gustav, which could hit the Leeward Islands on the weekend. And spare a thought for New Orleans, too. According to the press, New Orleans mayor C. Ray Nagin has said that he would order a mandatory evacuation of the city if a category 3 storm got within 60 hours – which is something that is predicted. And if brother and sister hurricane worsen both manage to strengthen in the Gulf of Mexico and head towards the US shore, there could be more tears – and rain – on Bourbon Street.

He’s back!

Thu, 21 Aug 2008 15:50:41 GMT

Alex Ferguson writes: After departing Guy Carpenter just a few months ago, David Spiller is back in town, taking up the chairman’s position at Heritage Underwriting, a unit of Bermudian (re)insurer Argo. I was having lunch today with two senior brokers, and the three of us – while watching the hop, skip and jump of the Olympics – were talking about what happens to senior figures in the market. One name that came up was former XL chief operating officer Henry Keeling, who left the company earlier this month. “Keeling’s not going to retire, he’s too young,” said one of the brokers, echoing the same thoughts ringing round Reinsurance Towers earlier that day. But – as you know, dear reader – the question is: who? And now the (re)insurance universe has stopped worrying about the whereabouts of Mr Spiller, we can now say: “Where are thou going, Mr Keeling?” Anyone who can come up with the answer let us know here at Reinsurance Towers.

Smart or stupid?

Thu, 07 Aug 2008 12:47:24 GMT

Alex Ferguson writes: Such is the nature of our industry that if a reinsurance underwriter is seen to be writing half the coast of Florida, he's seen as being "stupid". But if if a hurriance doesn't hit, then he's made everyone a lot of money, helped to keep the combined ratio down, and looks absolutely wonderful. However, Reinsurance Towers was sent the definitive test of being smart and stupid. Can we encourage you to test your intelligence? Our score was 17 out of a possible 23. That's apparently nearly 30% ahead of the rest of the people tested. Needless to say, we're off to crack open the champagne and talk about why Einstein's Theory of Relativity was wrong - but our one's much, much closer to the bone...or not.

The King is dead, long live the king

Fri, 25 Jul 2008 16:43:02 GMT

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.

Hello Dolly

Tue, 22 Jul 2008 15:56:20 GMT

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

The man with only one arm

Fri, 18 Jul 2008 17:47:59 GMT

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!

Competition - who wears a ring like this?

Wed, 16 Jul 2008 09:43:35 GMT

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

Don't drive the moped to work

Mon, 14 Jul 2008 10:48:12 GMT

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

Winning words

Fri, 11 Jul 2008 17:33:47 GMT

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.

Bertha for Bermuda?

Mon, 07 Jul 2008 10:37:44 GMT

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.

Pass the parcel

Fri, 04 Jul 2008 17:37:24 GMT

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!

Fri, 04 Jul 2008 11:48:59 GMT

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.