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REINSURANCE COMPANIES VICTORIOUS IN SECURITIES FRAUD CLASS ACTIONS ARISING OUT OF CAT LOSSES: "Two reinsurance companies have prevailed on motions to dismiss in shareholder securities law putative class actions over the restatements of loss levels from cat events, illustrating that the process of estimating cat losses accurately may be challenging, and that companies are not guarantors of the completeness and accuracy of that process. PXRE prevailed in a lawsuit alleging a scheme to understate losses arising out of a series of hurricanes that devastated the Gulf Coast in 2005, restating the amount of losses several times.
Judge Sullivan granted PXRE’s motion to dismiss, finding that plaintiffs “failed to plead that defendants were reckless in not knowing about the flaws in PXRE’s calculation of its loss estimates.” In re PXRE Group, Ltd., Securities Litigation, No. 06 CIV 3410 (S.D.N.Y. March 5, 2009). Judge Sullivan issued an order in a similar individual case filed against PXRE implying that he will follow the same course in that action. Anegada Master Fund Ltd v. PXRE Group Ltd., No. 08 Civ 10584 (S.D.N.Y. March 5, 2009).
Quanta Capital Holdings Ltd. (“Quanta”) issued several estimated loss projections relating to Hurricanes Katrina and Rita that ranged from $42-$68.5 million, resulting in multiple rating downgrades, forcing Quanta to cease writing new insurance and reinsurance business and to sell its remaining insurance and reinsurance portfolios.
Noting the conjectural nature of insurance reserves established for losses that have been incurred but not yet reported, the court ruled that the Complaint did not put forth sufficient factual allegations such that the court could plausibly find that the loss estimate included in the offering documents was a material untruth at the time it was made, especially since the adjusted estimate was based on a single business interruption claim. The district court also held that the Complaint did not meet applicable heightened pleading requirements, and that some of the claims failed because the $68.5 million preliminary loss estimate was protected by the “bespeaks caution” doctrine. Zirkin v. Quanta Capital Holdings Ltd., Case No. 07-851 (USDC S.D.N.Y. Jan. 22, 2009)."
Source: Reinsurance Focus
10 March 2009
Known Unknowns and 'Black Swans'
Known Unknowns: "The “black swan” is trumpeting! Last year, we saw the first-hand effects of random, unforeseen, and massive events. Catastrophe models — the tools we use to forecast disaster and protect capital — were shown to be quite fallible, leaving balance sheets exposed to more risk than carriers realized. Yet, maybe we’ve been a bit hasty in meting out blame. Catastrophe models have made great strides since they were first introduced, and our industry must continue to use them for a reason. What has emerged is an essential tension between the unknown and efforts to counteract it.
Nassim Nicholas Talib is the father of the black swan concept. Introduced in a book bearing the phenomenon’s name, black swans represent the types of event that models simply cannot anticipate. This idea has received extra attention from insurers and reinsurers over the past few months. Many feel that models have let them down, particularly with Hurricane Ike. The storm produced insured losses for many companies that are multiples of catastrophe model estimates. Whether the event was large enough to meet Talib’s black swan standard is up to him. But as we approach USD20 billion in insured losses for Ike, the reality for our industry couldn’t be clearer.
Hurricane Ike’s unexpected severity was not an isolated incident. Rather, it is the latest instance in a growing chasm between modeled forecasts and actual losses. Over the past few years, several storms have exceeded estimates by wide margins, causing consternation among risk bearers. But, what other choices are available? For now, carriers can choose to use models or abandon them. Unsurprisingly, most will continue with the former. Though flawed, these tools do create value — mostly by forcing insurers and reinsurers to look at risk systematically.
In the past, insured losses were estimated by drawing concentric circles on a map. Each circle represented (very roughly) bands of varying wind speeds within which we could estimate exposure concentration. Multiply exposure by some “destruction factor,” and a loss estimate emerges. This was a simple, yet not ridiculous approach to the problem. Unfortunately, most of the parameters needed to make this method reasonably credible — such as circle size, wind speed by location, and expected damage for a given class of business — were lacking. The industry needed catastrophe models to address these concerns.
In addition to improving the measurement of risk, there is another reason why (re)insurers continue to use catastrophe models: everyone does. Largely due to rating agency pressure, the models have become an industry standard, and so the market is influenced heavily by their results. This leads buyers and sellers of risk to reference them as common points of understanding. Consequently, they offer a de facto data standard among risk traders. The contents, geographic resolution, and format of exposure data are now common throughout the industry, improving the overall awareness of risk and the transparency of risk trades tremendously. Better information has helped change underwriting guidelines, set exposure limits, and push prices closer to the true cost of risk. Even if the models are “wrong,” they have decreased the likelihood of a black swan.
Ironically, for all the utility of models, we never really believed them anyway … which is why we will continue to use them. Professionals who are familiar with the models have long understood that they are not built to estimate the losses of a single event. Catastrophe models are meant to look at long-term probabilities of loss to a portfolio. An individual storm, earthquake, or tornado, for example, has nuances that a simplified mathematical proxy will not anticipate. Can we find a black swan in this shortcoming? That is a possibility that model users must keep at the front of their minds."
Source: GCCapitalIdeas
Nassim Nicholas Talib is the father of the black swan concept. Introduced in a book bearing the phenomenon’s name, black swans represent the types of event that models simply cannot anticipate. This idea has received extra attention from insurers and reinsurers over the past few months. Many feel that models have let them down, particularly with Hurricane Ike. The storm produced insured losses for many companies that are multiples of catastrophe model estimates. Whether the event was large enough to meet Talib’s black swan standard is up to him. But as we approach USD20 billion in insured losses for Ike, the reality for our industry couldn’t be clearer.
Hurricane Ike’s unexpected severity was not an isolated incident. Rather, it is the latest instance in a growing chasm between modeled forecasts and actual losses. Over the past few years, several storms have exceeded estimates by wide margins, causing consternation among risk bearers. But, what other choices are available? For now, carriers can choose to use models or abandon them. Unsurprisingly, most will continue with the former. Though flawed, these tools do create value — mostly by forcing insurers and reinsurers to look at risk systematically.
In the past, insured losses were estimated by drawing concentric circles on a map. Each circle represented (very roughly) bands of varying wind speeds within which we could estimate exposure concentration. Multiply exposure by some “destruction factor,” and a loss estimate emerges. This was a simple, yet not ridiculous approach to the problem. Unfortunately, most of the parameters needed to make this method reasonably credible — such as circle size, wind speed by location, and expected damage for a given class of business — were lacking. The industry needed catastrophe models to address these concerns.
In addition to improving the measurement of risk, there is another reason why (re)insurers continue to use catastrophe models: everyone does. Largely due to rating agency pressure, the models have become an industry standard, and so the market is influenced heavily by their results. This leads buyers and sellers of risk to reference them as common points of understanding. Consequently, they offer a de facto data standard among risk traders. The contents, geographic resolution, and format of exposure data are now common throughout the industry, improving the overall awareness of risk and the transparency of risk trades tremendously. Better information has helped change underwriting guidelines, set exposure limits, and push prices closer to the true cost of risk. Even if the models are “wrong,” they have decreased the likelihood of a black swan.
Ironically, for all the utility of models, we never really believed them anyway … which is why we will continue to use them. Professionals who are familiar with the models have long understood that they are not built to estimate the losses of a single event. Catastrophe models are meant to look at long-term probabilities of loss to a portfolio. An individual storm, earthquake, or tornado, for example, has nuances that a simplified mathematical proxy will not anticipate. Can we find a black swan in this shortcoming? That is a possibility that model users must keep at the front of their minds."
Source: GCCapitalIdeas
Andrew Rippert Joins Karen Clark & Co
Andrew Rippert Joins Karen Clark & Company as Senior Vice President : "aren Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced that Andrew Rippert has joined the firm as Senior Vice President. Mr. Rippert will lead the team responsible for executing the company's strategy across property and insurance services and data technology.
'Andrew has the perfect background for heading our new initiatives in data collection, risk analysis, and the distribution of property insurance products,' said Karen Clark, President and CEO of Karen Clark & Company. 'We are extremely pleased he has accepted the challenge to help transform the way the industry collects, manages, and utilizes property and risk information for decision-making.'
Mr. Rippert has more than twenty years of insurance, capital markets and consulting experience and a track record for developing and delivering value-added, innovative solutions in U.S. and international markets. Prior to joining Karen Clark & Company, Mr. Rippert served as the President of Bunker Hill Insurance Company and Chief Underwriting Officer of Plymouth Rock Assurance Company. Earlier, Mr. Rippert was Senior Vice President and Managing Director of Radian Guaranty, where he started and developed the firm's international mortgage based insurance and structured transaction business, creating successful and profitable operations in Europe, Asia, and Australia. At American Re-Insurance, Mr. Rippert led the dynamic financial modeling team, developed their first dynamic financial analysis models, and contributed to efforts to integrate the reinsurance and capital markets. His consulting experience includes work at Tillinghast/Towers Perrin and Deloitte."
Source: MarketWatch
'Andrew has the perfect background for heading our new initiatives in data collection, risk analysis, and the distribution of property insurance products,' said Karen Clark, President and CEO of Karen Clark & Company. 'We are extremely pleased he has accepted the challenge to help transform the way the industry collects, manages, and utilizes property and risk information for decision-making.'
Mr. Rippert has more than twenty years of insurance, capital markets and consulting experience and a track record for developing and delivering value-added, innovative solutions in U.S. and international markets. Prior to joining Karen Clark & Company, Mr. Rippert served as the President of Bunker Hill Insurance Company and Chief Underwriting Officer of Plymouth Rock Assurance Company. Earlier, Mr. Rippert was Senior Vice President and Managing Director of Radian Guaranty, where he started and developed the firm's international mortgage based insurance and structured transaction business, creating successful and profitable operations in Europe, Asia, and Australia. At American Re-Insurance, Mr. Rippert led the dynamic financial modeling team, developed their first dynamic financial analysis models, and contributed to efforts to integrate the reinsurance and capital markets. His consulting experience includes work at Tillinghast/Towers Perrin and Deloitte."
Source: MarketWatch
Buffett Will Sell Less Catastrophe Reinsurance This Year -CNBC
Buffett:Will Sell Less Catastrophe Reinsurance This Year -CNBC: "In order to keep a comfortable cushion of capital on hand, Berkshire Hathaway Inc. (BRKA) will sell less catastrophe reinsurance this year, said Warren Buffett, the company's chairman.
Buffett said he aims to keep an 'absolute minimum' of $10 billion in available capital on hand in the company, he said during a Monday interview on CNBC's Squawk Box.
'I like to have quite a bit more than that to be sure we don't go below that,' he said. 'We could have a hurricane,' which would deplete reserves. 'What has changed is that we will do less catastrophe reinsurance this year,' he said.
Buffett also hedged on whether he would be interested in buying more shares of American Express Co. (AXP) or General Electric Corp. (GE), now that shares of both companies are below the price he has paid in the past.
In the case of American Express, a long-time Berkshire Hathaway holding, Buffett said that because of the company's new status as a bank holding company, he would need the Federal Reserve's approval to go above his current stake."
Source: CNN
Buffett said he aims to keep an 'absolute minimum' of $10 billion in available capital on hand in the company, he said during a Monday interview on CNBC's Squawk Box.
'I like to have quite a bit more than that to be sure we don't go below that,' he said. 'We could have a hurricane,' which would deplete reserves. 'What has changed is that we will do less catastrophe reinsurance this year,' he said.
Buffett also hedged on whether he would be interested in buying more shares of American Express Co. (AXP) or General Electric Corp. (GE), now that shares of both companies are below the price he has paid in the past.
In the case of American Express, a long-time Berkshire Hathaway holding, Buffett said that because of the company's new status as a bank holding company, he would need the Federal Reserve's approval to go above his current stake."
Source: CNN
Oxygen swoops for Craven's broking pair and business
Oxygen swoops for broking pair and business: "Oxygen Insurance Brokers has created a facilities broking team. Headed up by new hires Donald Alcorn and Jonathan Woods, the team will place bespoke binding authorities for UK/European cover-holders into the Lloyd’s and company markets.
Nigel Barton, chief executive officer, Oxygen Insurance Brokers, said, “We are delighted to welcome Donald and Jonathan to Oxygen. They have a proven track record of placing and servicing some very effective underwriting programmes for specialist UK coverholders. This skill-set adds another very important string to Oxygen’s bow.”
The team joins from Craven & Partners, and their portfolio of facilities for various specialist sectors will transfer across to Oxygen with immediate effect."
Source: Post Online
Nigel Barton, chief executive officer, Oxygen Insurance Brokers, said, “We are delighted to welcome Donald and Jonathan to Oxygen. They have a proven track record of placing and servicing some very effective underwriting programmes for specialist UK coverholders. This skill-set adds another very important string to Oxygen’s bow.”
The team joins from Craven & Partners, and their portfolio of facilities for various specialist sectors will transfer across to Oxygen with immediate effect."
Source: Post Online
Omega's active underwriter to stand down
Omega's active underwriter to stand down: "John Robinson, the active underwriter of Omega's Lloyd's Syndicate 958, has said that he will stand down from the position at the end of the year to focus on 'group responsibilities'.
Robinson will be replaced by Daria Vanous.
Richard Tolliday, Omega's chief executive said: 'We have also recognised that the expansion of the Group has reached a point which requires our chief underwriting officer, John Robinson, to be able to dedicate himself full-time to supporting the development of all of the Group's underwriting activities and ensuring that the philosophy, approach and underwriting discipline that have driven the success of Syndicate 958 since its formation in 1980 are maintained across the Group. With that in mind, John will be relinquishing the post of Active Underwriter of Syndicate 958 with effect from the end of 2009.'
The announcement came as part of Omega's 2008 full-year results, when the Bermuda-domiciled Lloyd's insurer saw pretax profits drop to $28.2m from $59.5m on investment and hurricane losses."
Source: Reinsurance
Robinson will be replaced by Daria Vanous.
Richard Tolliday, Omega's chief executive said: 'We have also recognised that the expansion of the Group has reached a point which requires our chief underwriting officer, John Robinson, to be able to dedicate himself full-time to supporting the development of all of the Group's underwriting activities and ensuring that the philosophy, approach and underwriting discipline that have driven the success of Syndicate 958 since its formation in 1980 are maintained across the Group. With that in mind, John will be relinquishing the post of Active Underwriter of Syndicate 958 with effect from the end of 2009.'
The announcement came as part of Omega's 2008 full-year results, when the Bermuda-domiciled Lloyd's insurer saw pretax profits drop to $28.2m from $59.5m on investment and hurricane losses."
Source: Reinsurance
Fitch Advocates Global Rating Agencies Regulator
Fitch Advocates Global Rating Agencies Regulator: "At the Australian Securities and Investments Commission (ASIC) Summer School conference, held in the week of 2 March 2009, Ben McCarthy, the managing director of Fitch Ratings Australia, said that rating agencies would support moves to create a global regulatory framework for the credit ratings sector.
McCarthy explained that 'to a significant extent, the rating agencies are looking at the most onerous of any of the international regulations and implementing them worldwide'. An internationally accepted standard would make it easier for S&P or Fitch to run their businesses in this way as currently they need to comply with all the regulations around the world at once.
Furthermore, the agencies would support a plan to create a single global regulatory agency for their sector. McCarthy stated that this would simplify the process of developing, communicating and enforcing a set of international standards. He anticipated that the principal drivers for this process would be the US, Europe and the International Organisation of Securities Commissions."
Source: Insurance & Reinsurance Blog
McCarthy explained that 'to a significant extent, the rating agencies are looking at the most onerous of any of the international regulations and implementing them worldwide'. An internationally accepted standard would make it easier for S&P or Fitch to run their businesses in this way as currently they need to comply with all the regulations around the world at once.
Furthermore, the agencies would support a plan to create a single global regulatory agency for their sector. McCarthy stated that this would simplify the process of developing, communicating and enforcing a set of international standards. He anticipated that the principal drivers for this process would be the US, Europe and the International Organisation of Securities Commissions."
Source: Insurance & Reinsurance Blog
AIG Warned Treasury Of "Chain Reaction Of Enormous Proportion"
AIG Warned Treasury Of "Chain Reaction Of Enormous Proportion": "The second bailout of American International Group Inc. (AIG: News ) was preceded by a plea and a warning, according to a document obtained and published by ABC news. According to the document sent to the Treasury on February 26th, AIG warned the Treasury Department that, barring another rescue, it would collapse and spark a dangerous domino effect.
'The failure of the world's largest insurer at a time of major global financial and economic instability will exacerbate the challenge of reigniting consumer confidence,' it wrote.
The report went onto say that the failure of AUG would have a 'devestating impact on the U.S. and global economy,' and that 'damage to credit markets worldwide from an AIG failure would dwarf the Lehman fallout.'
The consequences could include a fall in the dollar, increase in Treasury's borrowing costs, and doubts about whether or not the U.S. could support its banking system, AIG wrote.
'Public confidence in financial institutions is at a nadir and it is questionable whether the economy could tolerate another shock to the system that a failure of AIG would produce,' the insurer warned.
Considered a classic example of 'too big to fail,' AIG noted that its failure 'could create a chain reaction of enormous proportion.'
Four days later, the government stepped in and bailed out the embattled insurer. That action made Federal Reserve Chairman Ben Bernanke 'more angry' than any other episode of the past 18 months, he told lawmakers last week in testimony before the Senate Banking Committee."
Source: RTTNews -
'The failure of the world's largest insurer at a time of major global financial and economic instability will exacerbate the challenge of reigniting consumer confidence,' it wrote.
The report went onto say that the failure of AUG would have a 'devestating impact on the U.S. and global economy,' and that 'damage to credit markets worldwide from an AIG failure would dwarf the Lehman fallout.'
The consequences could include a fall in the dollar, increase in Treasury's borrowing costs, and doubts about whether or not the U.S. could support its banking system, AIG wrote.
'Public confidence in financial institutions is at a nadir and it is questionable whether the economy could tolerate another shock to the system that a failure of AIG would produce,' the insurer warned.
Considered a classic example of 'too big to fail,' AIG noted that its failure 'could create a chain reaction of enormous proportion.'
Four days later, the government stepped in and bailed out the embattled insurer. That action made Federal Reserve Chairman Ben Bernanke 'more angry' than any other episode of the past 18 months, he told lawmakers last week in testimony before the Senate Banking Committee."
Source: RTTNews -
Novae reports ’successful’ 2008
Novae reports ’successful’ 2008: "Novae has reported its 2008 results, falling narrowly short of the firm’s record profits posted in 2007.
Pre-tax profit for full year 2008 was £40.2 million, compared to £41 million in 2007.
Chief executive Matthew Fosh pointed out that the near record results were achieved despite a “much more difficult underwriting and investment environment.”
Gross premiums for the year increased to £345.7 million, compared to £302.6 million in 2007, although this increase was largely offset by $40 million in payouts for hurricanes Gustav and Ike.
Investment income increased to £50 million, compared to £46.8 million in 2007.
Net tangible assets per share grew to 410.8p, up from 366.7p a year earlier.
Chairman John Hastings-Bass said: “Against the backdrop of poor results from many underwriting businesses and some catastrophic results from the rest of the financial sector, Novae steered a steady course.”
The group predicted that rates will increase by 5-10% in 2009, with property and aviation seeing the largest increases."
Source: Insurance Daily
Pre-tax profit for full year 2008 was £40.2 million, compared to £41 million in 2007.
Chief executive Matthew Fosh pointed out that the near record results were achieved despite a “much more difficult underwriting and investment environment.”
Gross premiums for the year increased to £345.7 million, compared to £302.6 million in 2007, although this increase was largely offset by $40 million in payouts for hurricanes Gustav and Ike.
Investment income increased to £50 million, compared to £46.8 million in 2007.
Net tangible assets per share grew to 410.8p, up from 366.7p a year earlier.
Chairman John Hastings-Bass said: “Against the backdrop of poor results from many underwriting businesses and some catastrophic results from the rest of the financial sector, Novae steered a steady course.”
The group predicted that rates will increase by 5-10% in 2009, with property and aviation seeing the largest increases."
Source: Insurance Daily
Kiln updates on syndicates
Kiln updates on syndicates: "R J Kiln has released the final results for its managed syndicates for the 2006 year of account, updated forecasts for the 2007 year of account and initial forecasts for the 2008 year of account.
Kiln said the 2006 year of account closed considerably ahead of the company’s expectations, as set out in the November 2008 estimates, in respect of all four Kiln syndicates underwriting on the 2006 year of account. 'While Kiln had anticipated good results, the change was due primarily to a strong investment performance in the fourth quarter and reserve releases on the closed years of account,' it said.
The 2007 year of account forecasts remained relatively stable for syndicates 510, 557 and 308. The forecast has deteriorated slightly on Syndicate 807 due to increased claims activity in the property account.
Kiln’s initial forecasts on the non-life syndicates for the 2008 year of account reflect an eventful year, set against a challenging economic backdrop, the company said.
'The first half of the year was characterised by falling rates, and Q1 was also subject to a spate of large property losses that were exacerbated by high commodity prices. Rates began to improve again towards the end of the year, in the wake of Hurricanes Ike and Gustav in the US. Kiln has yet to determine the longer term effects of the economic crisis and, in light of the large amounts of premium yet to be earned for the year, these figures should be regarded as preliminary only and are subject to no significant catastrophes or other adverse developments occurring in the future, which may have a detrimental effect on the Kiln portfolio,' said Kiln."
Source: Insurance Times -
Kiln said the 2006 year of account closed considerably ahead of the company’s expectations, as set out in the November 2008 estimates, in respect of all four Kiln syndicates underwriting on the 2006 year of account. 'While Kiln had anticipated good results, the change was due primarily to a strong investment performance in the fourth quarter and reserve releases on the closed years of account,' it said.
The 2007 year of account forecasts remained relatively stable for syndicates 510, 557 and 308. The forecast has deteriorated slightly on Syndicate 807 due to increased claims activity in the property account.
Kiln’s initial forecasts on the non-life syndicates for the 2008 year of account reflect an eventful year, set against a challenging economic backdrop, the company said.
'The first half of the year was characterised by falling rates, and Q1 was also subject to a spate of large property losses that were exacerbated by high commodity prices. Rates began to improve again towards the end of the year, in the wake of Hurricanes Ike and Gustav in the US. Kiln has yet to determine the longer term effects of the economic crisis and, in light of the large amounts of premium yet to be earned for the year, these figures should be regarded as preliminary only and are subject to no significant catastrophes or other adverse developments occurring in the future, which may have a detrimental effect on the Kiln portfolio,' said Kiln."
Source: Insurance Times -
Brit CEO says AIG might 'wither' if parts of businesses aren't sold
Brit CEO says AIG might 'wither' if parts of businesses aren't sold: "AIG might 'wither' if it does not sell its non-core businesses, a Lloyd's market chief executive has said.
'AIG - the holding company - has collapsed as far as I'm concerned,' said Dane Douetil, chief executive of Brit Insurance at a press conference on Monday. 'AIU, which is AIG's property/casualty book, is a well-capitalised company, and we'll see the non-core business being stripped out. If AIG were not to sell areas of their business they will wither on the vine.'
AIG so far has lacked suitors for a number of businesses, forcing it to loan more money from the US government - which in turn has made it a virtually nationalised entity."
Source: Reinsurance -
'AIG - the holding company - has collapsed as far as I'm concerned,' said Dane Douetil, chief executive of Brit Insurance at a press conference on Monday. 'AIU, which is AIG's property/casualty book, is a well-capitalised company, and we'll see the non-core business being stripped out. If AIG were not to sell areas of their business they will wither on the vine.'
AIG so far has lacked suitors for a number of businesses, forcing it to loan more money from the US government - which in turn has made it a virtually nationalised entity."
Source: Reinsurance -
Florida: Major crisis if 'big one' hits
"Already mired in severe budget problems, Florida could face a bigger financial crisis if a major hurricane slams the state this year.
A state catastrophe-insurance program is supposed to help insurers pay claims after a devastating storm. But state and industry officials say the program could be as much as $18 billion short of meeting its obligations.
That has left state officials struggling to patch together a financing plan as hurricane season gets ready to start June 1 -- including possibly trying to line up help from the federal government.
'We are in economic distress in this country, and this state could be in considerably more economic distress if it gets hit by the big one,' said U.S. Sen. Bill Nelson, D-Fla.
The issue deals with the Florida Hurricane Catastrophe Fund, which sells low-cost 'reinsurance' to private insurers and to the state-backed Citizens Property Insurance Corp."
Source and Complete Article: newsjournalonline.com
A state catastrophe-insurance program is supposed to help insurers pay claims after a devastating storm. But state and industry officials say the program could be as much as $18 billion short of meeting its obligations.
That has left state officials struggling to patch together a financing plan as hurricane season gets ready to start June 1 -- including possibly trying to line up help from the federal government.
'We are in economic distress in this country, and this state could be in considerably more economic distress if it gets hit by the big one,' said U.S. Sen. Bill Nelson, D-Fla.
The issue deals with the Florida Hurricane Catastrophe Fund, which sells low-cost 'reinsurance' to private insurers and to the state-backed Citizens Property Insurance Corp."
Source and Complete Article: newsjournalonline.com
How AIG Fell Through the Regulatory Cracks
How AIG Fell Through the Regulatory Cracks: "U.S. lawmakers blasted state and federal regulators for dodging blame and keeping secrets after the failure of insurance giant American International Group Inc., which now has access to more than $170 billion in taxpayer money.
Calling AIG 'the greatest corporate failure in American history,'' Sen. Richard Shelby on Thursday needled the New York state insurance regulator and representatives from the Federal Reserve and Office of Thrift Supervision about the lack of oversight leading to the company's collapse.
AIG on Monday reported a $61.7 billion quarterly loss, the worst in U.S. history. The same day, Treasury provided AIG as much as $30 billion in additional aid from the $700 billion financial bailout program.
The government effectively controls the insolvent company, with the Treasury Department owning up to 79.9 percent.
In turns apologetic and defensive, the regulators explained why their agencies weren't set up to oversee a firm like AIG, or why the company's problems were outside of their jurisdictions.
The toughest questioning fell on Federal Reserve Vice Chairman David Kohn. His appearance followed rare and withering criticism of AIG earlier this week from Fed Chairman Ben Bernanke.
'I share your concern, I share your anger,'' Bernanke told the Senate Budget Committee Tuesday. 'It's a terrible situation, but we're not doing this to bail out AIG or their shareholders. We're doing this to protect our financial system and to avoid a much more severe crisis in our global economy.''
Banking Committee Chairman Sen. Chris Dodd demanded to know Thursday which other banks had benefited from the billions of dollars AIG has spent winding down its credit-default swap business and other relationships. The swaps insure companies against losses on corporate bonds, but are not regulated like insurance. AIG was the top player in the multitrillion-dollar industry that played a major part in the financial crisis.
'The question is, who is actually being rescued?'' Dodd asked Kohn."
Source: Insurance Journal
Calling AIG 'the greatest corporate failure in American history,'' Sen. Richard Shelby on Thursday needled the New York state insurance regulator and representatives from the Federal Reserve and Office of Thrift Supervision about the lack of oversight leading to the company's collapse.
AIG on Monday reported a $61.7 billion quarterly loss, the worst in U.S. history. The same day, Treasury provided AIG as much as $30 billion in additional aid from the $700 billion financial bailout program.
The government effectively controls the insolvent company, with the Treasury Department owning up to 79.9 percent.
In turns apologetic and defensive, the regulators explained why their agencies weren't set up to oversee a firm like AIG, or why the company's problems were outside of their jurisdictions.
The toughest questioning fell on Federal Reserve Vice Chairman David Kohn. His appearance followed rare and withering criticism of AIG earlier this week from Fed Chairman Ben Bernanke.
'I share your concern, I share your anger,'' Bernanke told the Senate Budget Committee Tuesday. 'It's a terrible situation, but we're not doing this to bail out AIG or their shareholders. We're doing this to protect our financial system and to avoid a much more severe crisis in our global economy.''
Banking Committee Chairman Sen. Chris Dodd demanded to know Thursday which other banks had benefited from the billions of dollars AIG has spent winding down its credit-default swap business and other relationships. The swaps insure companies against losses on corporate bonds, but are not regulated like insurance. AIG was the top player in the multitrillion-dollar industry that played a major part in the financial crisis.
'The question is, who is actually being rescued?'' Dodd asked Kohn."
Source: Insurance Journal
Goldman Sachs, Deutsche Bank monster beneficiaries of AIG payout- report
Goldman Sachs, Deutsche Bank monster beneficiaries of AIG payout- report: "Goldman Sachs and Deutsche Bank have been named as two of the biggest beneficiaries of the downfall of AIG, the Wall Street Journal has reported.
The two investment banking giants were reported to have each received $6bn out of the $50bn given to AIG as part of the company's first bailout between September and December - they were two major counterparties of the stricken US insurer when it agreed to provide them with a guarantee against losses from credit default swaps.
Rivals Merrill Lynch, Morgan Stanley, Societe Generale also received bailout funds, as did UK banks HSBC and Royal Bank of Scotland"
Source: Post Online
The two investment banking giants were reported to have each received $6bn out of the $50bn given to AIG as part of the company's first bailout between September and December - they were two major counterparties of the stricken US insurer when it agreed to provide them with a guarantee against losses from credit default swaps.
Rivals Merrill Lynch, Morgan Stanley, Societe Generale also received bailout funds, as did UK banks HSBC and Royal Bank of Scotland"
Source: Post Online
Montana approves captive tax break
Montana approves captive tax break: "Small captive insurance companies set up in Montana and subject to the state’s $5,000 minimum premium tax would have the assessment prorated during the year the captive was licensed under legislation that received final approval Monday.
Captives licensed in the first quarter would be liable for the full amount. Those licensed later in the year would see their tax liabilities decrease by $1,250 in each succeeding quarter.
State captive officials earlier said H.B. 160, which was approved with an 82-16 vote, makes the process fair, noting that under current law a small captive licensed at the end of the year would have to pay the full $5,000 minimum premium tax."
Source: Business Insurance
Captives licensed in the first quarter would be liable for the full amount. Those licensed later in the year would see their tax liabilities decrease by $1,250 in each succeeding quarter.
State captive officials earlier said H.B. 160, which was approved with an 82-16 vote, makes the process fair, noting that under current law a small captive licensed at the end of the year would have to pay the full $5,000 minimum premium tax."
Source: Business Insurance
Everest Names Mark Herman President of Everest Specialty Underwriters
Everest Names Mark Herman President of Everest Specialty Underwriters: "Everest Re Group, Ltd. (NYSE: RE) announced today that Mark Herman has been appointed President of the newly-created Everest Specialty Underwriters, effective immediately. This new division, based in New York, will focus its attention on the professional lines markets, specifically directors and officers and errors and omissions products for the primary insurance market.
Mr. Herman joins Everest from Valiant Insurance Group, where he served as Non-executive Chairman. Prior to that, Mr. Herman was Co-President of Ariel Holdings Ltd., where he was instrumental in building the operation from its formation in 2005. Before assuming this role, he spent nine years with ACE Limited as President and Chief Executive Officer of ACE Bermuda. Having joined ACE in 1995 from the Chubb Group, where he held a number of senior assignments, Mr. Herman brings to Everest significant underwriting depth and management experience in the professional lines arena."
Source: BusinessWire
Mr. Herman joins Everest from Valiant Insurance Group, where he served as Non-executive Chairman. Prior to that, Mr. Herman was Co-President of Ariel Holdings Ltd., where he was instrumental in building the operation from its formation in 2005. Before assuming this role, he spent nine years with ACE Limited as President and Chief Executive Officer of ACE Bermuda. Having joined ACE in 1995 from the Chubb Group, where he held a number of senior assignments, Mr. Herman brings to Everest significant underwriting depth and management experience in the professional lines arena."
Source: BusinessWire
Frontiers of Risk Management: Fitch: Counterparty Changes in New CAT Bonds a Credit Positive
Fitch: Counterparty Changes in New CAT Bonds a Credit Positive: "Qualified investment guidelines and swap counterparty structures contained in recent catastrophe (CAT) bond transactions are positive changes from a credit perspective, according to Fitch Ratings.
The recent financial downturn has shown that CAT bonds are not free from credit risk as highly rated counterparties have been subjected to rapid downgrades, and qualified assets have endured sharp and often inexplicable markdowns, according to Don Thorpe, Senior Director and Global Head of Fitch's Insurance-Linked Securities group.
'The recent credit crisis has challenged the notion of near zero correlation between CAT bonds and other assets in the financial markets,' said Thorpe. 'That being said, the CAT bond structures now coming to market feature several structural improvements in the area of invested assets and swap counterparties,' said Harish Gohil, a Senior Director in Fitch's EMEA Insurance group.
These new structures include:
Asset portfolios that are invested in more liquid securities whose durations are better matched to the bonds' maturities;
Greater disclosure of the assets owned and more frequent 'topping up' of any market value declines by the applicable swap counterparties.
The catastrophe bond market has also reopened with the marketing of a handful of transactions including Scor's Atlas V bond in recent weeks.
This is an important aspect of the structure where Fitch believes the interests of both the transaction sponsors and the note holders are aligned. 'If a structure suffers a loss due to a combination of investment losses and the failure of a swap counterparty to perform, then that loss will be passed on to note holders in the form of missed interest or principle payments,' said Thorpe. 'At the same time, the sponsor will be paying for insurance (or reinsurance) protection that may not be fully available to it in the event of a catastrophe because of the investment losses.'
'Whereas asset default, mark-to-market and credit risk have always been key areas of deliberation while rating life insurance deals, these themes have assumed greater prominence on the non-life side as well,' said Ruchira Dabas, a Director in Fitch's U.S. ABS group. The joint involvement of the ABS and insurance teams allows Fitch to thoroughly review all embedded risks, even seemingly peripheral ones. Consequently, risks that have the potential to impair a CAT bond rating in addition to catastrophic event risk such as credit quality of the sponsor, counterparties and invested assets are factored into the assigned rating initially and on an on-going basis.
Although the credit quality of the assets held in trust and the swap counterparty are generally not limiting factors in its ratings of CAT bonds, Fitch nonetheless views these changes positively even though these changes likely will not result in higher ratings. In particular, Fitch believes a daily posting by the swap counterparty of collateral for any mark-to-market shortfalls strongly mitigates the risk of investment losses.
CAT bonds have conventionally been regarded as being a pure insurance play with credit risk being virtually eliminated through structural features such as a highly-rated Total Return Swap (TRS) counterparty and qualified investment guidelines.
However, activity in the CAT bond market stalled following the failure of Lehman Brothers in the fall of 2008. Lehman Brothers had been the TRS counterparty on four CAT bonds. At least one of those bonds, Willow Re, has subsequently failed to make its full interest payments when due. In addition, certain transactions have been negatively impacted by losses in the qualified investment portfolio resulting from asset value markdowns."
Source: Frontiers of Risk Management
The recent financial downturn has shown that CAT bonds are not free from credit risk as highly rated counterparties have been subjected to rapid downgrades, and qualified assets have endured sharp and often inexplicable markdowns, according to Don Thorpe, Senior Director and Global Head of Fitch's Insurance-Linked Securities group.
'The recent credit crisis has challenged the notion of near zero correlation between CAT bonds and other assets in the financial markets,' said Thorpe. 'That being said, the CAT bond structures now coming to market feature several structural improvements in the area of invested assets and swap counterparties,' said Harish Gohil, a Senior Director in Fitch's EMEA Insurance group.
These new structures include:
Asset portfolios that are invested in more liquid securities whose durations are better matched to the bonds' maturities;
Greater disclosure of the assets owned and more frequent 'topping up' of any market value declines by the applicable swap counterparties.
The catastrophe bond market has also reopened with the marketing of a handful of transactions including Scor's Atlas V bond in recent weeks.
This is an important aspect of the structure where Fitch believes the interests of both the transaction sponsors and the note holders are aligned. 'If a structure suffers a loss due to a combination of investment losses and the failure of a swap counterparty to perform, then that loss will be passed on to note holders in the form of missed interest or principle payments,' said Thorpe. 'At the same time, the sponsor will be paying for insurance (or reinsurance) protection that may not be fully available to it in the event of a catastrophe because of the investment losses.'
'Whereas asset default, mark-to-market and credit risk have always been key areas of deliberation while rating life insurance deals, these themes have assumed greater prominence on the non-life side as well,' said Ruchira Dabas, a Director in Fitch's U.S. ABS group. The joint involvement of the ABS and insurance teams allows Fitch to thoroughly review all embedded risks, even seemingly peripheral ones. Consequently, risks that have the potential to impair a CAT bond rating in addition to catastrophic event risk such as credit quality of the sponsor, counterparties and invested assets are factored into the assigned rating initially and on an on-going basis.
Although the credit quality of the assets held in trust and the swap counterparty are generally not limiting factors in its ratings of CAT bonds, Fitch nonetheless views these changes positively even though these changes likely will not result in higher ratings. In particular, Fitch believes a daily posting by the swap counterparty of collateral for any mark-to-market shortfalls strongly mitigates the risk of investment losses.
CAT bonds have conventionally been regarded as being a pure insurance play with credit risk being virtually eliminated through structural features such as a highly-rated Total Return Swap (TRS) counterparty and qualified investment guidelines.
However, activity in the CAT bond market stalled following the failure of Lehman Brothers in the fall of 2008. Lehman Brothers had been the TRS counterparty on four CAT bonds. At least one of those bonds, Willow Re, has subsequently failed to make its full interest payments when due. In addition, certain transactions have been negatively impacted by losses in the qualified investment portfolio resulting from asset value markdowns."
Source: Frontiers of Risk Management
Swiss Re: Forstmoser out, Kielholz new Chairman; to focus on cutting risks
Swiss Re’s new regime to focus on cutting risks: "Investors have for weeks been calling for heads to roll at Swiss Re, as one of the flagships of Swiss finance has stumbled after its first hint of trouble when it suffered a SFr1.2bn ($1.03bn) writedown on two credit default swaps 16 months ago.
As losses mounted and speculation about the group’s shift from its re-insurance roots into esoteric financial activities grew, changes at the top become increasingly inevitable.
Last month, the group announced a SFr3bn cash injection from Warren Buffett, the veteran US investor, who was already a big shareholder. A week later, Jacques Aigrain stepped down as chief executive.
Now, Peter Forstmoser is to go as chairman. His replacement Walter Kielholz said on Monday the board would intensify its focus on reducing risks in the investment portfolio and improving capital management.
Mr Kielholz will work closely with Mathis Cabiallavetta, who is to become deputy chairman. After joining the board last year, Mr Cabiallavetta was given special responsibility for overseeing investment policies.
A former UBS chief executive and chairman forced out of the Swiss bank amid heavy losses in the late 1990s, Mr Cabiallavetta, now aged 64, fell on his sword in the fallout from the collapse of Long Term Capital Management.
Having re-emerged at Marsh & McLennan, the insurance brokers, and with strong contacts in private equity, he should be well placed to oversee management of Swiss Re’s SFr200bn investments.
There were even suggestions he had been approached for the chairmanship, but declined after recalling the opprobrium experienced a decade earlier at UBS. Investment policy will be crucial.
Swiss Re has been hit, like other insurers, by heavy writedowns. Most recently, its share price, already weakened by its ill-advised move towards investment banking activities, has been further pummelled amid concerns about the health of all the world’s insurers in tumbling markets.
Such issues will loom large at this week’s shareholders’ meeting. Once a formality – especially after record earnings in 2006 and 2007 – the mood is likely to be bleak when investors meet on Friday.
Most analysts welcomed the decision by Mr Kielholz, a former Swiss Re chief executive with a history in re-insurance, to take a bigger role by renouncing his chairmanship of Credit Suisse.
“It is good that Kielholz has decided to leave the bank and focus his energies on troubled Swiss Re, which is in far more serious difficulties,” noted Peter Thorne of Helvea, the Swiss brokerage.
But there was also criticism that Mr Kielholz shared responsibility for the group’s problems given his former position as deputy chairman – and tacit power behind the scenes – as well as perceived support for Mr Aigrain.
“This is bad news. The financial market, the press and academic circles repeatedly asked vice-chairman Kielholz to resign as one of the people responsible for the current situation and not only chairman Forstmoser”, noted Fabrizio Croce of Kepler Capital Markets.
With all the changes, including the departure of three other board directors, Swiss Re’s board will shrink to seven members.
Mr Forstmoser and Mr Kielholz defended the number, saying the incumbents offered enough necessary expertise – though they suggested additions could in time be made to reinforce the board’s skills in capital markets and regulatory affairs."
Source: FT.com
As losses mounted and speculation about the group’s shift from its re-insurance roots into esoteric financial activities grew, changes at the top become increasingly inevitable.
Last month, the group announced a SFr3bn cash injection from Warren Buffett, the veteran US investor, who was already a big shareholder. A week later, Jacques Aigrain stepped down as chief executive.
Now, Peter Forstmoser is to go as chairman. His replacement Walter Kielholz said on Monday the board would intensify its focus on reducing risks in the investment portfolio and improving capital management.
Mr Kielholz will work closely with Mathis Cabiallavetta, who is to become deputy chairman. After joining the board last year, Mr Cabiallavetta was given special responsibility for overseeing investment policies.
A former UBS chief executive and chairman forced out of the Swiss bank amid heavy losses in the late 1990s, Mr Cabiallavetta, now aged 64, fell on his sword in the fallout from the collapse of Long Term Capital Management.
Having re-emerged at Marsh & McLennan, the insurance brokers, and with strong contacts in private equity, he should be well placed to oversee management of Swiss Re’s SFr200bn investments.
There were even suggestions he had been approached for the chairmanship, but declined after recalling the opprobrium experienced a decade earlier at UBS. Investment policy will be crucial.
Swiss Re has been hit, like other insurers, by heavy writedowns. Most recently, its share price, already weakened by its ill-advised move towards investment banking activities, has been further pummelled amid concerns about the health of all the world’s insurers in tumbling markets.
Such issues will loom large at this week’s shareholders’ meeting. Once a formality – especially after record earnings in 2006 and 2007 – the mood is likely to be bleak when investors meet on Friday.
Most analysts welcomed the decision by Mr Kielholz, a former Swiss Re chief executive with a history in re-insurance, to take a bigger role by renouncing his chairmanship of Credit Suisse.
“It is good that Kielholz has decided to leave the bank and focus his energies on troubled Swiss Re, which is in far more serious difficulties,” noted Peter Thorne of Helvea, the Swiss brokerage.
But there was also criticism that Mr Kielholz shared responsibility for the group’s problems given his former position as deputy chairman – and tacit power behind the scenes – as well as perceived support for Mr Aigrain.
“This is bad news. The financial market, the press and academic circles repeatedly asked vice-chairman Kielholz to resign as one of the people responsible for the current situation and not only chairman Forstmoser”, noted Fabrizio Croce of Kepler Capital Markets.
With all the changes, including the departure of three other board directors, Swiss Re’s board will shrink to seven members.
Mr Forstmoser and Mr Kielholz defended the number, saying the incumbents offered enough necessary expertise – though they suggested additions could in time be made to reinforce the board’s skills in capital markets and regulatory affairs."
Source: FT.com
AIG's CFO: We're Not Like Papa
AIG's CFO: We're Not Like Papa : "Like the child of a convict, the property-casualty insurance business of American International Group is struggling to distinguish itself from its embarrassing parent.
Trying to assure corporate policyholders that there's more than enough capital to cover their claims, Robert Schimek, CFO of AIG's property-casualty insurance group, is touting the group's new holding-company structure as a way of clearly separating it from the fortunes of its stumbling parent company.
On Monday, as AIG was reporting a $61.7 billion net loss for the fourth quarter of 2008, it also announced that it intends to form AIU Holdings, a holding company for its property and casualty businesses that will be run by a separate board and management team and feature a 'brand distinct from AIG.'
The new structure will enable the business-insurance companies to gain direct access to debt and equity markets, the CFO said during a Webinar held by the Risk and Insurance Management Society. The group previously had to tap the capital markets via AIG Inc., the wobbly financial-services giant that's currently 80 percent owned by the U.S. Federal Reserve Board.
What would happen, however, if AIG Inc. went bankrupt? 'Under U.S. insurance law, the insurance companies can't go bankrupt, and so bankruptcy would not be an issue for the insurance companies themselves,' contended Schimek, who noted that the property-casualty insurers are very well capitalized. 'The single biggest issue for us would be further brand damage from the challenges to AIG. But it wouldn't be a concern for us in paying claims or [in terms of] financial strength.'
Indeed, executives argued, the new structure will enable the AIU companies to boost the value of parent company shares, which were at 35 cents a pop in late trading Friday. 'It gives us a platform to grow shareholder equity in our company,' said John Doyle, a senior vice president of AIG as well as an executive vice president of the property-casualty group. The group hopes to grow its shareholder equity from its current worth, between $43 billion and $45 billion, to $50 billion over time, he added.
AIG will own 100 percent of AIU Holdings and has expectations of being at least an 80 percent owner in the future. Selling such a minority stake to an outside investor would generate 'a gain on the sale of the operations to AIG that would go to the benefit of the [parent company's] stakeholders,' said Schimek.
At pains to draw a contrast between his company and AIG, however, Schimek noted that the property-casualty group, 'in stark contrast with the performance of AIG Inc.,' reported a profit of $520 million for the fourth quarter and one of $1.852 billion for all of 2008."
Source: - - CFO.com
Trying to assure corporate policyholders that there's more than enough capital to cover their claims, Robert Schimek, CFO of AIG's property-casualty insurance group, is touting the group's new holding-company structure as a way of clearly separating it from the fortunes of its stumbling parent company.
On Monday, as AIG was reporting a $61.7 billion net loss for the fourth quarter of 2008, it also announced that it intends to form AIU Holdings, a holding company for its property and casualty businesses that will be run by a separate board and management team and feature a 'brand distinct from AIG.'
The new structure will enable the business-insurance companies to gain direct access to debt and equity markets, the CFO said during a Webinar held by the Risk and Insurance Management Society. The group previously had to tap the capital markets via AIG Inc., the wobbly financial-services giant that's currently 80 percent owned by the U.S. Federal Reserve Board.
What would happen, however, if AIG Inc. went bankrupt? 'Under U.S. insurance law, the insurance companies can't go bankrupt, and so bankruptcy would not be an issue for the insurance companies themselves,' contended Schimek, who noted that the property-casualty insurers are very well capitalized. 'The single biggest issue for us would be further brand damage from the challenges to AIG. But it wouldn't be a concern for us in paying claims or [in terms of] financial strength.'
Indeed, executives argued, the new structure will enable the AIU companies to boost the value of parent company shares, which were at 35 cents a pop in late trading Friday. 'It gives us a platform to grow shareholder equity in our company,' said John Doyle, a senior vice president of AIG as well as an executive vice president of the property-casualty group. The group hopes to grow its shareholder equity from its current worth, between $43 billion and $45 billion, to $50 billion over time, he added.
AIG will own 100 percent of AIU Holdings and has expectations of being at least an 80 percent owner in the future. Selling such a minority stake to an outside investor would generate 'a gain on the sale of the operations to AIG that would go to the benefit of the [parent company's] stakeholders,' said Schimek.
At pains to draw a contrast between his company and AIG, however, Schimek noted that the property-casualty group, 'in stark contrast with the performance of AIG Inc.,' reported a profit of $520 million for the fourth quarter and one of $1.852 billion for all of 2008."
Source: - - CFO.com
Slabbed: Is it possible Berkshire Hathaway is insolvent?
Is it possible Berkshire Hathaway is insolvent? Warren Buffett, Oracle of Omaha and Media Darling, Welcome to Slabbed « slabbed: "Is it possible Berkshire Hathaway is insolvent? Warren Buffett, Oracle of Omaha and Media Darling, Welcome to Slabbed
1212 does not agree with the article, but nonetheless interesting reading:
A market economy creates some lopsided payoffs to participants. The right endowment of vocal chords, anatomical structure, physical strength, or mental powers can produce enormous piles of claim checks (stocks, bonds, and other forms of capital) on future national output. Proper selection of ancestors similarly can result in lifetime supplies of such tickets upon birth. If zero real investment returns diverted a bit greater portion of the national output from such stockholders to equally worthy and hardworking citizens lacking jackpot-producing talents, it would seem unlikely to pose such an insult to an equitable world as to risk Divine Intervention.
How Inflation Swindles the Equity Investor by Warren E. Buffett, Fortune May 1977
As the current CDO/MBS meltdown manifests itself in varying ways throughout our financial system we’ve seen Mr Buffett’s name with increasing regularity in the financial press. His recent 2008 shareholder letter was widely cited early last week in the press for instance, especially the paragraph that attempts to put current events in a historical perspective. I was drawn to the paragraph two above that one:
This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.
I immediately wondered what he meant by ‘They”. “They won’t leave willingly”. And is this the same “they” that brought us this disaster? Did anyone at CNBC, the Wall Street Journal or the New York Times read Buffett’s letter with a critical eye? I’ll warn our readers now this will be a long post by necessity.
First we’ll start with a blog entry from Seeking Alpha that appeared yesterday on our Hartford Bankruptcy Watch RSS feed. The entry and commentary, which we will explore in some detail, is stunning in both detail and human psychology. I don’t buy the author’s conclusions as a closer look at his data suggests something entirely different but let’s start with the numbers which are indisputable:"
Click for Source and Complete Article: Slabbed
1212 does not agree with the article, but nonetheless interesting reading:
A market economy creates some lopsided payoffs to participants. The right endowment of vocal chords, anatomical structure, physical strength, or mental powers can produce enormous piles of claim checks (stocks, bonds, and other forms of capital) on future national output. Proper selection of ancestors similarly can result in lifetime supplies of such tickets upon birth. If zero real investment returns diverted a bit greater portion of the national output from such stockholders to equally worthy and hardworking citizens lacking jackpot-producing talents, it would seem unlikely to pose such an insult to an equitable world as to risk Divine Intervention.
How Inflation Swindles the Equity Investor by Warren E. Buffett, Fortune May 1977
As the current CDO/MBS meltdown manifests itself in varying ways throughout our financial system we’ve seen Mr Buffett’s name with increasing regularity in the financial press. His recent 2008 shareholder letter was widely cited early last week in the press for instance, especially the paragraph that attempts to put current events in a historical perspective. I was drawn to the paragraph two above that one:
This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.
I immediately wondered what he meant by ‘They”. “They won’t leave willingly”. And is this the same “they” that brought us this disaster? Did anyone at CNBC, the Wall Street Journal or the New York Times read Buffett’s letter with a critical eye? I’ll warn our readers now this will be a long post by necessity.
First we’ll start with a blog entry from Seeking Alpha that appeared yesterday on our Hartford Bankruptcy Watch RSS feed. The entry and commentary, which we will explore in some detail, is stunning in both detail and human psychology. I don’t buy the author’s conclusions as a closer look at his data suggests something entirely different but let’s start with the numbers which are indisputable:"
Click for Source and Complete Article: Slabbed
Brit announces relocation to The Netherlands as profit falls
Brit announces relocation to The Netherlands as profit falls: "Brit announces relocation to The Netherlands as profit falls
Brit Guaranty is relocating its corporate headquarters to The Netherlands.
The UK-domiciled heterogeneous insurance and reinsurance group announced the news as it reported a pre-octroi profit of £89.2 million for 2008, against pre-tax profit of £191.2 million a year earlier.
The attendance has been examining relocation options since last summer, when together with a bunch of other businesses it voiced protests over Treasury proposals to escalation the amount of tax UK-based firms pay on overseas earnings.
Returning to the insurer’s results, the body reported gross written premiums (GWP) of £1394.6 million, up from £1264.9 million in 2007. At Brit UK, GWP for the benefit of 2008 soared 28.0%, to £350.6 million.
The company also revealed that entire Brit UK rates fell by 0.8% during 2008, compared with a let go of 4.5% in 2007.
With regard to the firm’s reinsurance and epidemic markets business, these recorded falls in annualised rates of 2.0% and 3.3% separately, compared with an 0.8% decline for reinsurance and a winnings of 1.5% for global markets in 2007.
Commenting on the results, chief chairman of the board, Dane Douetil, said: “In a difficult year for insurance, our adherence to the principles of our blueprint has led us to a strong result. Market conditions are improving auxiliary in most areas, our strong balance sheet and the subscription stripe of much of our business are attractive to risk buyers and abide us in good stead for 2009.”
Brit’s proposed device to The Netherlands will be subject to requisite regulatory clearances and approvals."
Source: John Lewis
Brit Guaranty is relocating its corporate headquarters to The Netherlands.
The UK-domiciled heterogeneous insurance and reinsurance group announced the news as it reported a pre-octroi profit of £89.2 million for 2008, against pre-tax profit of £191.2 million a year earlier.
The attendance has been examining relocation options since last summer, when together with a bunch of other businesses it voiced protests over Treasury proposals to escalation the amount of tax UK-based firms pay on overseas earnings.
Returning to the insurer’s results, the body reported gross written premiums (GWP) of £1394.6 million, up from £1264.9 million in 2007. At Brit UK, GWP for the benefit of 2008 soared 28.0%, to £350.6 million.
The company also revealed that entire Brit UK rates fell by 0.8% during 2008, compared with a let go of 4.5% in 2007.
With regard to the firm’s reinsurance and epidemic markets business, these recorded falls in annualised rates of 2.0% and 3.3% separately, compared with an 0.8% decline for reinsurance and a winnings of 1.5% for global markets in 2007.
Commenting on the results, chief chairman of the board, Dane Douetil, said: “In a difficult year for insurance, our adherence to the principles of our blueprint has led us to a strong result. Market conditions are improving auxiliary in most areas, our strong balance sheet and the subscription stripe of much of our business are attractive to risk buyers and abide us in good stead for 2009.”
Brit’s proposed device to The Netherlands will be subject to requisite regulatory clearances and approvals."
Source: John Lewis
Hiscox 2008 profit down 55 pct
Hiscox 2008 profit down 55 pct : "London-listed insurer Hiscox (HSX.L) on Monday reported a 55 percent drop in its annual profit, blaming hurricane-related losses and weak investment returns, but said it was set for strong growth as global insurance prices rise.
Hiscox said pretax profit fell to 105.2 million pounds ($149.6 million) for the year to Dec. 31 2008 from 237.2 million pounds the previous year.
Analysts had expected profit of 82.9 million pounds, according to the average of eight forecasts collected by Reuters Estimates.
'Conditions are good for our existing and new teams to continue to grow a profitable balanced business,' Hiscox Chairman Robert Hiscox said."
Source: Reuters
Hiscox said pretax profit fell to 105.2 million pounds ($149.6 million) for the year to Dec. 31 2008 from 237.2 million pounds the previous year.
Analysts had expected profit of 82.9 million pounds, according to the average of eight forecasts collected by Reuters Estimates.
'Conditions are good for our existing and new teams to continue to grow a profitable balanced business,' Hiscox Chairman Robert Hiscox said."
Source: Reuters
Ascot Increases Funds at Lloyd's by US$ 100m
Ascot Underwriting | Ascot Increases Funds at Lloyd's: "Ascot Underwriting is pleased to announce that it has deposited an additional $100m at Lloyd's to support its 2009 business plan. These funds address the foreign exchange movements over the past several months and give Ascot the ability to expand in 2009.
Andrew Brooks, CEO of Ascot Underwriting said, 'We are delighted with the unwavering commitment that we received from our capital provide when we asked for additional funds not only to support but also expand our 2009 business plan. The underwriting environment is changing on a daily basis, providing Ascot with opportunities, particularly in the reinsurance and offshore energy sectors.'
Nicholas Walsh, President and CEO of AIU, said, 'Ascot is an important and core part of AIU and will be a key component of the recently announced AIU Holdings, Inc.'
Ascot remains committed to providing the best service to meet the needs of our brokers and clients. We are part of the Lloyd's Chain of Security and all policies written by Ascot are backed by the security of the Central Fund.
Lloyd's Financial Strength rating is A (Excellent) from AM Best and A+ (Strong) from S&P and Fitch*."
Andrew Brooks, CEO of Ascot Underwriting said, 'We are delighted with the unwavering commitment that we received from our capital provide when we asked for additional funds not only to support but also expand our 2009 business plan. The underwriting environment is changing on a daily basis, providing Ascot with opportunities, particularly in the reinsurance and offshore energy sectors.'
Nicholas Walsh, President and CEO of AIU, said, 'Ascot is an important and core part of AIU and will be a key component of the recently announced AIU Holdings, Inc.'
Ascot remains committed to providing the best service to meet the needs of our brokers and clients. We are part of the Lloyd's Chain of Security and all policies written by Ascot are backed by the security of the Central Fund.
Lloyd's Financial Strength rating is A (Excellent) from AM Best and A+ (Strong) from S&P and Fitch*."
Torus names Trimble head of U.S. excess casualty
"Torus Insurance Holdings Ltd. has named Linc Trimble as the head of its U.S. excess casualty office, a company statement said.
Trimble takes up his new post in the New Jersey office of the Hamilton, Bermuda-based specialty insurer.
Most recently president of Statehouse Casualty Managers, a managing general underwriting firm, Trimble has served in the past with the U.S. field operations office of the specialty excess division of the St. Paul Travelers Group.
Trimble also has served as a senior vice president in the property/casualty office of Chubb Atlantic Indemnity Ltd.
Torus Insurance Holdings Ltd. provides specialty property/casualty insurance and reinsurance through its subsidiaries."
Source: Individual.com
Trimble takes up his new post in the New Jersey office of the Hamilton, Bermuda-based specialty insurer.
Most recently president of Statehouse Casualty Managers, a managing general underwriting firm, Trimble has served in the past with the U.S. field operations office of the specialty excess division of the St. Paul Travelers Group.
Trimble also has served as a senior vice president in the property/casualty office of Chubb Atlantic Indemnity Ltd.
Torus Insurance Holdings Ltd. provides specialty property/casualty insurance and reinsurance through its subsidiaries."
Source: Individual.com
Brit Insurance falls on talk of fundraising
Brit Insurance falls on talk of fundraising : "Sources said the company has approached investors about a possible rights issue or placing to raise around £150m at 120p to 150p a share.
A presentation about the capital raising is understood to have been sent to some investors.
Market practitioners believe Brit Insurance – down 6½ to 171½p – has been looking to raise fresh funds to finance a possible
part-cash, part-paper bid for rival Chaucer, which is up for sale.
Traders said bids for Chaucer – down 2¼ to 39¾p – are due in the next week. It is believed those parties interested in acquiring Chaucer have almost completed due diligence.
However, people close to the situation said late last night that Brit Insurance's board had this week decided not to carry out the fund-raising.
A source said: 'The board considered a fund-raising, but believe it is now not in the best interest of shareholders.'
Meanwhile, there were also rumours that Hiscox – up 6½ at 283½p – is set to announce an equity capital raising on Monday. People close to the company poured cold water on the tale.
Elsewhere in the sector, rival Lloyd's insurer Novae perked up 1 to 300p after it reported preliminary results ahead of analysts' expectations.
The company said it had made a 2008 pre-tax profit of £40.2m and also raised its 2008 dividend by a third to 10p a share and announced a special dividend of 4p a share."
Source: - Telegraph
A presentation about the capital raising is understood to have been sent to some investors.
Market practitioners believe Brit Insurance – down 6½ to 171½p – has been looking to raise fresh funds to finance a possible
part-cash, part-paper bid for rival Chaucer, which is up for sale.
Traders said bids for Chaucer – down 2¼ to 39¾p – are due in the next week. It is believed those parties interested in acquiring Chaucer have almost completed due diligence.
However, people close to the situation said late last night that Brit Insurance's board had this week decided not to carry out the fund-raising.
A source said: 'The board considered a fund-raising, but believe it is now not in the best interest of shareholders.'
Meanwhile, there were also rumours that Hiscox – up 6½ at 283½p – is set to announce an equity capital raising on Monday. People close to the company poured cold water on the tale.
Elsewhere in the sector, rival Lloyd's insurer Novae perked up 1 to 300p after it reported preliminary results ahead of analysts' expectations.
The company said it had made a 2008 pre-tax profit of £40.2m and also raised its 2008 dividend by a third to 10p a share and announced a special dividend of 4p a share."
Source: - Telegraph
Coffee taster's tongue insured for $14M
Coffee taster's tongue insured for $14M"A taste tester for Britain's Costa Coffee said the company has taken out an insurance policy on his tongue worth $14 million.
Costa Coffee taster Gennaro Pelliccia said the company took out the insurance policy with Lloyd's of London as it prepares to open a planned 100 new stores during the year, The Daily Telegraph reported Monday.
'In my profession, my taste buds and sensory skills are crucial,' Pelliccia said. 'My 18 years of experience enable me to distinguish between thousands of flavors. My taste buds also allow me to distinguish any defects, which enables me to protect and guarantee Costa's unique Mocha Italia blend.'
While competitor Starbucks has been forced to close hundreds of locations around the world, Costa officials said their company has thus far evaded any recession-powered downturn and reported positive sales growth this year.
A spokesman for Glencairn, the Lloyd's broker handling the policy, said Pelliccia's insurance trumps the $4.8 million policy taken out for singer Bruce Springsteen's voice.
'The taste buds of a 'master of coffee' are as important as the vocal chords of a singer or the legs of a top model, and this is one of the biggest single insurance policies taken out for one person. It shows how valuable Gennaro's tongue is to the Costa brand,' the spokesman said."
Source: MarketWatch
Costa Coffee taster Gennaro Pelliccia said the company took out the insurance policy with Lloyd's of London as it prepares to open a planned 100 new stores during the year, The Daily Telegraph reported Monday.
'In my profession, my taste buds and sensory skills are crucial,' Pelliccia said. 'My 18 years of experience enable me to distinguish between thousands of flavors. My taste buds also allow me to distinguish any defects, which enables me to protect and guarantee Costa's unique Mocha Italia blend.'
While competitor Starbucks has been forced to close hundreds of locations around the world, Costa officials said their company has thus far evaded any recession-powered downturn and reported positive sales growth this year.
A spokesman for Glencairn, the Lloyd's broker handling the policy, said Pelliccia's insurance trumps the $4.8 million policy taken out for singer Bruce Springsteen's voice.
'The taste buds of a 'master of coffee' are as important as the vocal chords of a singer or the legs of a top model, and this is one of the biggest single insurance policies taken out for one person. It shows how valuable Gennaro's tongue is to the Costa brand,' the spokesman said."
Source: MarketWatch
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