+1 (609) 683-0888
Welcome to the December edition of CATEX Reports. We know that December is the busiest time for the reinsurance industry and not too much of that frenzy is due to the holidays as you know. With reinsurance premiums being what they are it seems that December has become even more taxing on the nerves.
Since our last newsletter we have three names for you -- Grahame Chilton, Brian Duperreault and Inga Beale. Maybe we could have guessed Mr. Duperreault's return as he'd already been revealed as aiding in the purchase of SAC Re but Mr. Chilton's and Ms. Beale's news made the mainstream media. To be fair to Mr. Duperreault, the Wall Street Journal had a nice article on his involvement with the new Hamilton Re.
The CATEX Data Vera product continues to get great reviews. The first comment we hear when we complete the 30 minute demonstration is "This is a lot more than just an Excel converter. You could just about run your whole business using this!".
The data verification and business rules of Data Vera, that are applied against each of the potentially tens of thousands of data cells, do make it much more than "just" a spreadsheet converter. When we add the data products that can be produced from one processing of one file we can see why some demo participants react the way they do.
Let us know if you would like to see a Data Vera demo as we would be interested in your comments.
It is December and there are bits and pieces of unusual news floating about. We've picked some interesting stories for you and of course they are all set against the backdrop of underwriters doing their best to maintain price discipline while premium prices are dropping. Now there is evidence that premiums are declining in casualty reinsurance too.
We have our Roger Crombie column too. We've heard from him and he is alive and well and still, apparently, examining why certain people succeed and some don't. Maybe he has the answer?
We hope you enjoy this month's newsletter and as always if we may ever be of assistance to you please do not hesitate to contact us.
And, of course, we wish you all the best for the holidays too!
Thank you very much.
Senior Vice President/CATEX
London market practitioners following Data Vera demos
Data Vera is a "Game-changer"
We don't like to blow our own horn as any regular reader of CATEX Reports knows. Generally we keep as low key as we can about our products when we write this monthly report but we couldn't help this one.
In our last Data Vera demonstration to a London market before we went to press with the December newsletter one of the participants observed that Data Vera was a "game-changer" (honestly!) and that's a comment a software/systems company loves to hear. We couldn't resist mentioning it.
Data Vera is much, much more than a simple Excel import application. In fact, as we've been fine tuning it in response to comments from clients and prospects, we can see the day when it will ultimately encompass the entire Pivot Point transaction system.
Imagine being able to send raw Excel data to a transaction processing platform and receive back structured data pertaining to the premium, claims, location, exposure, loss ratios and modeling aggregates. Now imagine if another file you received back included the premium statements and the ledger entries --all easily integrated with your own system.
We've shown Date Vera to underwriters, data analysts, binder processors, rating engine providers, aggregators, modeling experts and the huge array of data products that are produced from one processing of one file is where we heard the "game-changer" quote.
Data Vera seems to strike home with just about every professional practitioner group we've shown it to --and why not --everyone has the same conundrum with spreadsheets, templates and output. Data Vera is applicable to the claims people, for example, as it is to the binder group and as pertinent to the underwriters as it is to the accounting group.
That's the direction we seem to be heading with Data Vera but, for now, you should see it for yourself. Please call or email for a demo and we'll set it up. Now, on to the news....
Beale Chilton Duperreault
Chilton & Duperreault return
Beale named CEO of Lloyd's
The end of the year is usually a frenzy with the 1/1 renewals looming. This year the frenzy seems at a fever pitch because of the downward premium pressure on reinsurance rates and the increasing pushback from reinsurance buyers. Reinsurance brokers, who sometimes seem to serve as the canaries in the coal mine, have noticed this pushback.
Aon Benfield has an initiative to broaden terms on property cat placements initially targeted seven A+ rated carriers and though Aon says that the "new" terms would make traditional reinsurance more competitive with ILS coverage a number of large reinsurers have declined to change.
When you add to the mix the burgeoning strength of the ILS market --that shows absolutely no sign of letting up --the traditional reinsurance market seems to be experiencing undue tension at year's end.
As if all of this is not enough "news" to digest let's throw in; the return of Grahame Chilton; the naming of Inga Beale to succeed Richard Ward and the reappearance of Brian Duperreault in Bermuda and one comes suddenly close to a news "overload" threshold. What next?
As we were wrapping up this issue we learned that Mark Byrne is back in the game with his Haverford Group having made a sizable investment in the Lloyd's syndicate Sportscover 3334. According to press reports Byrne is understood to have concluded an agreement which would ultimately permit him to obtain control of the syndicate in the future. As readers of this publication know Mark Byrne has been interested in acquiring a Lloyd's platform for years.
There are still a few hours left in 2013. Who else will reappear? What more will happen? Let's look at the details before we start predicting.
Inga Beale, formerly the CEO of Canopius and Zurich Insurance, was named to succeed Richard Ward as CEO of Lloyd's. By last week rumors were circulating around the London market about the possibility of the first woman CEO of Lloyd's. On December 13th the rumors became a reality and Ms. Beale is readying her office on the 12th floor at One Lime Street.
Richard Ward leaves after nearly seven event filled years to become the chairman of Brit Insurance. It's hard to be the CEO of any group that has so many constituencies to please and be universally popular. Let's face it, at Lloyd's between the syndicates, the giant markets outside Lloyd's, the brokers, the clients represented by the brokers, the innumerable binder coverholders, the EU in Brussels, UK regulators, global national insurance authorities, the stake in Xchanging Insurance Services, preserving the Central Fund, measuring the market performance of members as well as dealing with the hundreds of rank and file Lloyd's employees worldwide, it does seem to be a pretty thankless job.
We've always been Richard Ward fans and think he did a better job than most people credit him for. He emerges after the storm of the 2008 global recession and the 2011 annual claim losses, which set a record, with Lloyd's possessing an A+ rating. The inroads Lloyd's made during his time into South America and Asia will be paying dividends for years.
There were also a considerably larger number of brokers around back then and when you're a broker market like Lloyd's that number is real important. Lloyd's thrived when Ward was CEO. Was it because of Ward or, as some say, in spite of Ward? Who can say but we remember a quote Bill Clinton used to use when opponents scoffed that the US economic growth of the 1990s would have occurred even without him. Clinton would bring up an old line from an anecdote told by a farmer. He would say "If you see a turtle sitting on top of a fence post, it didn't get there by accident." We'll leave it at that on judging Richard Ward's tenure.
Now Inga Beale steps into the role. For all the talk about her being "the first woman to be the Lloyd's CEO" one does have to recognize that it is, unfortunately, a really big deal. Any visitor to Lloyd's would recognize in an instant that it's a long overdue move. The market became coed long ago and Beale's appointment, while a clear signal that Lloyd's has recognized so called "gender reality", is clearly an effort by the Lloyd's Council to place the best person in the job. We wish her well --her success will be to the benefit of us all.
The announcement that Grahame Chilton is returning to set up and expand the reinsurance broking operations of Arthur J. Gallagher UK, by establishing a joint venture called Capsicum Re, is very interesting. Although the news broke just before the holiday season began in earnest it hardly seems to have been digested yet by the market.
Remember who Chilton is. After the tragic death of Matthew Harding in 1996 it was Chilton who pushed Benfield to acquire Greig Fester, Bates Turner and EW Blanch before finally taking the company public. And it was Chilton who engineered the sale of Benfield to Aon in 2008 for $1.43 billion.
Since then Chilton, and his long time associate Rupert Swallow, seem to have been involved primarily in Formula 1 racing through the Capsicum Private Office set up to manage the interests of the Chilton family. Anyone who follows the sport knows that the British racecar driver Max Chilton is Grahame Chilton's son and that the father is a rabid supporter and sponsor of the sport.
Now he is back --as is Swallow who was a long-time broker with Grieg Fester, Benfield and Aon -- and they are firmly housed within the structure of AJG, one of the US's biggest brokers. Make no mistake about it. Chilton's return means that out at AJG Headquarters in Itasca, Illinois a careful calculation has signaled that there is money to be made in reinsurance broking. Chilton apparently feels the same way. If you think back to how far companies like Tiger Risk have come in only 5 years imagine how far Chilton could come endowed with all the advantages that AJG can provide.
Remember that AJG processes a huge amount of commercial business that could and does end up in the reinsurance market. This could mean that we will soon see the likes of Chilton and Swallow extolling the virtues of choice offered by smaller, more specialized brokers in comparison to the Big Three.
As far as Brian Duperreault is concerned his Hamilton Re entity has already been granted an A- rating by A.M. Best. Most observers believe that Duperreault and his underwriters plan to follow the successful model of Third Point Re and plan to grow by reinsuring risk underwritten by hedge fund investors. Given that several of Hamilton's investors are hedge funds this seems to be a logical idea and it seems that Duperreault, like Third Point's John Berger, have figured out the best hybrid yet to match capital market investors with professional underwriting.
More data on "Emerging Markets"
Swiss Re's Chief Economist Kurt Karl believes that reinsurance premium growth will increase around 2% in the "advanced" economies in 2014 but will increase nearly 8% in the emerging markets during the upcoming year.
Swiss Re, and others, have noted the trend in developing countries toward increased urbanization and he said that "Emerging markets, especially in Africa and Asia, will definitely provide some of the more spectacular growth figures in non-life business as cities grow and people look for financial protection of their property."
Watch this space...Karl is alluding to many studies predicting an explosion in the growth of cities during this century especially in the developing world. According to the UN "Asia in particular, is projected to see its urban population increase by 1.4 billion, Africa by 0.9 billion and Latin America and the Caribbean by 0.2 billion by 2050. Population growth is therefore becoming largely an urban phenomenon concentrated in the developing world."
We won't discuss the problems such a massive increase in the number of global city dwellers will present, such as scarcity of rural population to grow food or the near certain disastrous infrastructure problems endemic to nearly all Third World "mega-cities", but you need to appreciate what people like Karl see ahead.
Ultimately, one of the building blocks of any urban growth is insurance. Apartment buildings, train stations, airports, office complexes, water treatment facilities and power generation plants all will require some type of financing. Financing means that the lender will want to ensure that there is insurance in place before the first shovel is turned. This is the big piņata in the developing countries and it is the one that has everyone's attention.
Of course there will be a corresponding increase in personal lines coverage as populations gain economic affluence and seek to protect their own assets but that growth, with all due respect to the carting business, is in fact the cart after the horse in this case. The infrastructure development needs to occur before rises in individual incomes can be realized.
Still not sure of the prospective demand from these coming mega-cities? Read this quote from the UN report then: "Of the more than 450 urban areas with 1 million inhabitants or more in 2011, 60%, or more than 890 million people, were living in area of high risk of exposure to at least one natural hazard."
And that was in 2011. Look at the report to see what the UN expects those numbers to be in 2050 and you'll understand the focus of the reinsurance industry on urbanization and emerging markets. There will be an untold amount of capital investment that will need to be protected.
Roger Crombie writing for CATEX Reports takes an off-beat view of the world of insurance
At this time of year, insurers are either too busy to read, since they're renewing the book for next year, or too drunk. Therefore, a column this month on a matter related to all of business, rather than one specifically about insurance.
Other than inheritance, income is usually the most important factor affecting personal finances. But what other factors affect success? In many places, the bed you were born in has been legislatively ruled out of contention in this regard. But whatever laws may be passed, your income will be largely dictated by subtler factors than the colour of your skin or hormonal make-up. These factors are legion.
Here is a baker's dozen:
Fact: The taller you are, the more money you will earn. In The Tall Book, author Arianne Cohen calculated that "tall people bring home a lot more bacon than short people, to the tune of $789 more per inch per year". Need more proof? Ms. Cohen writes that just two percent of Americans are taller than 6' 3", yet among the chief executives of the 50 largest US corporations, 29 percent exceed that height. (We'll ignore the obvious statistical error, since 29 percent of 50 would be 14.5 CEOs.)
Making jokes about the overweight is the one remaining area of comedy that the need for diversity has yet to defeat. Survey after survey reveals that the heavy are discriminated against in job hiring, promotions and every other aspect of corporate life. He ain't heavy: he's my assistant.
Hardly anyone would defend nepotism, yet the world is chock full of examples of fathers handing jobs and offices down to their sons (or, occasionally, their daughters). This one's rather handy for the modern no-responsibility crowd: "I didn't get the job because he gave it to his son."
Education is the largest single income-booster. Well-educated equals better-paid. No one doubts that and, if I may venture a rare personal opinion, nor should they. Doctors take a dozen years to train; they then save lives. Why shouldn't they earn more than journalists?
Sad but true: no one other than a circus would hire the Elephant Man. Good-looking people sail through life by comparison to the rest of us. The only thing that keeps us going is that the better looking a person is, generally speaking, the dimmer that person seems to be. (If you're a good-looking genius, don't bother to write in. Everyone already hates you.)
"Clothes make the man," said Mark Twain, adding: "Naked people have little or no influence on society." The truth is that a well-dressed man or woman is far likelier to succeed in life. That's why we wear our best clothes for a job interview or a hot date. This prejudice is extraordinarily powerful. Dress for success.
Do you have a visible piercing (other than ladies' ears)? Forty percent of Americans aged 26 to 40 have a visible tattoo, and it's not hard to imagine them finding some types of work more difficult to come by as a result. It's equally hard to criticise an employer who discriminates against the visibly pierced or tattooed, since it's such a blatant indicator of low self-esteem.
Speak properly and people will think you know what you're talking about. Those with the plummiest of English tones are sometimes considered snobs by the less well vocally-endowed, who are just jealous.
In the 1970s, men with visible ears couldn't find work because long hair was all the rage. Today, the reverse applies. Men with ponytails limit themselves to certain kinds of jobs, and that's all I have to say on that subject, except this: to maximise your corporate income, keep your hair clean, tidy and short, if you're a man.
It would require a m-u-c-h braver man than I to talk about women's hair.
A simple rule on discussing politics at work: don't.
The chemistry between the candidate and the interviewer, as the representative of the corporate culture, is the largest single factor in hiring.
"I'd rather be lucky than good," a major insurance company CEO told me once. How right he was, although being good at your job helps.
I've kept this one until last, because it's my favourite. It proves that no amount of laws or socialism will ever change anything. A few years ago, Jewish people made up 0.2 percent of the world's population, but 54 percent of world chess champions, 31 percent of Nobel medicine laureates and 27 percent of physics laureates. They made up two percent of the US population, but 21 percent of Ivy League students, 26 percent of Kennedy Centre honorees, 37 percent of Academy Award-winning directors and 51 percent of Pulitzer Prize winners for non-fiction. No one definitively knows why.
* * *
Roger Crombie is an American Society of Business Publication Editors national award winner. An English chartered accountant who lives in London, he writes and broadcasts news and opinion in the US, UK, Bermuda and the Caribbean, in print and online. His main beat is insurance and financial services, with 30-year sidelines in music and humour. All views expressed in Roger's columns are exclusively his own. Contact Roger at email@example.com.
Copyright CATEX Reports
December 27, 2013
The ILS markets
have certainly impacted the North American property CAT business but when one reinsurance underwriter said "I have a strong gut feel that it's all going to hell in a handcart
. The sheer amount of capacity around means it's only a matter of time before someone breaks ranks and does something stupid" he was talking about the casualty reinsurance marke
t....The European Insurance and Occupational Pensions Authority (fortunately, better known as Eiopa
) said that they're
supposedly Kenya Re, Zep Re, East Africa Re, Swiss Re and Africa Re
are on the policy...The most recent annual NAIC
homeowners insurance report ranks Florida as the costliest state for home coverage
with an average of $1,933 annually. Utah is the cheapest
with an average of $450 annually. There is that little matter of hurricane peril though in Florida which keeps the cost so high although, as we noted last month, the Insurance Department is under pressure to reduce rates
because reinsurance premiums have fallen because more capacity is available because of new ILS vehicles because there has been no claim activity because there have been no hurricanes
. You get the picture....Google
employees who live in San Francisco
apparently have a paid for work perk in that they are chauffeured to the Google campus
from downtown SF in
luxury buses (with company provided fresh fruit, granola snacks and rain forest coffee included as they are whisked through the streets of San Francisco to their jobs. Not so fast. It seems some sort of class warfare erupted
and one of the Google buses was surrounded by angry demonstrators who blamed the company for rising rents and increased evictions in the city. Those employees have to live somewhere. It's not known if the occupants of the bus were able to lift their heads from their portable devices long enough
to notice the commotion...And here's one for event cancellation coverage. The National Basketball Association
in their expanding quest for global coverage (to be fair the NFL and MLB do it too)
had a game scheduled
between the San Antonio Spurs
and the Minnesota Timberwolves
at the Mexico City Arena in Mexico City
that was cancelled because of heavy smoke
in the arena caused by an electrical fire. The players departed the arena in their uniforms and couldn't return to the locker rooms. One said "we thought they were shooting off indoor firework
s." No word on if the game will be rescheduled but the Timberwolves had a long ride back to Minneapolis in their shorts