CATEX Reports
Issue 26 July  2013
In This Issue
CATEX in Monte Carlo
Intelligent Insurer asks for your Vote and So Does CATEX
CATEX Software Permits Underwriting Aggregation Analysis
Remember the Financial Crisis?
Roger Crombie's memories of a past Monte Carlo Rendez-vous
ABIR supports Obama, new frontiers for ILS and Paper Chinese Lanterns

 

 Quick Links

  

 

  

Contact CATEX

 

 

Princeton, NJ

 

+1 (609) 683-0888

 

  

London

 

+44 (0)20-7663-5656

 

 

Dear Colleague,

 

I am pleased to send you the July, 2013 edition of CATEX Reports. We do not write an August issue so you won't hear from us again until early September.

It has been an eventful several weeks since our last CATEX Reports. Lloyd's Richard Ward announced his departure; details have emerged about Lloyd's reaction to the Aon-Berkshire sidecar; ILS competition seems to have really pressured reinsurers on the July 1 treaties; and of course there was a Boeing 777 crash in San Francisco with miraculously only three fatalities.

CATEX will be at the Rendez-Vous in Monte Carlo from September 8th through the 11th and we are filling our calendar now. We will be showing our new Data Vera software as well as our Pivot Point Transaction System.

CATEX TV will be conducting interviews and will be posting them to our worldwide distribution sites immediately.

We have our monthly column from Roger Crombie too. From a 2010 column in Risk & Insurance we recalled this quote of Roger's...."No career in journalism may be considered worthy unless it includes an unceremonious deportation from at least one country, solely for representing the truth. While any fool may be ejected from Burma or North Korea merely by presenting his credentials, I'm among the first wave of journalists ever to be expelled from sunny Bermuda."

After reading his current column we suspect that the Principality of Monaco will join that list should he ever set foot in Monte Carlo again.

As always, if you have any questions about CATEX, our product suite, or any comments on CATEX Reports, please feel free to contact us. We always enjoy hearing from our readers.

 

Thank you very much.

 

Sincerely,

 

Stephanie Fucetola

Senior Vice President/CATEX

 

--------------------------------------------------------------------------------------------------------------------------

 

 

Monte Carlo Meetings  
MC

 

 

 

We've decided to lead with Monte Carlo in September for the first story. Monte Carlo as you may know is the first of the two big annual reinsurance "confabs" held each year. The second one, 4 or 5 weeks later, is at Baden-Baden in Germany.


Common wisdom has it that at Monte Carlo reinsurance buyers begin discussions with reinsurers and outline what they think their January 1st needs may be. Reinsurers signal back with evidence of any interest and or conditions they would require. 


Monte Carlo meetings are traditionally short -30 minutes or less. With such a short time frame in place for most of the meetings details and specifics about buying needs or pricing are hard to come by.


By the time Baden Baden rolls around in October though most reinsurers have a pretty good idea of what kinds of capacity they are going to make available and at what price. Some of that determination is gleaned from work started in those quick 30 minute Monte Carlo meetings.


Reinsurers who may have seen 40 or 50 buyers asking about cover availability for a particular LOB will have learned that there may be a high demand for it.


By the time of the Baden Baden meetings reinsurers will have measured out their internal aggregates to determine if they have the flexibility to be able to respond to specific requests from buyers. If a type of cover is in high demand the reinsurer, if they have done the homework, will know just what other coverages need to be limited or see a higher attachment point.


Of course that kind of homework means being able to run varieties of "what if" scenarios across your overall aggregated book of business worldwide which is no small feat if your most granular in-force records are maintained in Excel. (CATEX's Data Vera and its Pivot Point Mosaic Reporting Service can solve that problem and even export proposed business to CAT modelers cleanly, accurately and very quickly.)


It is at Baden Baden that the real work gets done and the pricing begins to firm. But that work can't be achieved until or unless the initial information forays occur in Monaco. If you miss Monte Carlo and you are a reinsurer you may not have an idea about the appetite of the market that year. Preparing for something that doesn't materialize is, we suppose, prudent -unless you failed to prepare for what did materialize because you didn't know about it!


So....the "speed-dating" nature of the Monte Carlo carousel does have a purpose and it serves that purpose well. The social and entertainment diversions available in the fairy tale Mediterranean resort seem only to contribute to information gathering. Many companies will routinely debrief their entire traveling party immediately upon its return to the office to ensure no nugget of information obtained (by any means!) is not reported and considered. 


Although we now know that some government agencies are listening in on phone calls and meetings we in the reinsurance industry have to do these things the old fashioned way. We wait in lobbies for appointments; stand in line for entry to receptions; fight off surly servers at the Café de Paris and get up early the next day and do it all over again --all part of a quest for information. 


Too bad we don't have an unlimited eavesdropping budget -we could stay at home and watch football and apparently not miss a thing.


CATEX is not staying home. We will be in Monte Carlo with a four person team. We each will have laptops for quick (well within the traditional 30 minute meeting time!) demos of our new Data Vera software and our Pivot Point Transaction System.


We want to see you. If you have an interest in seeing what we can do for you and can spend 30 minutes with us please contact Martin Robinson and we will schedule a time to meet.

 

CATEX on "Shortlist" for Technology Award

 

Intell Ins   

 

The Intelligent Insurer released news of their "finalists" for their annual awards which they will announce on Sunday, September 8th at the Monte Carlo Rendez-vous.

 

The finalists were picked from over 500 responses that were submitted to Intelligent Insurer from reinsurance and insurance industry participants. CATEX is a finalist for Technology Company of the Year.

 

Naturally we were very pleased with being named a finalist, ranking with some pretty impressive companies so we are very happy about that.  

 

The final voting is currently in progress and if you are interested in responding please do so at this link.  Intelligent Insurer will ask for your name and email to ensure that you are an actual human responding but your anonymity is assured.

 

You will find the technology question is toward the very end of the survey. Thanks for any consideration you give us. See information about our latest offering, Data Vera, by clicking here. We will be showing Data Vera in Monte Carlo.

 

Now of course we will have to attend this glitzy dinner to learn if we have won! Well...we had to eat anyway, right? Hopefully we will see you regardless of the outcome of the final voting. 

 

 

 

 

 

Florida Wind Prices Drop; Headlines Predict Active Season

 

  

 

CATEX software that enables risk bearers, managing agents and brokers to better understand the risks they've written and broked, as well as see how proposed new business fits within that written book, seem to have arrived just in time.

 

By any measure so called "traditional reinsurers" are being besieged by the flood of new ILS capital and the double whammy effect of lower premiums caused by that new capital.  Throw in the low interest returns on investments and it's not unfair to think that reinsurers have the financial equivalent of the view from The Alamo.

 

Here are some headlines......"Reinsurers taking robust defensive measures"..."Credit Suisse says ILS could harm traditional reinsurers"... "Third Party Capital forces steep price cuts"... "Bermuda ILS pressure traditional reinsurers"....and they go on and on. If you're running a reinsurance company these days you could be excused if sometimes your view seems to be what Davy Crockett saw from here.

 


  

Maybe it is because the smaller headlines about commercial insurance rates are so different than the property CAT reinsurance stories that they stand out so much. Here are a few of them ..."Commercial insurance rates up 5%"....

"Commercial property/casualty insurance prices continue to rise" and of course the most telling headline of all "Berkshire Hathaway launches new property casualty insurance business."

 

You know there is money to be made when Warren Buffett says "It's official: We are moving into commercial insurance in a substantial way, and we are here to stay".

 

 

 

 

                                                                    
                                
 Financial Claims "Tsunami" Coming?
  
Vickers  
Vickers 
 
 

 Do you remember the "Great Financial Crisis of 2008"? Some day our children will read about it in the history books but unless you've intentionally developed amnesia about it you should remember it.

 

According to Willis Re reinsurers have not yet ruled out the prospect of the widely predicted "tsunami of claims" stemming from the crisis and are pricing financial lines business appropriately.  According to Willis while many casualty lines saw premium reductions at the July 1 renewals financial lines-exposed liability classes experienced increases of up to 10%.

 

James Vickers, Willis Re's international chairman said that the report "suggests reinsurers are still pretty nervous on financial lines."

 

 

Financial Crisis

 

Aside from the premium increases observers are monitoring claim reserve releases for commercial casualty. In 2008 (pre-crisis) reserve releases were $5.3 billion but dipped to $3.8 billion in 2009 and all the way down to $2.4 billion in 2010.

 

Possibly the reserve release trail is evidence of concerns about paying for an expected large number of D&O and PI claims stemming from alleged misbehavior?

 

If so then 2011, which saw $4.1 billion of commercial casualty claim reserve releases allowed everyone to breathe easier. Who would be releasing claim reserves in 2011 if they foresaw claims in the pipeline?

 

Indeed, the same question is asked now after 2012 saw reserve releases dip by a half-billion dollars down to $3.6 billion. If reserve releases are tightening up, especially in this era of low investment yields, it's a logical guess to think that insurers are keeping the money on hand because they think they see something headed their way. 

 

Let's hope James Vickers is right when he said "Generically it doesn't appear a tsunami of claims is coming, but I don't think we're out of the woods and underwriters know how difficult and dangerous financial institutions are."

 

  
  

 

 

Roger Crombie writing for CATEX Reports takes an off-beat view of the world of insurance
  roger 
Roger Crombie
 

Monte Carlo Perspectives

 

 

 

For a while, my father was described in the musical press as "Britain's leading reed player". He played clarinet and saxophone, appearing onstage in Monte Carlo at the age of 16. In those (just) pre-war days, MC was the last word in elegance. If you could make it there, you didn't need to make it anywhere else.

 

Readers familiar with an earlier column published elsewhere some years ago will know that I am no great fan of the Principality. I described it as "a hellhole" after my only visit to the Rendez-Vous de Septembre. I've never been back, nor will I. But the approach of this year's bash reminded me of an aspect of that trip that I have never reported, which might best be tagged as How Journalism Works.

 

For a national publication in the US, I had negotiated at great length with one of Bermuda's leading reinsurance personages (Ted, not his real name) that I would shadow him for a full day at the Rendez-Vous and report just what that entails. He'd explained to me that the day would involve meetings, meetings and more meetings. We agreed I wouldn't sit in at any of them, but that I'd be told in broad themes after each meeting what had transpired, and given insight into what his clients were thinking about the markets. We also agreed that I wouldn't mention clients' names.

 

Ted was a gung-ho type, who held meetings in Europe for a week before getting to Monte Carlo, where he would hold meetings for another week. In a very old-fashioned way, he felt that the absurd cost of the trip should result in some business purpose. The trick in Monte Carlo was to see as many key players as possible, for 15 or 30 minutes each, plus breakfast, lunch and dinner meetings.

 

The Big Day began at 6:45am. Ted met me in the lobby of the finest hotel in town, where he was staying. He explained who his breakfast companions were. A few minutes later, they all trouped up and went off to eat. I sat napping in the lobby. At 7:45, Ted woke me up and we ran to catch the bus to another part of town.

 

Dozy me: I had only 50 Euro notes with me; the bus driver wouldn't give change; the bus driver wouldn't keep the change; the bus driver threw me off the bus. My story went west at 50 kilometres an hour and I'd gotten out of bed at 5:30 for nothing. As Bob Marley might have put it if he were a journalist: no story, no pay.

 

So this is how journalism works. I went back to my crummy hotel ($700 a night and as much arrant rudeness from the staff as you could stand (and then lots more), and slept until the late afternoon. Ted returned to his hotel at about 11pm and found me waiting in the lobby. I explained what had happened. I had a plan, but the man was in no state to listen to any more plans.

 

After we both got back to Bermuda, I interviewed Ted and had him tell me in detail what he'd done all day in Monte Carlo. From those notes, and not once referring to my hatred of Monte Carlo (where a multitude of other humiliations were inflicted on me), I fashioned an article that might have given readers the impression that I had spent the day shadowing Ted. If you read the article closely, it was clear that I might equally not have spent the day shadowing Ted.

 

My editor had approved the idea in advance and the piece ran. I got paid. Ted has retired from the game and now travels. I have retired from the game and almost never leave the house. Monte Carlo, I would imagine, goes on being a hellhole, and that, my friends, is all I wrote.

  

* * *

 

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 roger.crombie@catex.com.

 

Copyright CATEX Reports

June 24, 2013

 

 

 

 

 

 

Quick "Bytes"
 
  
After increasingly loud exchanges about the "Neal Bill" the White House must have been surprised to see the press release from Brad Kading at the Association of Bermuda Insurers and Reinsurers endorsing President Obama's climate proposal...."Traditional reinsurers" often note that their industry has an excellent record of paying claims but that the new ILS insurers don't yet have a track record. Presumably certain "traditional" eyebrows were raised when the liquidators of the Mariah Re CAT bond sued PCS, AIR and American Family Mutual Insurance claiming that the trio conspired to bring about a $100 million payout of the CAT bond based on a falsified loss report. Investors are seeking the return of the $100 million in capital that was paid out...
 
 
Bill Dubinsky willis
Dubinsky
 
As the ILS market contemplates how far it can push its boundaries beyond its natural CAT comfort zone the CAT bond and ILS market needs to embrace new perils or geographies if it is to maintain the growth rate of recent years saysBill Dubinsky head of Willis Capital Makets & Advisory ILS arm...Speaking of which Insurance Insider reports that alternative asset manager Highbridge Capital Management and Bermudian reinsurer Arch Capital are possibly looking at setting up a sidecar-style structure to write a quota share of casualty reinsurance business. Presumably the sidecar would be funded by "non-traditional" ILS capital...
 
chinese lanterns
Cows Beware!
  
Finally (and this is a new one for us Americans who tend to rely on the boom and bang of gunpowder fueled fireworks) but the British Chief Fire Officers Association says that paper lanterns, heated by lit candles and launched into the air during celebrations, can cause significant damage. The group says that a large blaze near Birmingham, at a recycling plant, that caused $9 million in damage was started by a paper lantern (with a lit candle in it) that floated over the site.
 
cow
 
The firemen said that as well as being a fire hazard to everything from thatched roofs to hazardous waste the paper lanterns also posed a risk to livestock.....
Copyright MMXIII  CATEX