Issue 52
November 2015
In this Issue
  • Reaction to Paris attacks will be key
  • Alice in Wonderland and the news of the month
  • Aon comes out with two blockbusters
  • Regulators warn that although ILS is needed they will be watching
  • US health warning on meat
  • CATEX's Data Vera
  • There is a lot of room     ahead for alternative capital
  • Roger wonders about James Bond's insurability
  • Quick Bytes: Volvo, Un-tested capital and China bans golf

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Dear Colleague, 

We were finalizing this newsletter when the terrorist attacks in Paris occurred. Our thoughts and prayers are with the families of those lost or injured in Paris and with the families of those lost or injured in an attack in Beirut a day earlier.

After the events of last week writing about reinsurance can seem a mundane exercise. We will carry on but with a heavy heart.

By the time you read this the fate of the Willis-Towers Watson deal should be known. The institutional advisory firms have flexed their muscles and those pushing for the merger have been busy countering the headwinds caused by their recommendations.

AIG was in the news --being pushed by none other than Carl Icahn to break up the company.  Aon has made some big news too, which frankly, seems to become more important with each passing day.

There was an unusually strident health warning from the WHO which may someday have risk implications and we have an update on our Data Vera product too.

Our regular Roger Crombie column is here too.  Roger's reaction to the new James Bond movie was certainly not what its producers intended! 

If you have any questions or comments about this newsletter, or CATEX and its product suite, please contact me.

Thank you very much.

Stephanie A. Fucetola
Senior Vice President/CATEX

Black September, Islamic Jihad, Al-Qaeda and now ISIS

It's difficult to focus on matters such as insurance and reinsurance when over the weekend the world was horrified by the terrorist attacks in Paris. The US cable networks quickly implemented 24 hour coverage of the tragedy and Americans couldn't help but remember the September, 2001 attacks in New York and Washington.

Nearly lost in the media coverage was the news that on just a day earlier 43 people had been killed in Beirut. The bombing was perpetrated by ISIS, the same group responsible for the Paris attacks.

The increasing pace of "Globalization" has been identified by a number of studies as being an important consideration for underwriting in the near future. The concept that more urban centers will be formed, with increasing density; more cultural inter-mixing will occur, and that the near universal availability of communication tools have become underwriting considerations.

If such factors have become underwriting considerations they've certainly become the focus of intelligence agencies too. We can't help but remember that the self-proclaimed goal of ISIS is to cause enough outrage so that the reactions of Western governments will lead to anti-Islamic measures thereby placing "Muslims in the West in a position where they will quickly find themselves between one of two choices, they either apostatize. or they emigrate to the Islamic State and thereby escape persecution from the Crusader governments and citizens."

This is a horrifying but brutally effective calculation. Remember, that not only do the 44 million European Muslims already live with the threat of the rise of "far right" political parties, but the front pages of European newspapers carry daily stories of the continuing onslaught of mainly Muslim refugees risking their lives trying to enter Europe.

After an attack such as Paris it requires considerable restraint to avoid painting an entire religion or cultural group with one brush. Doing so would seem to be the exact ambition of ISIS.

It's interesting to note that as many as 11 million Christians died fighting each other in the Thirty Years War (1618-1648) as Catholics and Protestants initially fought for control of what is now Germany. 

Religious wars are not new and probably neither is the brutal predictive calculation made by ISIS. What does need to be new is that the West does not respond in a manner that levies blame against one religion.

This is the challenge ISIS is betting we can't meet.

Down the rabbit hole

As Alice in Wonderland said things just seem to get curiouser and curiouser. We read negative headlines about third quarter financial results from Berkshire Hathaway but after reading the articles closely we saw that the company had one of its best quarters overall.  We even saw more than a few bright spots in the firm's insurance and reinsurance results too. It seems as if Warren Buffet's famous "insurance float" --the amount of money paid in premiums that he has to invest until or if claims are made --reached an all-time high of $86.2 billion. 

Then we read that none other than Carl Icahn had appeared as a significant shareholder of AIG.  If you're a CEO of a company such news alone is normally enough to make you nervous, but the public announcement that Icahn had been amassing AIG shares also came with a cry to break up AIG into at least three separate companies.  

Icahn said that it was plain that the multi-line approach wasn't working for AIG and that he advocated a break-up so that three essentially monoline insurers could be formed.  This was curious as it seems that everyone is trying to do just the opposite. What do we know? Mr. Icahn is worth a reported $21 billion. He must know something.  

But then we read on and saw that he was complaining about the size of AIG as being "too big to succeed" as compared to being the original "too big to fail" company.  Icahn claimed that AIG was laden with bureaucracy, needed greater efficiency, and by reducing its size would likely avoid designation of expensive compliance with non-bank systemically important financial institution (Sifi) status. Sifi status which, by the way, was created to avoid precisely the kind of problem AIG encountered in 2008.

Icahn is upset that AIG is seeing returns of only 5% or so annually while he claims its peers are generating returns nearer to 10%.  We thought about this and noticed that AIG's stock has tripled in value over the past three years.  We also know that by 2013 AIG had repaid the US government the $182 billion rescue loan extended to it five years earlier plus $22.7 billion in interest.  And we also know that after its near death experience in 2008 AIG shed over 40 sizable assets for over $66 billion in cash.  And we also wondered about the merits of moving away from the status of a diversified property & casualty insurer.

We read AIG CEO Peter Hancock's response with interest. 

If Icahn thinks AIG is too big to succeed now what would he had thought of AIG before 2008? We suspect he shouldn't ask Maurice Greenberg who was reportedly livid that the company sold off assets he had taken decades to acquire.

Not for nothing, but from where we sit, the AIG story has been a pretty remarkable one when you remember those grim days at the end of 2008. It was good to see AIG's CEO Peter Hancock's forceful response to Icahn (and to the others who piled on after the legendary activist shareholder went public).

We saw Axis' CEO Albert Benchimol talking during an analyst call about Axis' Q3 numbers. Someone asked him if Axis had any plans to acquire a reinsurer in the near future. Why, no, said Benchimol. Why would one ever think that?  He went on to discuss a construct which already places Axis as a top ten global reinsurer and said he wouldn't consider acquiring a reinsurer.

We found this to be curious. Maybe we had only imagined the events of the summer? We did indeed go back and verified the lengthy and sometimes bitter attempt by Axis to acquire (guess what) a reinsurer earlier this year when it pursued PartnerRe. Perhaps the $315 million deal "breakup" fee paid to Axis by Partner went a long way to softening that blow.

We were curious when news broke in mid-September that Berkshire's Ajit Jain had decided not to renew the 7.5% portfolio arrangement he has with Aon when it expires at the end of this year. He apparently is said to be concerned about continuing softening of rates and who are we to argue with him?

But what was even "curiouser" was the news that Aon, despite Berkshire's concerns about pricing, announced a new and larger portfolio underwriting initiative that will involve a number of Lloyd's syndicates and will offer a 20% line to Aon's entire London market wholesale client base.  The facility could write as much as $600 million in premium next year after it launches in January making it the biggest slice of portfolio underwriting in Lloyd's history.

In another move, and this was curious maybe only because it took AonBenfield's CEO Eric Andersen this long to pull it off, was the unveiling of something called Aon Carrier Link.  ACL will open a direct channel to Lloyd's syndicates for Aon's global $78 billion premium retail market. Lloyd's is happy as currently it is thought that only about $1.8 billion of this premium is currently reaching the market.  Eric Andersen is pleased, because as the former head of Aon's retail operation, he well knows the value of being able to deliver access to the Lloyd's market direct to Aon's 450,000 global retail clients.

This is curious, too. Lloyd's Shirine Khoury-Haq said that "market practitioners have invested over 13,000 hours of their time" to assist in the discovery phase of Lloyd's six priority initiatives which will comprise the Target Operating Model (TOM). We confess that we pay particular attention to statements like this ever since a prospective client asked us "how many million man-hours had it taken us to develop our flagship Pivot Point System"?

Everyone hopes for the success of TOM. It's a huge initiative that encompasses just about every aspect of Lloyd's operation and its implementation costs are estimated to be north of $400 million. As Khoury-Haq, who is the Lloyd's executive charged with TOM's implementation, is well aware there are unfortunate precedents in this area that are etched in people's memories.

In another curiosity Willis Re's James Vickers said that, of late, "capital market investors tend to be now more disciplined than the traditional reinsurers."  He noted that if prices are too soft and competition is too high large third party investors simply deploy assets elsewhere for better returns. Unfortunately since insurers don't really have similar flexibility they can be tempted to be less disciplined in underwriting in order to maintain a certain level of return. 

Vickers had identified this possible shifting over two years ago when he famously noted "What happens if [an area such as] banana futures suddenly looks more attractive, or yields [from bond investments] improve?".  

Vickers also noted that "some of the ILS funds are spilling over from the reinsurance and dropping down the food chain to actually try to access what they want, which is clear, easily modelled catastrophe risk at the ground level."

And finally, what is really curious is trying to find out exactly what's going on with premium rates as we approach the 1/1 renewals. Some have said that the proverbial  "bottom" has been reached or nearly reached; some say that rates will decline only by about 5%; others say that rates will drop on average again by over 10%.  To date the only hard news we've seen is the 15% rate reduction negotiated by French insurer Covea which hardly bodes well for the optimists.
 Aon signals that the world is their oyster

The two announcements by Aon related to the Lloyd's market have the potential to be game-changers.  Aon Client Treaty (ACT) the broker's 20% all-class facility, and Aon Carrier Link (ACL) that will provide syndicate access to Aon's $78 billion retail client base, are both set to go live in early 2016.

We've written before about Lloyd's opposition to big portfolio deals. In fact after the Aon-Berkshire deal in 2013 it was reported that Lloyd's had warned that it would oppose future huge portfolio arrangements or at minimum ensure that its full arsenal of regulatory review would be thrown at each one proposed.  

Lloyd's has obviously changed its mind. The Berkshire-Aon deal (which will expire at the end of this year as Ajit Jain is not renewing it) obligated Berkshire to write 7.5% of Aon-placed Lloyd's business.  The outcry from opponents to that arrangement is seeming to pale now in comparison to the reaction to the ACT deal. The new arrangement will place 20% of all Aon-placed London market wholesale client business into a follow form facility of approximately six risk bearers. Reports indicate that the facility could write as much as $600 million in 2016.

Anticipating opposition from critics that facility participants will have no control over the business placed into the portfolio, and that they will need to follow the price, terms and conditions negotiated by the lead, Aon noted that its sophisticated data and analytics supporting the portfolio underwriting had modelled the book and shown it would have delivered strong profits from 2012-2015. In other words the broker is saying claims of "blind underwriting" are groundless as not only will the lead underwriter be involved but underwriting will be buttressed by the Aon tools. However, what the facility participants obviously won't know is what other business the lead has with Aon as part of their portfolio and the extent to which they are following obliged lines or accommodations.

Aon was right to expect opposition. It was fast and furious.  Observers, who truth be told chose to remain anonymous, noted that if a "normal" CAT loss experience was factored in with the current lower premium rates the deal would begin to look marginal.

Insurance Insider's Adam McNestrie's article had some descriptive reactions. "There is no underwriting with ACT," one senior market source said. "The approach taken here is at odds with the way Lloyd's has always transacted business," explaining that participating carriers would be forced to accept any risks Aon produced. Another observer said "This has the stink of the soft market. Writing it is crazy".

Clearly there are strong feelings about ACT although most of its presumed strongest defenders, the six or so markets subscribed, are bound by Aon confidentiality agreements from commenting.  Aon isn't saying much either other than what was said at a November 11 briefing at its Cheesegrater headquarters. Lloyd's, apparently, is not offering any comment.

How good or how bad this eventually may be is anyone's guess. The bottom line is that if the largest broker in the world approaches XL Catlin, the overall leader for the facility, and the five following markets, to form a program that will price and underwrite 20% of the $5 billion in premium Aon places into the London market any market is certainly going to listen to the proposal.  In a time of falling premiums, combined with promises of increased efficiency from the program placements, it's not as if agreeing to the deal is the craziest thing we've ever heard.

Obviously it made sense to people like Mike McGavick at XL Catlin, the lead underwriter and Hank Greenberg at CV Starr, said to be one of the follow on markets. We would be hard pressed to think of two others who could be more trusted to ensure adequate underwriting and proper pricing if we were a market approached by Aon.

All of which leads to a renewed analysis of the reasons that prompted Berkshire Hathaway's withdrawal from not only its facility arrangement with Aon but also from smaller, similar arrangements with Willis and Marsh. Berkshire's investment returns remain enviable; their cost model is an industry "gold standard" and they were said to be charging only a 3 percent commission on the facility placements.  If Berkshire pulled out it meant that they didn't find the returns attractive enough

We didn't mention underwriting in connection with the factors which may have affected Ajit Jain's decision. Maybe we don't have to. Read this quote from Berkshire's 2nd quarter report back in August: "We continue to decline business when we believe prices are inadequate," Berkshire said. "However, we remain prepared to write more business when more appropriate prices can be attained relative to the risks assumed," the company added. The next month Jain pulled out of the facilities.

It may all go back to what James Vickers observed with his "banana futures" example. Companies like Berkshire can deploy their capital elsewhere internally but other insurers and reinsurers don't have that luxury. They need to focus on the only product they have to produce returns. In that case the Aon deal could look attractive to some.

The other Aon news is something called Aon Carrier Link (ACL).  On this one Lloyd's was perfectly prepared to comment and why not?  ACL would open the over $78 billion in premium that Aon places globally on behalf of 450,000 retail clients to Lloyd's syndicates. Currently it's thought that only about $1.8 billion of this premium reaches Lloyd's.

ACL has been a long time in the making. The first time we heard Eric Andersen, CEO of Aon Benfield, speak two years ago, he declared that his prior position, CEO of Aon Risk Solutions Americas charged with developing Aon's North American retail business, had led him to conclude that there were far fewer client-oriented products in reinsurance than there were in retail.  He noted that while retail was quicker off the mark to develop and service client needs there was often a lack of capacity to underwrite products servicing those needs. Reinsurance, he was surprised to learn, was the opposite.  There was ample capacity but fewer products.

Not any more. Andersen has been preparing what may be the most far-ranging change in the history of Lloyd's. If new products and innovative ideas are needed by businesses and insurance clients on the ground level then why not go straight to the people who insured Bruce Springsteen's voice, Kim Kardashian's derriere and the Titanic?  

ACL will provide syndicates direct access to those primary, retail risks which are now placed mainly in local markets.  What has everyone been talking about recently? Moving down the food chain to get closer to the client?  By accessing business via ACL, Lloyd's syndicates will be able to take a giant step in that direction. From Aon's perspective, they will now be able to offer direct placement into Lloyd's to any client, retail or reinsurance, in the world.

And of course, with the increasing number of special purpose syndicates, being formed and financed by ILS entities, initiatives like ACL will open ever wider ranges of risk for them to underwrite.  It's a very big step for Lloyd's and for Aon.

There will be monitoring this time around warn Nelson & Carney

We noted last month that both John Nelson and Mark Carney, the Governor of the Bank of England warned of potential new risks already in the pipeline.  Nelson spoke about a "trust deficit" faced by corporations, perhaps in response to the scandal at Volkswagen and Carney discussed transition risk, as the carbon-based economy switches to alternative fuels in response to climate change. 

Both men recognize that alternative capital and insurance linked securities are certain to play a big role in responding to coverage requirements that develop in both corporate reputational risk and carbon economy transition but both have also warned about the need for oversight of the products.  In a speech in Chile earlier this month Nelson said "While ILS's, in the right structure, provide useful additional reinsurance capital, industry and regulators must be watchful in terms of the evolution and structures."

Nelson is, after all a banker, so his next comment --"The impact of complex derivative structures within the sub-prime mortgage sector in the US led to devastating instability that we must avoid causing in the reinsurance market." --was not surprising.  

Carney, for his part, is said to believe that regulators "need more power to regulate hedge funds, derivatives markets and insurers' lending activities", a position he made clear in a letter to the Chancellor of the Exchequer George Osborne.

We take these statements at face value.  They are certainly true, yet no one has been more active in rounding up "new" capital for Lloyd's than Nelson.  And under Carney's watch, the UK task force on developing new ILS regulations has moved at remarkable speed to place the revisions before Parliament for approval.  Nelson and Carney seem to be reminding us that they will be watching to ensure the train doesn't jump the rails.   
"Mad Men" and Mad MeatCATEX's Data Vera strikes a chord
If you've watched the American TV series "Mad Men", a virtual soap opera of the growth centered on the Madison Avenue advertising industry in the 1950s and 1960s, you will have noticed that the producers of the series take great pains to authentically recreate the era down to the display of long gone corporate logos; background music on the radio; products seen in the homes of the characters; and the clothes they wear and the cars they drive.

Someone clearly has gone though a lot of effort to recreate authentic scenes from sixty years ago.  It pays off too as numerous viewers tune in just to be reminded of the nostalgia of earlier days.  That is if they could peer through the cigarette smoke to actually see these items.

To authentically recreate an office environment in the late 1950s and early 1960s there had to be cigarette smoking and lots of it. Everyone it seems smoked and smoked all the time.

Some of us can dimly remember an era when smoking was allowed at work but few of us would argue that its prohibition is anything but a positive move.

One interesting "Mad Men" episode makes reference to the 1964 US Surgeon General's Report which, for the first time, linked diseases such has heart disease and lung cancer with cigarette smoking.

It's interesting to hear the 1964 "Mad Men" characters talk about how they "had a 90 year old aunt who smokes two packs a day"; or knew someone who had never smoked "who suddenly dropped dead"; or "it's just another study --you can find studies that say smoking is good for you too."

It was ironic almost to look back at the comments from a distance of 60 years and see how misguided they were.  Today, only a fool would dispute the causal links between disease and smoking as even the cigarette manufacturers have seemingly recognized with their cash settlements with various US states for compensation for damages paid as a result of smoking.

When we saw the news that the World Health Organization had announced that bacon, sausage and other processed meats cause cancer, and that red meat probably does, too we couldn't help but think of the "Mad Men" episodes.  

The WHO study "took into consideration all the relevant data, including the substantial epidemiological data showing a positive association between consumption of red meat and colorectal cancer."  The WHO has now placed processed meat in the same category as plutonium, as it definitely does cause cancer.

That last bit definitely got our attention. We don't see much plutonium here in New Jersey but know enough that we'd quickly head in the other direction if we saw it.  We can't say the same yet about hot dogs or steak.

The $95 billion US beef industry promptly responded to the WHO study claiming that it doubted that the so-called "link"  was substantial enough to support the WHO's conclusions. 

Soon we will begin to hear of "90 year old aunts who eat meat every day"; and "healthy vegetarians developing cancer" and read other studies saying meat is actually good for you.

We do know one healthy 86 year old in Omaha who famously enjoys cheeseburgers and it doesn't seem to have done him any harm.

It would be interesting to see if our grandchildren, sixty years from now, react as we did when we see Mad Men actors puffing away. Instead they will see actors portraying scenes from 2015 as they tuck into a juicy, medium rare steak.  
We can't begin to tell you how pleased we are with the reactions people have to our Data Vera application. We were in London for a week earlier this month and managed to offer demonstrations of it to dozens of companies.

Everyone it seems will answer "yes" if asked whether they have data challenges. CATEX develops and operates end to end transaction systems for reinsurers, reinsurance brokers, managing general agencies and delegated authority.

By "end to end" we mean that our systems can manage everything associated with processing any type of transaction in the placement, contract, statement, accounting, ledger, claims and MI areas.

We process over $7 billion annually in premium and claims and our systems depend on accurate, verified data to produce results.

Data Vera, with its learning capabilities, makes loading thousands of files accurately and quickly, without the aid of human mapping, accurate and fast. Data Vera has been added to all our systems as the preferred method to load data onto our systems.  What we like best about Data Vera is the complete audit trail that reflects every change made to the data and who made it. 

It's a simple question we can pose to any company. Do you have data challenges?  If they do we respond affirmatively we have an application that may help.  

Data Vera can provide the "clean" processed data in a variety of formats, regardless of the import format, and in most instances directly feed your in-house systems and/or data warehouse.

We can produce any data report required and we can produce an audit certificate showing any viewer every change that has been made to the data.

When we developed Data Vera we did so in response to a need from our binder system licensees who needed to load thousands of disparately formatted Excels into our database. 

Then we learned that the need to accurately analyze incoming data --expanded now to include csv, xml, and Acord data -- also extended to the CAT model community and to those maintaining internal aggregate systems.

In short the response to our question about "data challenges" has been just what we expected but the scope of those challenges has prompted much work at our end.

That's why Data Vera has now become an insurance and reinsurance industry specific data conversion and analytic tool complete with thousands of data fields specific to the industry.

Data Vera is easy to use and we've deployed it in large offshore data centers greatly easing the burden of data conversion and noticeably increasing data conversion accuracy.

Data Vera examines every data cell and compares it against chosen business rules and will look to your past selections if a case doesn't fit within the rule. Data Vera
never makes a "headless" decision but will offer its highlighted suggestion so the user can either affirm it or change it.

Tens of thousands of files can be accurately converted in minutes and your transaction systems can begin to match premiums, claims and settlements to specific risks. 

Data Vera has been licensed by both the very largest of insurers and the smallest of binding partners. We have the capability to deploy it at any level.

There is fertile ground ahead for alternative capital

We thought about this the other day when we read that the London-based IUA announced that the overall premium total for the London company market in 2014 was about $36.65 billion. The split between direct/facultative and treaty was about 79% to 21%.

When you add in the total for Lloyd's, and its GWP for 2014 of about $40 billion, the overall total for the London Market is about $77.2 billion.  According to Willis "dedicated global reinsurance capital from both traditional and non-traditional (or alternative) sources remained static at $425 billion".

So the London Market continues to be a big player with more than 18% of the global reinsurance premium dollar. But how "big" really?

We've used this quote in the past --"A billion here, a billion there, pretty soon, you're talking real money" -- but its long thought author was not former Illinois Senator Everett Dirksen as we had believed. Whoever it was will remain lost forever but when we saw the London Market numbers we quickly looked up the market capitalization of Apple. It's about $650 billion. Microsoft is $422 billion. ExxonMobil is $328 billion. Berkshire Hathaway is $326 billion. GE is $305 billion. 

These five companies alone total $2.03 trillion in market capitalization. According to Swiss Re total direct, non-life premiums written globally in 2014 were $2.1 trillion. If we added a sixth company, say Walmart with a market capitalization of $183 billion, our total market capitalization for only six companies --all US based --easily exceeds the total amount of non-life premium collected globally in 2014.

If you're an ILS person reading this your observation is likely, "Of course that's correct and we haven't even included all the US companies, publicly traded or not or companies from Europe, Asia, Africa, South America and Australia --not to mention the assets that market capitalization cannot quantify! That's why alternative capital is the only capacity source that can provide this much coverage."

But if you're operating a traditional insurer or reinsurer, and have a strong underwriting perspective, it's precisely this type of equation that keeps you awake at night.  There are insurable risks everywhere, Eric Andersen is right about that. The trick is how to price them profitably so the comparatively small insurance and reinsurance industry isn't capsized. 

Those same accelerating forces of "globalization", that may have prompted the spread of conflict, also prompt the acceleration of interest from prospective insurance purchasers worldwide. This is what Aon is betting on with its Aon Carrier Link. You can bet if a significant portion of its $78 billion retail market is successfully placed into Lloyd's, and capacity for more risk grows, that Aon will be working to develop new products that can reach this untapped global risk inventory.

Aon may have recognized that the factor of "time" is no longer viewed in the same way it was five years ago or even a year ago. Everything is moving faster. They could be holding the end of an ever-widening hose that shoots right into One Lime Street.
Roger ruminates about James Bond's risk manager
Is the British government the insurer of last resort for 007?

Roger Crombie
I saw the new James Bond film, Spectre, the other day. The movie is notable for its ordinariness - lunatic villain, everything blows up, hundreds are killed in the process - but also for its elevated level of product placement.

Watching the movie in a dilapidated cinema much older than the Bond franchise, I wondered why insurance companies hadn't taken advantage of the chance for product placement. If Bond's preferred tipple has for a price become Heineken, rather than the iconic martini, why couldn't one or two of our finest insurers be mentioned rather prominently?

When Bond picks up a new Aston Martin, for instance, 'Q' advises him to bring it back in one piece, rather than in pieces. Why not have 'Q' say: "Our insurer, Allied World, is very unhappy with you," or "Even though you have wiped out our no-claims bonus regularly since 1962, Allstate has kindly agreed to continue to cover us at only a slightly increased premium"?

Underchallenged by the seen-it-all-before nature of Spectre, my brain began working on all the possibilities for insurance product placement as the movie unfolded. But then I began to think through why insurers hadn't rushed to take advantage of product placement.

Life insurance, for instance, wouldn't be a good fit. Bond is rarely expected to return alive from any of his capers. Life and health insurers don't like it when their customers are strapped to tables and have laser beams directed at their genitals. (It's not a question insurers ask, but perhaps it should be. Who knows when a twisted mastermind might move into your neighborhood and commence operations?)

Fire insurance is obviously not on: Bond sets fire to most of the places he goes, or causes them to explode, following which they are left as burning ruins.

Motor insurance is also out of the question. Bond routinely trashes whatever car he happens to be in, and destroys almost any vehicle within 100 yards. He also drives way too fast, especially when being pursued by his enemies or chasing a female he intends to bed.

Kidnap and ransom? Bond has been kidnapped during just about every case he's ever worked on. He'd have to append about 90 pages of history to his application form.

All risks? Bond is nothing but risk. Look at him running along the roof of a train - all the while wearing a suit so skin-tight that any attempt to leap anywhere would result in horribly painful damage to some of his most important equipment.

Bond's enemies, the bad guys, would also have a hard time obtaining cover. Say for a moment that you're a criminal genius and utter nutcase, and you've built a hidden laboratory where you employ a staff of 10,000 thugs. The health and safety considerations alone are staggering. You'd have to show your insurer around the facility, and then you'd have to kill him before he got back to the office and told everyone about your secret plans.

Liability cover would be impossible for the modern-day Blofeld to acquire, because every time he steps forward to destroy the world, Bond blows up his secret operations and kills the cat-stroker's evil employees. Since the whole criminal enterprise is secret, and the outcome is always dead baddies, the chief villain would be open to all manner of employment-related claims. Plus, pet insurance for the cat would be prohibitive.

If you were a bona fide megalomaniac, all your equipment would have to be shipped to your secret island hideaway, but you couldn't buy insurance for it, since it would all have to be smuggled there to avoid detection.

These thoughts aside, a conclusion finally formed in my mind: the British Government must be Bond's insurer. James is forever blowing up buildings, aircraft or hidden weapons labs, or demolishing half a year's output of the car industry while trying to avoid a hitman such as Jaws (who obviously had no dental cover).

When the owners of these vehicles, so innocently parked on the city street the night before, awake to find their prized transportation a burning mass of twisted metal, their insurance claim, surely, would end up in the hands of 'R', MI5's risk manager.

No wonder my taxes are so high.

Roger Crombie is an American Society of Business Publication Editors national award winner. An English chartered accountant who lives in Eastbourne, on England's South Coast, 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

Copyright CATEX Reports
November 17, 2015
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AIG has executed a master service agreement with CATEX to use its Data Vera application for global business units... Former Aon Ltd CEO Dennis Mahoney is the new CEO of RFIB. Calera Capital, a San Francisco based private equity firm, inserted Mahoney as executive chairman of RFIB earlier this year when it made an investment in the London broker resulting in ownership of a majority stake...Speaking of brokers, Marsh's CEO Dan Glaser said during the company's Q3 earnings call "It's tougher to be a reinsurance capital provider than a reinsurance broker, because for us, it's not about the premium, per-se, it's about the value we create." When you think about it, after all the hue and cry about buyers searching for the best deal, Glaser is probably right which isn't a confidence builder for reinsurers if they're thought of only as a source of capital...There's a reason Lloyd's has embarked on its TOM project if what Hyperion CEO David Howden says is true. "We whinge when the banks take 0.05 percent as a transaction charge, but as insurers we often end up taking 50%" he said. "If our clients knew how much of the premium was taken in delivering the product they would be horrified."...Volvo announced that it will accept full product liability in the event of any incident while its cars are in autonomous mode according to its CEO Hakan Samuelsson. Insurers have begun to forecast challenges as more and more initiatives for so-called "driverless" cars are unveiled...S&P is concerned that reinsurers could incur worse-than-expected losses after a major event because worsening terms and conditions have increased their risk exposures. S&P's Taoufik Gharib said "Terms and conditions are worsening--and that is like a price decline, when you're charging the same price or slightly lower and covering more risk"....Marco Giovane of Trans Re is worried that cedants in Latin America need to be wary of low reinsurance pricing and cheap capital. "The region has to understand that there is a lot more to reinsurance than just underwriting, so insurance companies should look very closely at what is behind a reinsurance company's underwriting."...China's Communist Party has banned its members from "extravagant eating and drinking", engaging in "sexual relationships outside of marriage" and playing golf, state media reported. Party members were already barred from "keeping paramours and conducting adultery" but the new rule on sexual activity is stricter according to the official news agency Xinhua. Playing golf and excessive eating and drinking were explicitly listed as discipline violations for the first time this year...Not with a ten foot pole will we touch this one...

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