Issue 68
May 2017
In this Issue
  • Terror in Manchester
  • Duperreault returns to AIG
  • London expenses, ILS and collateralization concerns
  • Greenberg warns its management pushing underwriters
  • Berkshire has over $100 billion of float
  • Roger sees a bleak landscape after Brexit vote; politics as usual
  • Quick Bytes: Ogden rate change hits; Ajit Jain's biBerk; Catlin's "Fantastic Journey"; Rabobank protects its ATMs from explosions; US property insurers see worst Q1 in 20 years; US can expect mass migrations resulting from SLR; Lloyd's echoes C.E. Heath and pays Sewol claims; KLM really is the "Royal Dutch Airline".

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Dear Colleague, 
The news this month of course starts with the installation of Brian Duperreault as the new CEO of AIG.  Duperreault had put in 21 years at AIG before leaving in 1994 to take the lead job at ACE.  Twenty three years after leaving AIG he is coming back to assume the top spot.  

Of course he has been pretty busy these last 23 years and we will look at that record as well as what his departure means for Hamilton Insurance which he founded in 2015.  He made sure that he did right by his former colleagues there and this may be one of those rare cases where both sides come out better.

There is more discussion on ILS both in terms of the effects it's having on traditional cost structures such as Lloyd's and also on what Torsten Jeworrek at Munich Re has observed to be a loosening of the need to fully collateralize ILS risk.  

There is also a discussion of the Berkshire Hathaway annual meeting in Omaha and comments made by both Warren Buffett and Charlie Munger about the reinsurance deal with AIG.  In an aside Mr. Munger noted that Berkshire also could envision an acquisition in the range of $150 billion.  We bet people were asking each other "Did he just say $150 billion?"

We will be in London the week of June 5th showing our new Data Vera for Exposure Management application and our new Pivot Point application.  We've taken the admonitions of all concerned to heart and believe we've sliced the Gordian knot of extracting meaningful underwriting information from torrents of data.

And, as you probably have noticed, people are scheduling their Monte Carlo meetings for September.  We're doing the same and if you're interested in seeing us please let us know as slots are filling fast.

Our regular Roger Crombie  column is here too. This month Roger offers his own view on the current state of play of Brexit discussions in the UK.  We can only hope that the situation is not as bad as he makes it out to be but then, knowing Roger, we are aware of his views towards politicians.  

As always if you have any questions or comments about CATEX Reports , or want more information about CATEX , or our products, please feel free to contact me.
Thank you very much.
Stephanie A. Fucetola
Senior Vice President/CATEX

Terror strikes again

As we completed the outline of this issue news broke about the bombing in Manchester that resulted in the deaths of 23 people.  The television images of wounded teenagers and children attending the concert with their parents was difficult to accept. The mind struggles to understand any scenario where someone thinks it's a good idea to blow himself up in a public place at a time and date designed to kill as many innocent youths as possible.

In the United States the television channels immediately switched to live coverage of the Manchester bombing.  After watching for 15 minutes one understood that the same Twitter video footage replayed again and again, combined with breathless commentary from news anchors interviewing other correspondents, meant that there was little news available other than the main details of the attack.

Zombie-like though we continued to watch the coverage and began to realize that in some awful way this coverage and this topic was more familiar to us than the news events that have been unfolding on a daily basis in the US.  The footage of flashing blue lights of emergency vehicles in Paris, Nice, Brussels and now Manchester offered a narrative that although beyond our understanding was at least not unknown to us.

It is difficult to measure the effect on Americans which the daily headlines about Washington have had.  Discussions about the behavior, alleged or admitted, tends to happen only within small groups where affiliations and boundary lines are certain. After all, six months ago the current President did win an election obtaining 63 million votes. Neither side, those who voted for him or voted against him, it seems are interested in face-to-face discussion for fear of confrontation. Thus both sides remain comfortably within their own group, behind self-constructed fences,  watching their respective television networks and reading their respective news outlets.

The polarization of the United States is unprecedented and not even a tragedy such as Manchester seems to be able to bridge the gap.  We do know this though.  When TV coverage of the Manchester bombing provided even the thought that it offered a measure of relief from the daily onslaught of news about American politics then something is seriously wrong. 

Yet life goes on. Businesses remain functioning, families move through their schedules of proms, graduations and summer vacation plans, and one's own day-to-day world goes on uninterrupted.  Maybe that type of complacency, if in fact that's what it is, can be used to begin to understand why a 22 year old would blow himself up in the midst of a crowd of young people all but certain to perish with him.  

Killing children in Manchester won't help ICIL's defensive position in Mosul but killing 23 innocent people in Manchester will help to jolt people out of complacency. Perhaps that is the goal of the killers.

From the US perspective we fear what could be next for us.  Our armor of complacency seems particularly thick these days.  Our prayers are with our British friends.

23 years later Duperreault rides into AIG

It would be tough not to lead with the return of Brian Duperreault to AIG.  And this in a month that included the annual Warren Buffett "Woodstock for Capitalists" meeting; reports of the highest US severe storm claim total in twenty years; the first true global cyber-attack and ongoing waves of Ogden rate reserve hits belting bottom lines.  Still the return of the 70 year old Duperreault to AIG has to be the lead story if only because of the unusual arrangement he negotiated with the insurer to retain him.

Say what you want about Duperreault (and truthfully we have never heard anything negative said about him) but he seems to be cut from the cloth of those warriors who do not leave their fallen on the battlefield.  There is a reason for a headline in the Royal Gazette "Reardon: both Hamilton and AIG will gain" citing comments made by Hamilton Re CEO Kathleen Reardon.

The details of Duperreault's personal arrangements, as reported, may be found in any number of stories. Compare his arrangement against other compensation packages. The details about the arrangements involving Hamilton seem more complicated.  What does seem to be accurate is that AIG has agreed to purchase the Hamilton USA operation outright.  AIG has also agreed to an ongoing arrangement with Hamilton Re to cede up to $150 million of reinsurance premium annually to the Bermuda reinsurer a figure that can increase by 7% annually. Finally Duperreault consummated an agreement between AIG, Hamilton and Two Sigma Investments for AIG to fund $250 million over the next 5 years in research and development project to create a "next generation insurance platform" to be used by AIG.

There are more details about the overall arrangement floating around in the trade press than you can shake the proverbial stick at but suffice to say that AIG really wanted to have Duperreault as its CEO.

We've been covering Duperreault for as long as we've been writing these reports so it was not surprising to see that he is now 70 years old.  If you've met him recently you know that he is robust and probably more active than you may be (certainly more active than us) but we still did initially wonder why AIG was prepared to open the vault door so wide.

We wondered why until we saw this headline: "Duperreault: I will not  break up AIG". Then the very next day was this headline: "Duperreault signals immediate shift in AIG strategy." 

Unless you've been avoiding the trade news over the past few years you are aware of the ongoing pressure on AIG management from so-called activist investors like Carl Icahn and John Paulsen who have been pushing AIG management to break up the company. The argument is plausible enough.  AIG, the reasoning goes, is involved in so many different operations and businesses that not only is it virtually impossible to run but by breaking it up and selling the individual parts current shareholders would reap a bonanza.

We remember this tactic from the 1980s in the era of "corporate raiders" like T. Boone Pickens, Kohlberg, Kravis and Roberts and in fact Carl Icahn.  It's a bit like an economic Darwinian survival of the fittest mentality and it made some people very rich.

Here the plot thickens.  Duperreault had actually been with AIG for twenty years before he left the company in 1994 to become the CEO of ACE.  From 1973 to 1994 Duperreault worked at AIG rising to the position of  Chairman and Chief Executive of AIG's American International Underwriters, which comprised all of AIG's non-U.S. commercial business. Only six years prior to Duperreault's arrival at AIG, in 1967, Maurice Greenberg had been named the CEO of AIG.   

Greenberg began the task of building out an international insurance operation from one that had previously been focused on the CV Starr and American International Underwriters operations in Asia and Latin America.  From 1973 until his departure in 1994 Duperreault worked with Greenberg to create the multi-faceted, multi-lined AIG that became a global colossus. 

Greenberg is 92 years old and still going strong (more on him later), senior to Duperreault by 22 years.  It's well known that there was a coterie of people trusted by both Greenberg and Wall Street analysts who helped grow AIG into an international giant.  It would not be unfair to think that the younger generation of executives had aspirations to one day run AIG if Greenberg was ever to retire.

The thing is that Greenberg never retired.  It took the " widely reported so-called accounting scandal in 2005, that saw then-New York Attorney General  Eliot Spitzer  and prosecutors from the federal Department of Justice pressure AIG's Board to oust Greenberg."

That story is well known. Greenberg fought the charges for 12 years until a settlement was reached earlier this year. Greenberg still has not "retired" and is now chairman and CEO of C.V. Starr & Co., Inc. The point is though that the old adage "all politics are local" seems to apply here. Duperreault, Martin Sullivan, Steven Newman, Joseph Taranto and others, all top AIG executives at one time or another, and presumably each with an ambition to one day occupy the top spot, simply had to begin considering other options as it seemed increasingly unlikely that the top spot was ever going to be vacant.  

As it turned out it was Martin Sullivan who won the role of AIG CEO in 2005 when Greenberg did resign.  Duperreault had already left AIG nine years earlier and was by 2005 transforming ACE into an international insurance and reinsurance powerhouse with more than 11,000 employees, writing a wide variety of lines, in almost 50 countries.

Duperreault's story from that point on is well known.  In 2008 he was named CEO of Marsh and implemented a turn around in the fortunes of the major broker.  In 2013 he founded Hamilton Insurance Group in Bermuda. 

The US government's bailout of AIG in 2008 is another story we don't need repeat.  In 2009 Robert Benmosche was named CEO to implement the turnaround that eventually paid back US taxpayers every cent that had been loaned to AIG plus a profit

There are reports that when Robert Benmosche left the position as AIG CEO in 2014, after six years at the helm, that Duperreault had hoped to finally be named AIG CEO. Benmosche had been known to been ill for several years. While media reports of his illness caused speculation about succession at AIG, Duperreault at the same time was finalizing his work returning Marsh McLennan to financial health.  

The discussion that Duperreault was interested in the AIG job as the Benmosche era at AIG was drawing to a close could be on target. Benmosche's illness was diagnosed in 2010 and it was not until 2013 that Duperreault formally launched his new start-up Hamilton Insurance at the age of 66.  Did Duperreault learn that Peter Hancock would be named as Benmosche's successor?  Did Duperreault ever even throw his hat into the ring?  We'll never know.

Duperreault is a man, as we have just seen, who when on the brink of obtaining the AIG CEO job that he had been interested in since 1973, held off until he negotiated the deal he did for Hamilton.  There's a right way and a wrong way to do things and the employees and clients of Hamilton can vouch that Duperreault did the right thing by them. He was no more going to exit Hamilton without ensuring that the house would remain in order than he would have publicly or privately lobbied for the AIG job when it was soon to be vacated by a professional colleague's illness.

That right way pays dividends.  This is the business of insurance after all. It's built on trust and trust starts from the top.  As we were writing this A.M. Best removed their credit review with negative implications on AIG. The article headline says it all --"AIG ratings review ends as AM Best credits Duperreault."  

So, this now is the era of Duperreault at AIG, a company that still has more than 88 million customers in 130 countries and employs around 65,000 people. It is the 42nd largest public company in the world. It's diminished from its height in the Greenberg era, before the accounting scandal and the government bailout, but remains a very formidable force. Finally, Duperreault, who has been a champion of more women in the insurance industry, opening the industry to younger "millennials", and a tireless advocate for technological innovation is to take the reins of the company he started at 44 years ago.  

It will be interesting to watch, that's for sure.

Expenses, ILS and questions about level playing fields

There was news this month of a report commissioned by the London Market Group that warned that London is in danger of losing its global share in reinsurance to places like Bermuda, Singapore and Zurich. The study found that London's global share of reinsurance had decreased from 13.4% in 2013 to 12.3% in 2015. Gross reinsurance premiums decreased by 6% in the same period down to some $20.5 billion.

The study cited three reasons for the decline. First it noted that the London market "was not set up to compete for large structured reinsurance deals i ncluding large structured-reinsurance programs, insurance-linked securities, and life and health reinsurance."

Second, the study cited t he "challenges that London's relatively high expenses and cost of capital create at a time when market conditions are soft." and, finally, observed that the emergence of reinsurers outside of London were exacting a toll on the global share of reinsurance written through London.

We thought of the study, produced by Boston Consulting Group when, a few days later, we saw this story: "Lloyd's embarks on redundancy drive." Deep within the story was the news that "The Lloyd's market expense ratio has soared from 34.7% in 2010 to 40.6% in 2016 as broker revenue harvesting has intensified, pushing acquisition costs significantly higher."

Broker "revenue harvesting" acquisition costs have little to do with a letter written by Lloyd's to all its 1,100 employees asking them to express their interest in voluntary redundancy but you have to start somewhere. The Corporation is looking to reduce its headcount in an effort to improve expense control.  

We would note that figure of 40.6% in acquisiton costs and while much of that is insurance related as compared to reinsurance it certainly offers validation of BCG's conclusion about "relatively high expenses" in London.

In so far as BCG's observation about London being behind in terms of ILS we are aware of the postponement of the long-awaited regulations about developing a London ILS market. The final outline of whatever exit agreement the UK strikes with the EU needs to be understood before London starts considering itself as an ILS hub that will reach into Europe. 

But we also noted this article, "Munich Re's Jeworrek questions ILS' increasing use of leverage." At first glance we thought Torsten Jeworrek, Munich's CEO of Reinsurance, was on a familiar theme, talking about the untested nature of ILS coverage in comparison to that provided by a rated balance sheet but then we read further.

Jeworrek notes that today "the wealth of alternative reinsurance capital players no longer fully-collateralize as they once did, with ILS business models increasingly using leverage." The example he used during a recent earnings call was that ten different CAT events can be put together but that no longer is ten times the limit fully collateralized any more but in fact the collateralization has fallen to maybe only four or five times the limit.

We had to think about this, as we usually have to do whenever we read something Jeworrek says. Our first reaction was that we thought that all Insurance Linked Securities had to be fully collateralized.  That's the whole point, we thought, of using a non-traditional market. The buyer of coverage would demand that the limit of coverage be escrowed safely away in return for coverage not based on a rated balance sheet.   

Jeworrek believes that if more typical ILS investors such as pension and hedge funds are not required to provide 100% collateralization for all the limits offered it could increase the risk that this type of reinsurance could fail and increase credit risk.

He is particularly concerned about ILS funds that underwrite risk placed through "fronting insurers". The fronting insurer technically assumes the risk from the client but the fronting insurer then reinsures that risk with ILS commitments. Jeworrek's point is that if the ILS backing for such risks is not fully collateralized then an "uneven playing field" could result

In a fronting arrangement the credit risk is held by the insurer or reinsurer issuing the paper. Jeworrek is wondering whether regulators will continue to accept limits that "aren't fully collateralized in the same sense as they were in the past." 

He notes that traditional reinsurers are subject to stringent regulation but that " on the other hand you have very lean pension and hedge funds who don't have to provide the same amount of capital for the same risk."

Munich Re is the world's second largest non-life reinsurer. Three hundred miles to the north sits Hannover Re the world's fourth largest reinsurer.  We remembered this article  from several months ago. The article notes that Hannover Re " works alongside leading ILS fund managers to provide fronting or risk transformation solutions, enabling ILS managers to take advantage of its balance-sheet leverage, to a degree, and rated paper, an area of its business that has been growing in recent years."

Hannover Re's success in this fronting area seems to be the type of arrangement Jeworrek is warning about.  Hannover Re reported that it generated "attractive margins" from facilitating ILS and collateralized reinsurance in 2016, with its gross premiums written under structured reinsurance and ILS coming in at EUR 1.309 billion for the year.  This isn't an inconsiderable number and we suspect that Hennings Ludolph and his ILS team at Hannover are hard at work trying to boost that number.

We suspect that on some level Jeworrek has a point. Munich Re's big balance sheet is monitored by regulators and burdensome to maintain. There is no doubt some element of fairness or level playing field at work here.  But there is also nothing to prevent Munich Re from doing the same thing.  

We'll see what new Munich Re CEO Joachim Wenning plans are in this area but we won't be surprised if they too begin to become much more active in this area.  The expertise of these big reinsurers is their underwriting knowledge.  If the underwriting prices the risk profitably then the credit risk should be no different than if it was underwritten on a rated balance sheet.  After all, we're pretty sure that the likes of Hannover Re and Munich Re are subjecting their ILS investors to strict credit checks and we would bet that the contract between the underwriting reinsurer and the investor doesn't have much leeway in the event of a claim call.

Don't blame the underwriters says Greenberg; look at management

The annual New York InsiderScope conference was held on May 9th.  There was a long list of distinguished speakers but the coup for the Insider was landing a rare public appearance from CV Starr's Maurice Greenberg.  

Greenberg issued a warning to the industry saying that "Boards of directors of insurance companies are too lenient and too willing to accept failure from their management."  He said that the boards have themselves to blame when companies "have negative cash flow and poor accident year underwriting results."

Greenberg had particular concerns about the current state of underwriting.  He said that poor underwriting had been a plague on the industry for as long as he could remember. He said "You have underwriters that are very optimistic about a particular risk that they're underwriting and the experience is lacking and the result is poor underwriting."  

He noted that in his view management and the board were not "up to speed" on the underwriting side  and that "They think only about growth without thinking about the bottom line and what you have to do to have an underwriting profit."

This is a different slant of how the exaggerated picture of underwriters who simply can't help themselves is usually portrayed.  Greenberg would know though, and if the pressure from the board and management is such that the underwriter feels compelled to underwrite in an "undisciplined" manner then that behavior could well be ascribed to management.

Reading Greenberg's comments we couldn't help wondering who was on his  board Bloomberg lists the 5 CV Starr board members as of 2015.  

Greenberg's comments do capture the dilemma faced by the industry. The bread and butter of the business is underwriting profit --you have to achieve that on a consistent basis. If the underwriters are told from management that growth, growth, growth is the focus then even the best of them will break ranks.  In that sense, and realistically for this business there is no other sense, Greenberg is 100% correct.  You have to wonder though if the several hundred delegates were glancing at each other as he spoke as underwriters and management were sitting there.

The weekend the financial world looks at Omaha

Warren Buffett's Omaha was again the center of the financial universe on May 6 when Berkshire Hathaway held its annual meeting.  The behemoth posted a 4.8% drop in Q1 operating profit some of which was due to a decrease in the underwriting result of its insurance and reinsurance operations which slipped from a $213 million profit in Q1 2016 to a loss of $267 million in Q1 2017.

Overall operating earnings were still $3.56 billion for Q1 and the famous Buffett "float" has now reached $105 billion.  

The assumption of certain long-tail insurance liabilities from AIG, in exchange for $10.2 billion in premium was described by Charlie Munger, Vice Chairman of Berkshire, as "intrinsically a dangerous kind of activity, but that's one of its attractions." "Get me in a lot more of those businesses and I'll accept a little extra worry" said Munger. 

Right now the $10.2 billion paid by AIG is earning "peanuts" for Berkshire said Buffett but he was happy to gather more money that could potentially be used for takeovers and stock picks meaning that there is significant potential for better returns.

Buffett said "We'll do well by getting $10.2 billion today, with a maximum payout of $20 billion between now and Judgement Day, the question is how fast we pay out the money." Indeed, some analysts estimate that based on Berkshire's investment record and a review of its prior liability portfolio transfers the "total projected benefit" is about $8 billion.

Much depends on the projections of the value of the incurred claims --projections made by both AIG and subsequently reviewed by Berkshire.  Buffett alluded to this when he said "We know whatever our projection is, that it will be wrong, but we try to be conservative with this." "Overall, we've done OK on this" he said.

OK, indeed. During the 5 hours the 86 year old Buffett and 93 year old Munger answered questions from analysts and shareholders Munger said he thought Berkshire could now entertain acquisitions of up to $150 billion.  That's a pretty big number --equivalent for example to the annual GDP for the state of Nevada! 

Speaking of pretty big numbers we can't help but notice that between Buffett, Munger and Greenberg we're looking at an average age of 90.  Buffett would be the youngster if the three of them ever went fishing. 

Wannacry cyber attack could have been much worse

According to A.M. Best economic losses from the Wannacry computer virus may reach $8 billion.  Oddly, because the ransom demanded by the virus propagators to unlock infected computers was on average $600, that meant that only organizations with many multiple computers sustained losses that exceeded their deductibles.  Of course  only those with cyber insurance that covers such attacks would qualify. 

A.M. Best estimates that insured losses from the cyber-attack will be "only a fraction of the $8 billion."  Aon estimates that 90% of all cyber policies are written in the US, where Microsoft issued a software patch in March that would have plugged the security gap exploited by the Wannacry attack.  

Of course now there is speculation that since Microsoft had made the patch available, and those harmed by Wannacry were those who did not bother to apply the patch, any claim payouts could be contested.  We suspect that any cyber-policy mandates that the insured keep up to date with security patches.

Despite the apparent very minor hit to the insurance industry caused by Wannacry RMS has called the attack the world's "first ever cyber-catastrophe."  According to RMS' Tom Harvey Wannacry demonstrated the systemic nature of the risk with a "single vulnerability resulting in hundreds of thousands of infected machines across over 150 countries."

Hopefully, Wannacry was a wake-up call for businesses in two respects.  First, of course, is to ensure that security patches are applied regularly.  Second, is to look at obtaining cyber insurance. With Wannacry it was discovered that a "kill switch" within the software virus enabled security experts to disable the virus to limit its spread.

Oh, and where did it come from?  Thus far its origin is convoluted but apparently it originated in North Korea (remember Sony and the movie The Interview?) but the attack may have been based on computer vulnerabilities discovered by the US National Security Agency and stolen from the NSA in a hacking attack earlier this year.  Convoluted to say the least!
A possibly predictable chain of events from the Brexit vote...

Roger Crombie

Almost a year has passed since Great Britain voted to leave the European Union. Less than two years remain before the departure must take place.
Those elements of the insurance industry and others headquartered in the UK are attempting to parse the situation, to ensure that their futures remain least badly affected by the outcome.
Brexit was intended to produce a free-standing country on friendly terms with its neighbours. It has instead proved toxic to personal and international relationships and produced very real uncertainty as to the structure of the future: a perfect storm of incompetence and ill-will.
Those keen for Britain to retain its membership in the European Union started fighting back the day they lost the vote. Their anger has since intensified. Tony Blair, the very definition of a busted flush, is trying to persuade Britons to revolt against Brexit and is encouraging a second referendum. Mark Carney, the Governor of the Bank of England, misunderstanding the nature of his position, bangs on about the impending catastrophe that he believes Brexit represents.
Novelist Ian McEwan has gone on record wishing 1.5 million older Britons into their graves as fast as possible, so that a second referendum without them will cancel Britain's departure. The 2.5 million younger people who will become enfranchised in the next year and a half, he argues, will see Britain safely back under the European yoke.
Gina Miller, a wealthy, unelected private citizen, has decided that she alone can lead Britain to continued membership of Europe, thanks to her wealth. She successfully took the British Government to the Supreme Court over an aspect of leaving that she didn't like, and works unceasingly against everyone else's democratic interests.
The European leadership, meanwhile, has publicly vowed to make Brexit the end of Britain as a viable economic unit. One of the four presidents of the European Union's leading bodies recently announced that Brexit will and must fail, as he leaked invented private conversations with the British Prime Minister to a German magazine.
The EU demands 100 million Euros (about $91 billion) as its divorce settlement. British assets were ignored in the calculation; only liabilities were counted. The EU requires payment in full, without analysis or review, before it will allow negotiations to start. This from an organization that has not been able to persuade its auditors to certify its financial statements for two decades.
Britain has been told by the EU how it must order itself after Brexit. It will not be allowed to operate as a low-tax environment, although how the EU imagines it will dictate the law to a non-member country remains to be seen.
Spain ceded Gibraltar in perpetuity in 1713, but now demands ownership of Gibraltar before it will agree to anything. The EU insists on the reunification of Ireland before progress on Brexit can begin. The EU also wants permanent residence rights for its citizens living in the UK (without a minimum qualifying period), while hedging on the rights of British citizens living in the EU and their European pensions.
In other words, it's politics as usual.
I have said, in this space and others, that there will be no Brexit, and each day reinforces that view in greater depth. Negotiations, if they should ever start, will bog down hopelessly. The March 2019 deadline imposed by Article 50 will come and go, in my opinion. A second referendum will undoubtedly be held in the UK on one pretext or another, and will reject the notion of Brexit, and that will be that. Billions of hours and dollars will have been wasted.
This is the worst of all possible worlds for business, which values stability above all else. Wise business people, especially insurers, must run on dual tracks for the next year or two, planning for futures both in and out of Europe. A massive distraction therefore tops every agenda.
Mrs. May seeks a greater mandate in next month's general election, and will probably win one, but it will make no difference.
Brexit has produced the sorriest state of affairs, for business and for people, that I can recall. It's only going to get worse. That's not pessimism; it's realism. 

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
May 25, 2017
Quick Bytes

Reinsurers pushed through motor insurance rate increases of as much as 60% in the April renewals, while Q1 disclosures indicated a reserves hit of up to $7 billion say analysts in the aftermath of the UK government's decision to change the Ogden discount rate. Talks with the government about revising the way the rate is set are ongoing but The Insider is reporting that the PRA, the UK insurance regulator, is "watching like a hawk" any insurer that is reserving based on a hoped-for revision to the February rate change. The pain will go on it seems and the list of insurers and reinsurers taking additional claim reserve charges includes nearly everyone...As if Berkshire Hathaway hasn't enjoyed enough success keep your eye on something they are calling biBerk. The unit is the brainchild of Ajit Jain and the year old operation lets owners of small businesses shop online for commercial vehicle, general liability, property, workers comp and eventually professional liability insurance. Jain wanted a hassle-free way for small businesses to bypass insurance agents, often getting quotes within 5 minutes after completing a short questionnaire...Stephen Catlin officially left his position as excutive deputy chairman of XL Catlin earlier this month.  A long article in the Bermuda Royal Gazette describing Catlin's career is well worth the read... Rabobank in the Netherlands has employed security guards to protect its ATMs from being blown up by thieves. The bank is particularly concerned about cash machines located in apartment blocks that house people...The Wall Street Journal reports that "Hail, tornadoes and an ice storm turned the first three months of 2017 into the most expensive first quarter in more than 20 years for US insurers...Get used to this acronym--SLR. Sea Level Rise could radically reshape the US population landscape causing mass migration away from coastal areas if sea levels rise 1.8 meters by 2100 as many predict. A study finds that in addition to the mass migration the cost of adaptive infrastructure to counter SLR could reach $421 billion annually... After the 1906 San Francisco earthquake Lloyd's underwriter C.E. Heath ordered his agents to pay all claims "irrespective of the terms of their policies." If there's not a statue of Heath in San Francisco today there should be one to note his contribution to rebuild the ruined city. Lloyd's may have had Heath in mind when it reached an agreement with Korean Re to pay $89 million for South Korea's Sewol ferry accident victims after two years of negotiations. The ferry operator, it was argued, should have been accountable for the tragedy because it did not operate the ferry according to regulation but in the end Lloyd's decided to pay the compensation "after gauging its relations with the Korean government and business ties there."...The reigning monarch of the Netherlands, King Willem-Alexander, has admitted that he has regularly flown flights as a co-pilot for a subsidiary of the Dutch airline KLM for the past twenty years.  The King told a Dutch newspaper that his twice monthly flights with KLM allowed him to decompress from his royal duties. He is a licensed pilot trained on Boeing 737s and Fokker 70 twin-engined jets. He notes that he generally delivers the welcome aboard announcement wishing everyone "a heartfelt welcome in the name of the captain and crew, so I don't have to say my own name but most of the people don't listen anyway"...
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