- Too many London datelines of late
- Exterior cladding a focus in Grenfell fire
- UK's PRA investigates broker facilities
- UK election effects on Brexit and EU market rights
- Roger spots far reaching societal change in interaction with waiter
- Quick Bytes: Insurers are insular and introverted; risk-based capital should not fear InsureTech; Zurich warns of Westminster attack claims; Manchester bombing claims coming; EU regulators warned of "brass plaque" insurers; Indian crop insurance surging; US opioid crisis; Anbang chairman under arrest; British Airways IT chaos caused by error.
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Our visit to London two weeks ago coincided with yet another terrorist incident. We were struck by how everyone simply carried on and began to learn in person about that vaunted British "resolve" that appears in the face of crisis.
This issue also looks at a disaster that occurred in London namely the fire at the Grenfell Tower. The issue of exterior cladding is one we are watching as we think many others too.
We also happened to be in London for the Parliamentary election on June 8 as well as the results the next day. We wonder how or if the results will affect the strength of the government's negotiating position during the Brexit negotiations that started this week. We know that the insurance and reinsurance industry is following the talks closely.
Broking facilities were in the news this month too. The UK's PRA announced that it's investigating the facilities in response to concerns from insurers about rising acquisition costs. There was also a story about the biggest facility of them all, the Aon Client Treaty facility.
column is here too. We saw Roger during our trip earlier this month and he is in good form. This month Roger was able to glean a measure of the epochal change lying ahead simply from an interaction with a waiter in a restaurant. We're not sure how he does this but we think you will agree with his conclusion.
As always if you have any questions or comments about
, or want more information about
, or our products, please feel free to contact me.
Thank you very much.
Stephanie A. Fucetola
Senior Vice President/CATEX
Objects in mirror are closer than they appear
There are few of us who regularly travel to London who did not look closely at maps appearing in newspapers to determine the actual location of Grenfell Tower. When news of the fire broke the location of the apartment building was sometimes measured by its distance from such familiar locations as Kensington Palace and Notting Hill.
The distance of the tower from both locations, 2.5 miles or less, meant that probably at one time or another our eyes had "clocked" the 24 story structure on the horizon when spending time in those familiar areas. Buildings of such a height can appear nondescript in an urban area like London but photos of the charred tower, and its surroundings, portrayed it as a relatively singular structure that would likely be noticed if one was looking in its direction.
The death toll from the Grenfell fire as of this writing is 79. There still remain a number of people unaccounted for and this number may rise. The initial reports of the fire reached the US early in the morning of June 14 with indications that as many as 7 people had died in a fire at a London high-rise. It was not until later in the morning, when TV and streaming Internet videos showed a conflagration that seemed worthy of a Hollywood special effects team, that we realized that a tragedy of immense proportion was unfolding.
We had been in London the week earlier. On a warm Saturday night, June 3rd, we had been out walking through a crowded Covent Garden and jammed Leicester Square before jet lag caught up with us driving us back to our hotels by 10 pm. The next morning we awakened to the news of the terror attack that same evening near London Bridge.
Two days later, while in a meeting with an insurer, a public address announcement throughout the entire building signaled a minute of silence to remember those who had lost their lives on Saturday night.
Tragedy it seems can quickly expand itself from the purely impersonal, if you even so much as brush up against it, with the merest hint of a connection of distance and time. For the second month in a row our thoughts and prayers are with our British colleagues.
Grenfell fire, exterior cladding, large losses and fairness
blaze it seems as if suspicion has focused on the
that was installed on the tower during a refurbishment last year. The cladding, it is hypothesized, may have acted as an
which served to effectively spread the fire throughout the 24 story structure.
As soon as we read this we were reminded of the
New Year's Eve fire on December 31, 2015
at the 63 story
The Address hotel in Dubai
, as well as
high rise fires in Dubai, led to the introduction of
aimed at reducing cladding flammability. Exterior cladding is affixed to a building for a variety of purposes including insulation and decoration. Sometime, however, it seems as if it can be highly flammable too. A twenty or thirty story structure made from steel, concrete and plasterboard should be able to sustain a "contained" fire. The problem seems to be is that the exterior cladding, if it's flammable, actively moves the fire up and down the outside of the building ensuring every bit of combustible material is reached. The
of the Grenfell Tower, after the fire, show a burnt out hulk of a building. The fire seemed to have known no boundaries.
The cladding on Grenfell, which was installed last year, is
Reynobond and is produced by Arconic, a company spun off from the aluminum giant Alcoa last year. Some countries, the US included, ban the use of this cladding in high rises. The New York Times is reporting that despite initial comments from UK officials indicating that the cladding was banned in Britain its use is in fact permitted.
You can guess where this is going. Aside from the tragedy of lost lives and destruction of property it's possible that somewhere along the line a regulation was not in place that could have prevented the tragedy. No less a personage than the
Chancellor of the Exchequer
himself was quoted as saying that the cladding restriction was in place in Britain when according to reports it was not.
British officials are now urgently checking as many as 600 buildings which may have flammable exterior cladding similar to the Grenfell Tower. The New York Times is reporting that at least seven high rise buildings in Britain have been discovered to have similar cladding to Grenfell.
This omission made a difficult situation worse. Grenfell Tower was public housing for lower income residents. Kensington is a wealthy area as anyone who has walked around it surely knows. Grenfell is located in Kensington. The economic disparity between the residents of Grenfell and the residents in homes across the street valued at over a million pounds was jarring. Already Theresa May was booed, jeered and rushed away from the area when she came to visit displaced residents. People are angry.
One also has to wonder how much of
potential triple-digit property and liability losses
falling mainly on reinsurers" will ever reach the pockets of those who lost their loved ones or their homes. We understand that those insured, either businesses or ceding insurers of course maintained legal insurance interests. We suspect though that families of those who died or those who were displaced will not receive much in the way of indemnity compensation. We would wonder whether they even carried insurance and if they did how broad a policy it was. Depending on how the cladding issue plays out there could certainly be compensation from liability suits for those who receive little or nothing from insurance.
We read about the so-called
"coverage gap" and mostly think of it in terms of emerging economies or the difference between economic and insured losses in industrialized countries. But any
High Street insurance agent can tell you that the real coverage gap starts right at home. There are many people not bothering with insurance or not holding enough coverage. It is a discretionary purchase and if you have to choose between food on the table or gas in the car then paying insurance premiums gets pushed down the list. Meanwhile, those who can afford premiums, are indemnified when tragedy strikes while those who can't afford the premium are left far worse off.
Broker facilities seem to be in regulatory crosshairs
Broking was in the news this month too. The
Prudential Regulatory Authority
(PRA) announced that it was
in "one of two interconnected reviews
launched amid pleas for help from carriers
tackling mounting acquisition costs."
This news was a bit of a surprise as prior PRA policy seemed to be that facilities and broker remuneration were a matter of negotiation between sophisticated parties and not necessarily a subject for regulation.
Things change. As premium rates continue to remain flat or falling, carriers have increasingly voiced opposition to increasing business acquisition costs paid to brokers. According to the
Insurance Insider "rising acquisition costs in the Lloyd's market have eroded almost 5% of underwriting margin since 2013. Here's some more math: "if acquisition costs had remained flat since 2013 this
would have added $1.43 billion to underwriting profits."
We'll leave it to others to determine the appropriateness of rising acquisition costs being experienced at the same time that rates are under sharp pressure but to put it mildly
insurers have complained and complained loudly
in the Chubb Annual Report about broker behavior.
The mechanics of facilities are well known. Some markets argue that brokers are able to channel large volumes of business into facilities composed of a select group of insurers; obtain an
additional facility management fee (on top of the existing commission) and inordinately influence the premium rate charged by the lead market that in a follow-form facility has to be strictly followed by other markets. There is also that little matter of those markets excluded from the facility. They won't see any of the business poured through the facility if they're not on the panel.
Markets on the panel, perhaps acting under the belief that at least seeing a promised volume of business is better than not seeing any at all, are prepared to pay extra for that privilege. And who can say if to some extent that
augmented pricing analytics, promised by the brokers to assist in underwriting the risks, might have convinced some markets that they could dispense with certain underwriting tasks so long as the broker was providing the requisite data.
The highest profile facility in the London market is the
Aon Client Treaty
facility. When it was
in 2015 Aon committed to put 20% of its insurance book through the facility. Aon is the world's largest broker. Aon had marketed the facility to prospective markets
estimating a projected annual income of $450 million
and that was a "conservative" number it was noted as the total Aon London wholesale premium is estimated to be over $5 billion. In a time of extreme pressure on rates any market had to pay attention to something this big.
Last week we saw this
in the Insider:
"Aon Client Treaty volumes well down on projected levels."
According to the article it's possible that the Aon Client Treaty facility wrote only $150 million in premiums in 2015 or "around a third of the premiums forecast in its first full year of operation."
That's a substantial differential. The reasons for the shortfall are not known
"sources have speculated that
placing brokers may have been loath to urge the use of Aon Client Treaty
We found this comment hard to understand. What it seems to suggest is that Aon placing brokers themselves were not urging their clients to provide permission to place their business into the facility. The client can direct where the business is to be placed. It's possible then that one of several things could be happening.
First let's remove any questions about Aon discipline. If
Greg Case says the company is committed to a strategy then that means everyone in the company had better be committed to the same strategy. We don't doubt that Aon placing brokers have exerted thorough efforts to try to convince their clients to place their risks into the facility. No,
it isn't for lack of trying, we think, that premium volumes are down in the facility.
The lack of premium volume could be due to a combination of several factors. First it may be that
clients are satisfied with their markets and that their market is not included in the 8 market panel participating in the follow-form facility. Or it could be that the client is placing into one of the 8 markets already and
doesn't necessarily want to blend his or her risk into the more homogeneous pool being blended for coverage in the follow-form facility.
Finally, it may just be that premium levels have reached such depths that the extra charge being levied by Aon for placement through the facility is actually enough to tilt (there is always that one straw which breaks the back of the poor camel) the buyer away from the facility and place outside of it.
That would be quite a turn of events. Arguably, one of the reasons for creation of the broker facilities, say some observers, is for brokers to replenish decreased commission revenue as premiums have declined and clients better manage buying strategies. It would be quite something if premiums have dropped so low that Aon clients are resisting entreaties from their brokers to place business into the facility because they could get a better price outside the facility.
This may not be far off. Remember that in 2015,
Ajit Jain and Berkshire, withdrew from a sidecar arrangement with Aon that saw Berkshire taking 7.5% of an estimated $2.5 billion of Aon retail business. Jain also exited similar portfolio deals with Marsh and Willis. In particular, reports flagged up his inability to make the numbers work despite Berkshire's higher investment returns, low-cost model and more modest commission levels - said to be 3 percentage points.
We won't be the first to say this and certainly won't be the last. But if Berkshire couldn't make "the numbers work" as the sole market in the earlier Aon sidecar we wonder how 8 markets can make the numbers work two years later with even lower premium levels.
Will a "soft Brexit" result from UK election?
Of course there remains the matter of the results of the
UK "snap election"
held on Thursday, June 8th to discuss. When
Prime Minister May
called the election months earlier she had hoped to bolster her strength in the House of Commons, in anticipation of obtaining a stronger hand in Brexit negotiations, with the election of more
members. The result was a bit of a disaster for her.
winning 30 seats
Conservative party lost 13 seats
. Rushed discussions over the weekend of June 10-11 seems to have resulted in May continuing as Prime Minister but the so-called "hung Parliament" will allow the Tories to govern only through a coalition with the
Democratic Unionist Party which has 10 seats in Parliament. Not everyone is happy with this coalition but May seems to have little choice.
As of this writing it is not clear what agreement has been reached but the Queen's Speech was passed through Parliament so the Conservatives have indeed formed a government led, currently, by Theresa May.
From the perspective of an outsider, who was in London the week of the vote, one could not help but be struck by the level of outrage expressed by members of the business community with Labor leader Jeremy Corbyn. We admit to not knowing too terribly much about him other than that most of his policies would have made Bernie Sanders seem a Conservative. Nevertheless, Labor had a very successful election and it seems --again from the perspective of an outsider --that while part of the vote may have been a repudiation of May, who appears increasingly unpopular, that at least some component of Labor support was a vote against the so-called "hard Brexit" espoused by May.
Election results indicate that younger voters turned out in record numbers and it's thought that their appearance at the polls signaled a determination to modify the terms and conditions under which the UK is preparing to leave the EU. Many younger voters are dismayed at the prospect of losing the trans-European rights they have become accustomed to and were determined to make their voices heard.
The upshot of all this is that May's position has been seriously weakened. The leaders of the EU read newspapers too and are well aware that the British Prime Minister, with her promulgated hard Brexit plan, has been chastised by the voters.
To make matters worse on Monday, June 19th, the actual negotiations between Britain and the EU started in Brussels. The position of the UK negotiators was far from what Ms. May had hoped for when she called for the snap election in April. The UK representatives could well end up with a situation that may see the Prime Minister pushed out in London by the Conservative party in the midst of negotiations.
The Germans have a word called "schadenfreude" which might just describe how the Germans and other EU states are feeling right now. Far be it from anyone in the US, where we've been exposed to "hanging chad", "dimpled chad", "Florida recounts" and Donald Trump, to even contemplate schadenfreude. However we can't help but think that there was a certain level of satisfaction in European capitals on the night of June 8th.
In the long run it's difficult to see what the election results will really mean. Last June the UK voted 52% to 48% to leave the EU and that vote cannot be undone as far as we can determine. But we did note that very quickly the French and even the Germans publicly stated that the door remained open if Britain decided to remain in the EU.
Perhaps it's only wishful thinking on the part of President Macron and Chancellor Merkel but it may be that the intended audience for their public comments was not Theresa May but the British electorate. It appears that, after all the events leading up to the June, 2016 Brexit vote, and the ensuing creation of the "hard Brexit" plan by May, the EU is still ready to forgive and forget.
The June 8th election was not a referendum on Brexit. Both the Conservatives and Labor it seemed were determined to not publicly touch the results of the June, 2016 Brexit vote. Labor in fact is publicly committed to implementing the will of the electorate as expressed by the vote to leave the EU. The Conservatives have far stuck by their hard Brexit plan. The only vote someone could cast, who wanted to send a signal to Whitehall that leaving the EU was not what they wanted, was to vote against the Conservatives. It's here that May seems to have miscalculated by not recognizing the existence of a voting bloc that appeared to make their concerns known given the ballot choices. And that choice was a vote against the Conservatives.
Interestingly, in the first negotiating session in Brussels on June 19th both sides agreed that they would tackle the issue of rights of citizens living on each other's territory. This is a key issue to younger voters who have aspirations to study and work within the EU or may have relationships with people from the EU who live in the UK.
And for the big concerns of business, insurance and reinsurance in particular, such as access to the EU market and so-called passporting rights for UK firms to operate in the EU? That discussion will have to wait a bit. According to information coming from Brussels after the first day of talks the issues of the "outstanding bill Britain must pay for previous EU commitments and the Irish border issue" will be resolved first before talks would start focusing on the EU's new relationship with Britain.
The amount owed by Britain for previous UK commitments is said to be about 60 billion GBP so that discussion will take some time. As for the second issue, even a casual familiarity with news stories over the last generation gives the sense that when the three words "Irish", "border" and "issues" are used in the same sentence that things are going to get very complicated.
From the perspective of the insurance community none of this can be good news. It appears as if the uncertainty is going to continue and it's likely to lead to a continued exodus of insurers setting up operations on the continent to ensure continued access to the EU market.
Survival of the fittest: possible endgame of rate decreases
We noted comments by
Lloyd's Performance Management Director
"We are entering a
where only the fittest will survive." Hancock went on to say that he "
expects the market to shrink this year and to shrink next year
, premiums must surely reduce if performance is going to notably improve. "Doing the same" he said "just cannot be an option for syndicates and portfolios which are underperforming."
We always get nervous when
Charles Darwin is invoked to describe market conditions. It is clear that Lloyd's is taking direct aim at the underwriting results of selected syndicates which they believe may need increased monitoring. Hancock has introduced an enhanced risk-based monitoring approach that will allow Lloyd's to "intervene much faster and harder when we need to."
Hancock's comments come against the backdrop that some in the market believe that "Lloyd's
needs to see some failures, and record large losses, in order to maintain the health of the entire market." Hancock's goal can't be questioned but even now Lloyd's is writing 12% less than its stamp capacity when typically it writes about 8% less than authorized so there is clear evidence that market overall is maintaining underwriting discipline.
The news continues elsewhere. The mid-year
were a disappointment for reinsurers. After all the discussion about reinsurance premium rates nearing a "floor" or "bottoming out" indications are that the June 1 Florida
further decreases averaging 5% to 7.5%
. For the renewal season last year the
reported that the percentages of decrease were 2.5% to 5% so it appears that the 2017 renewals may have experienced a
greater rate of decrease
One factor in the rate decrease (in addition to the
abundant alternative capital
looking to underwrite Florida CAT) was the introduction of the
new version 17 of the RMS Atlantic Hurricane model
. "According to sources" writes the Insider "the updated model when applied to hurricane-exposed portfolios
lowers expected losses by as much as 20%
at some return periods."
Imagine what brokers and cedents were able to do with that little nugget of data during negotiations with reinsurers. As one Bermudian underwriter was quoted, "There's no way in this market that your exposures are going down and you're paying the same price."
At a conference sponsored by
Standard & Poors
in New York,
Trans Re CEO Mike Sapnar
that multiple classes of reinsurance business
could technically be underwater
because initial accident year industry loss estimates "by and large are below where they'll turn out." Sapnar was talking mainly about D&O business and said that increases in ceding commissions and decreases in premium rates as well as increased frequency of class action suits have made the business unprofitable.
In Florida it's a little bit of an inverse situation though. There has been a decrease in CAT claims but an increase in available capacity mainly driven by alternative capital. If that was not bad enough, from the perspective of a reinsurer attempting to justify a higher rate, any corresponding effect of reducing the insured exposure caused by a revised model would only exacerbate the problem for the reinsurer. It's a tough combination to argue against and in the end, if you don't like the deal, the underwriter has to walk away.
Sapnar noted something else as it pertains to reinsurance overall although unfortunately it seems not to apply to the Florida CAT market. He noted that today ceding companies were
"eating their own cooking." He observed that increased retentions held by cedents, and increasing use of quota share reinsurance, meant that the interests of cedents and reinsurers were much more aligned than in the past. He said of cedents "They're keeping in a lot of cases at least half and maybe more of the risk and keeping on quota shares and keeping coparticipation in excess layers. That allows for a lot more alignment." he said.
From the perspective of reinsurers one hopes that, despite the temptation for buyers to
retentions in the Florida market because of lower reinsurance pricing, somehow that "alignment" noted by Sapnar, will not be lost.
Change is coming and coming faster than you think
I had dinner at a steakhouse the other night. The various cuts of meat were listed by weight, in grammes.
I asked the waiter if he might be good enough to translate the weights into "English money", which is how older people in my country refer to the Imperial equivalent of any metric measure.
The waiter barely understood a word I was saying. When I explained that I know what half a pound is, but couldn't tell 100 grammes from a kilometre, he shot me a look. He explained that he was so young that he had no idea how Imperial measures work, and set off to find an abacus.
Despite his protestations, I'd bet good money that he knows what a pint is (beer is sold by the pint), and what 100 yards is, American football being enormously popular in the UK among the younger set.
I was able to work things out without the proffered calculator. The cuts of meat were priced by the 100 grammes. A kilogram is 10 times that much, and is also 2.2 pounds. Therefore, 100 grammes is a little under a quarter of a pound. Not difficult, is it? Just irritating.
The waiter was unimpressed. It looked as if he were deciding whether to have me dragged out of the restaurant like a recalcitrant airline passenger, but it all worked out in the end. He ordered for us what he thought three people might eat, which seemed like a lot when it arrived, but trenchermen and -women to the end, we polished it all off.
What does this have to do with insurance, I hear you asking. I could explain that my dinner companions were an insurance leader (and one entirely not mad hatter), or that we were dining in the City, London's financial district. Neither of those is the insurance link, however.
The link was our young waiter's lack of knowledge of anything that existed before his birth. Pretty soon, the insurance community is not going to know what motor insurance was, or what a tobacco exclusion in a health policy might have been.
The advent of driverless cars is speeding up. Within a decade, only the very richest will be allowed to drive, and they'll have to pay a pretty penny for the privilege. The rest of us will be carted around by thinking machines. Motor insurance will go the way of the wig insurance sold at Lloyd's in the 18th century, which I made up, but you know what I mean. Similarly, it won't be too long before smokers are executed for endangering their health, and then there won't be any smokers. Times change, and industry has to change with them.
If you're a young 'un who thinks that motor insurance might be the career for you, think again. Cyber is a much better prospect. One expert told me that "there are two kinds of companies in the world: those that have been hacked and are dealing with the consequences, and those that have been hacked but don't know it yet."
Twenty years ago, no one had heard of cyber insurance. Twenty years from now, no one will have heard of motor insurance. The rules of the sea have been rewritten to allow unmanned cargo vessels to ply their trade. Drone insurance is all the rage. Neither was imaginable a few years ago. The speed at which things change is picking up as we adopt new technologies as they come along.
My father was a Groucho Marx fan. Dad owned a set of tails, and called them his "Groucho suit". I too regard Groucho as the wittiest man to have lived. But I grew up with Woody Allen (onscreen), and so was luckier than my father, since I could enjoy both. I'm also luckier than our waiter, since I can convert hectares to acres, and he can't. (Nor can I, of course, and nor can anyone else, but that's beside the point.)
Fortune favours the flexible, in insurance as in everything else. If you want to get ahead, get a hat (my friend will make you one); try to know everything there is to know; and be aware that the ground we're all standing on is shifting by the day.
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
June 22, 2017
The "introverted and insular" attitude of the (re)insurance industry was cited by an InsureTech executive as responsible for its vulnerability to disruption from InsureTech firms. Speaking at an event hosted by the Insurance Insider Steven Mendel, CEO of the firm Bought by Many, noted that insurers also seem to take an inordinate amount of time trying to determine if firms like his are partners or competitors. Mendel said "They are spending too much energy on a verbal nuance"...Speaking at the same conference Nephila Capital co-founder Barney Schauble observed that venture capitalists backing InsureTech firms have a very different motivation than the risk based capital backing insurance and reinsurance liabilities. Schauble said of the InsureTech capital that "It's very different to the capital that wants to pay your claim. There's a huge role for the existing risk-capital provider". He noted that even after 20 years the ILS market has not eliminated traditional reinsurance...You knew these were coming. Zurich Insurance has told its reinsurers that there will be a loss related to liabilities resulting from the March Westminster terror attack near Parliament. Zurich is the insurer for Enterprise which is the car rental firm that owned the car used in the attack that killed 4 people. Some sources are speculating that Zurich's gross liabilities could run to tens of millions of pounds...After the deadly Manchester bombing last month the singer Ariana Grande cancelled five tour dates that could result in a claim of some 300,000 GBP to be filed by her promoter. It's thought that Brit and Talbot may be on the policy against which the claim will be brought. Following the attack at the Manchester Arena the musical group "Take That" was forced to cancel performances at the arena. That claim could run between 500,000 GBP and 1 million GBP. Supposedly Brit, Antares, Chaucer and ArgoGlobal are the insurers on that cover...The European Securities and Markets Authority (ESMA) is warning its member regulators to be on the lookout for companies looking to set up thinly staffed "brass plaque" entities ahead of Brexit. ESMA said local regulators should "reject any relocation request creating letterbox entities"...The Indian crop insurance market is expanding rapidly with total premiums likely to exceed $4 billion in 2017. Last year the government required farmers with bank financing to buy crop coverage and the insurance penetration rate went from 1% to 30%. It helps that the government pays nearly all the premium for many farmers...There is an opioid crises in the United States. Death rates are surging among nearly every demographic and a recent survey by Munich Re learned that while over 90% of life insurance professional were concerned about it only 53% of insurers actually test for opioids before issuing a policy...The chairman of the acquisitive financial conglomerate Anbang seems to have been arrested in China. Publications are reporting that Wu Xiaohui had been "taken away" by police and he has delegated his corporate role to others because of "personal reasons"...Willis Towers Watson is warning reinsurers that they need to review their casualty CAT treaties. WTW advised carriers to review policy wordings with a fine-tooth comb, to identify areas which could now be ambiguous, obsolete or have been expanded by judicial decisions. WTW notes that policies with accident and occurrence loss triggers could impact an insurer for decades...At least 61 people have died as a result of forest fires in Portugal. Many of the victims died in their cars trying to escape the flames...The IT related chaos that affected British Airways during the three day bank holiday weekend May 27-29 was caused by a contract engineer who had mistakenly disconnected a power supply line. Heathrow was the scene of tens of thousands of stranded travelers sleeping on concourse floors while the airline sorted out the problem. BA estimates that the IT meltdown will cost them at least 80 million GBP (over $100 million US). Willie Walsh, the CEO of the holding company owning BA, said it was a "dreadful experience". BA labor unions, well remembering Mr. Walsh from his tenure as CEO of BA, claimed the problem was actually due to making IT staff redundant and outsourcing the IT department last year. Mr. Walsh denied any connection...
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