Reports
Issue 63
November 2016
In this Issue
  • Like Brexit, "fear" drives US election
  • Will open markets be restricted?
  • Insurance is deeply entrenched globally if largely unnoticed
  • Popularity of "rated paper" seen as  gain over ILS
  • Lloyd's Beale comments on Bermuda and ILS
     
  • Roger's Crystal Ball may be proven true: believes UK will remain in EU
  • Quick Bytes: Catlin preferred choice to succeed Nelson; Blenheim backed by Nephila; Noonan notes Matthew's near shut-down of retro markets; British life spans prompt caution; Willis says broker facilities not for reinsurance; AIG & Berkshire; BASF plant fire may cause BI issues; Kanye West cancels 22 tour dates.

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James.Cogger@catex.com
Dear Colleague, 
  
We are getting this November issue of CATEX Reports to you in the nick of time before the calendar turns to December. Honestly, we've been stuck a bit digesting the US election result and as many of you know were in London for a week in which we attended the InsureTech conference on November 16th that was cosponsored by CATEX.

Back to reality however and we have some thoughts about the election and what it could mean to the American view of "globalization". We note, as well, that it's the insurance industry itself which was and is one of the earliest sectors to understand international cooperation and finance and perhaps which should be at least mindful of the trends revealed by both the American vote and the Brexit referendum.

We also noted what seems to be a renewed evaluation of the "staying power" of alternative capital in the reinsurance industry. We'd thought this issue to be somewhat resolved yet comments about the need for a "rated balance sheet" (an S2 requirement) and the recent trend shown by cedents to hedge against earning volatility apparently are highlighting the importance of a rated reinsurer.

Just last week the UK government released proposed draft regulations that would govern a new London-based ILS market. Coincidence or not the government's action occurred shortly after the Lloyd's CEO observed that Bermuda had "stolen" the ILS market from London.

Our regular Roger Crombie  column is here too. Roger wonders about the impermanence of the popular vote in so far as the Brexit referendum is concerned. In the US, we note that President-elect Trump will likely have received nearly 3 million fewer votes than Hillary Clinton when all is said and done so popular vote discrepancies are something understood by the American electorate.
 
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.
 
Sincerely,
Stephanie A. Fucetola
Senior Vice President/CATEX
 

Primary motive driving US election and Brexit may be fear


On November 8th Donald Trump was elected President of the United States. Most pre-election polls had predicted that his opponent, Hillary Clinton, would win a small but clear victory. They were wrong. States that had served as part of the Democratic party's long vaunted "firewall" began to fall like so many felled trees into Trump's column starting at about 11 pm EST.  News commentators and political pundits on TV networks were stunned and appeared ashen-faced as they struggled to explain why votes "yet to be counted" would likely turn the tide.

In the end the tide did not turn. Clinton won the overall popular vote but was defeated in the counting of Electoral College votes ensuring that Donald Trump will be sworn in as the 45th President of the United States at 12 noon on January 20, 2017.

By 10 pm on election night, when it was clear that Clinton's bid was in danger, the television networks began to include an additional graphic next to the Electoral vote count on the bottom of the screen.  Stock market futures had begun to plunge on global markets over the specter of a Trump win. It must have been just initial nerves because in the two weeks since Trump's election the Dow Jones index has risen to a record level.

While campaigning Trump was fond of saying that the US election would be like Brexit all over again. He predicted that polling that showed Clinton with a lead was wrong, just as wrong as the polling which had shown that "Remain" advocates would triumph in the June referendum.  He also began to claim that the US election had other similarities to Brexit aside from inaccurate polling data.

Trump ultimately found his political voice talking about the "Forgotten Man", referring to those Americans who had not benefited from the economic improvements seen since the 2008 recession.  The "Forgotten Man" is not a new phrase in American history. Franklin D. Roosevelt first identified that man in his first presidential race in 1932 when he claimed that millions of Americans had been ignored in the wave of speculative success that had prompted the 1929 stock market crash and were the worst afflicted in the ensuing Great Depression.

Current US economic data points to a moderately robust economy.  The US economy enjoys annual growth rates higher than most other western industrialized economies and with the exception of data reported by China (accurate or not) the US seems to be at the forefront of the long economic comeback from the 2008 recession. The Federal Reserve has signaled its own confidence in the recovery by beginning to raise interest rates.

If the economic data has revealed this message to the likes of us then surely this message was understood by Trump.  However, somewhere on the campaign trail he spotted something that we did not and apparently this was something missed by many others too.  In retrospect we should have noticed it certainly as late as 2011 when the "Occupy Wall Street" protests began in downtown Manhattan.

You will recall that those nearly spontaneous demonstrations were composed of people from all walks of life. College students, recent graduates, those recently laid off, and even those currently employed staged a months long sit-in in Zuccotti Park in the financial district of Manhattan. Their message was simple.  The benefits of the post-2008 recovery had not reached them but had only benefited the top 1%.

It was a forceful message and one which was easily understood. Most Americans, or for that matter most people everywhere, could look at the diversity of the protesters and hear their message and perhaps at least sympathize with them. In the main, most people have experienced only slow, incremental economic improvement since 2008 while others, the top 1%, have seem to have profited immensely.  If you added the other complaints of the protesters, about how no one had been jailed, with the exception of one middle management investment banker, for financial misconduct that had cost the economy untold billions of dollars in value, it combined to present a toxic, yet easily understood, view of the world.  

It's at this precise point that forces such as globalization, technological transformation, and supra-nationalist political unions like the EU emerged as factors that could be added into the mix to produce that sum of resentment, anger and overall sense that forces beyond one's control were disadvantaging people.

Globalization has been around since the beginning of time except they didn't call it that back then, it was more like "village-ization". People have always interacted and connected with others outside their immediate social, cultural or geographic groups. The technology of today permits an ever-increasing rate of globalization as communication barriers enforced by the speed of a stagecoach, sailing ship or train disappear and are superseded by texting, social media and YouTube.

Technological transformation has always been present.  We don't see many business people leaving on horseback for business trips these days.  Modern technological benefits are recognized by even Luddites yearning for a return to simpler times (we wonder if it's relevant that neither Trump nor Clinton use computers). 

Even the move towards supra-nationalism  has been a long standing theme in history. The history of long-term political units composed of many nations and culture s is too long to list. Some were involuntary marriages (there was no Article 50 to leave the Roman, Hapsburg or Ottoman Empires) but others were voluntary.  The United Nations , which enforces a light touch on a member's sovereignty, has been around for over 70 years.  Even the European Union , which enforces a heavier touch on a member state's sovereignty, was essentially born in 1951, only six short years after the end of World War II,  when six nations agreed to mutually control their coal and steel resources by creating the European Coal and Steel Community

In short it seems that globalization, technological change and supra-nationalist efforts haven't alarmed people to the point where they've acted to try to stop them --until now. Something changed and it changed enough to prompt 52% of UK voters to risk the uncertainty of a Brexit in order to leave the EU.  Something changed in the US that prompted the election of a total political outsider who has proposed to turn the US inwards, away from international involvement.

We think now, in hindsight, that what changed was obvious. After all people such as Nigel Farange and Donald Trump, like most of us, will never be confused with the likes of Stephen Hawking or Albert Einstein. But simply listening to the so-called "99%" for even a short time would have revealed that people are angry because they believe they have been short-changed, excluded, or, worse yet, taken for granted by those in control.  And those "in control" include presidents, prime ministers and CEOs. 

So now, five months after our British colleagues, the US will begin to pick through the pieces left in the aftermath of this particular expression of the public will.  Trepidation, fear and insecurity --all emotions our British friends have told us they endured after June 23rd --are the currency of the day in the US. Like our British friends we, too, shall endure and perhaps even recognize and address the issues that prompted the voters to deliver such a resounding message.

How will that "fear" affect free markets?

This "anti-globalization" chorus that was at the heart of both the Brexit and Trump votes presents an interesting scenario for the global risk industry.  Corporations have been involved in international trade since ships could sail. As companies expanded in size the entire globe became a marketplace for some of them.  Adopting a nativist, country-specific corporate policy could spell doom for just about everyone except for the corner store and it's likely that many of the goods sold by that store are produced elsewhere as well.  

It would seem to be impossible to roll back the clock. The more important question might be just who would want to?  It's one thing for a candidate to tell American coal miners that he is going to reopen mines and put them back to work. However, when coal produced in China is mined by workers earning $200 per month does that mean US miners would accept similar wages? If they won't then American produced coal will be awfully expensive on the open market.  

Similarly, imposition of tariffs on imported goods would likely soon lead to vacant shelves in the super-box stores favored by many consumers.  The goods that remain would be American-made or British-made, depending on your location, but they would be far higher in cost. There is a reason why companies outsource labor and production --it's a function of competition and profit.  If the company can lower the price of the product to ensure it can be sold, while lowering its labor costs the company can profit.  This is one of the core functions of an open, free market.

Does the free market benefit everyone? It's hard to see any benefit if you've lost a manufacturing job but your wife and family can load up on inexpensive items sold at Walmart that have been produced overseas. Soothing platitudes in the termination packet handed out by Human Resources mentioning "re-training", learning new skill-sets and the availability of minimum wage jobs just simply aren't enough. 

It remains to be seen what the new Administration is going to be able to accomplish. The US government has an in-place system of checks and balances designed to protect against radical change. Frankly, in a war against globalization, we think it would be like standing against a tidal wave.  But what we may be seeing is a price that must be paid by a fast-changing society to ensure that angry voters who believe they have been left behind are understood and cared for.

A few weeks have elapsed since the election and it may be that this "price" is one that every fair and caring society must consider and understand. After a point "blame" becomes unproductive. We are all fellow citizens of whatever nation we live in. If we happen to espouse progressive or liberal causes then certainly one must pause and consider the inequity of large swathes of the population who have been left behind while others have prospered.  

Circumstances have a way of changing minds and behavior.  It may be a time to embrace those who have fallen behind and do what we can to even out the fundamental economic inequality that has spawned such anger.  It is not a time to be afraid but perhaps it is a time to act. If one truly believes that there is nothing to fear from closer contact with citizens of other countries, and that increased trade with other countries ultimately benefits all, then we must ensure that the reasons for our optimism be shared with those who do fear it.  If this process of sharing and understanding means society as a whole needs to stop and pause while we work together to bring everyone to a more common level then that is a price that a just and democratic society should be happy to pay. 

We really don't have any choice now do we?

Global insurance is deeply entrenched if largely unseen

 
Money of course was the first commodity that could penetrate borders. It's not a surprise that 4th century BC Celtic coins minted in Britain were based on designs influenced by Greek coinage bearing the likeness of Alexander the Great.  Money can get through borders with ease and it always has. Trade works --it's that simple. If people trade tobacco, beaver pelts, horses, fabric, silver and gold it doesn't matter. As greater number of people became exposed to each other they desired items that they each possessed and figured out how to trade for them. Once currency was introduced, and more people accepted its value, the process became much easier.

As trade routes expanded due to technological change people began to trade more eclectic items.   Insurance may have begun with ancient Athenian ship owners seeking to protect cargo; or with merchant caravans leaving Italian city states for northern European market fairs in the 13th century pooling resources to make members whole if goods were stolen by brigands en-route.  And we all know the story of Edward Lloyd's coffee house, and the bright idea that someone had when they looked around the room and said out loud, "Listen, maybe there is a way we can work together so we're all not sitting here waiting to learn which one of us will be bankrupt if our ship doesn't come in."

For some time now one could argue that international insurance and reinsurance has quietly been the major force behind global finance. In the 1970s Americans, many of whom were on once in a lifetime vacations, began to see the Golden Arches of McDonald's restaurants dotted across a dozen or so locations in Western Europe. What they couldn't have known is that part of their homeowners or life insurance policies had long been reinsured by companies with funny sounding foreign names shrouded within gray office buildings in Zurich, London and Munich. McDonald's was a novelty at the time. Reinsurance was business.

We often hear that insurers and reinsurers are advised to obtain greater risk diversity and underwriting portfolio flexibility by expanding into as many geographic areas and LOBs as they safely can. The idea of course is to maximize the spread of exposure so that a loss in one LOB or one geographic area can be compensated for by profits in another. Limiting that ability would increase the risk of loss for insurers. Reinsurers have been doing this for years. 

Few homeowners have any idea that a small percentage of the premium they pay for home insurance to their local retail agent can end up circling the globe until it winds up with a reinsurer willing to assume the risk of a catastrophic loss which would include the homeowner's dwelling.  The homeowner never knows it. In the event of a loss he is paid by the insurer named on the policy and doesn't care which London, Bermuda, Swiss, German or American reinsurer is helping to compensate his primary insurer for the claim it paid to him.

But this is how the world works and it's especially the way the insurance and reinsurance markets work. There is a reason why the most highly prized brokers and underwriters are the ones with the relationships with the hundreds of small primary insurers throughout the world. Those small primary insurers need to reinsure their risks and it's not unusual for small mutual insurers in, for example, rural Iowa or Wisconsin, to have decades long relationships with reinsurers in Germany, London or Switzerland. We wonder how the anti-globalization, pro-nativist argument sits with executives in those small companies? Possibly the process of reinsurance is so ingrained with them that they don't connect the ceding of premium and risk to overseas reinsurers as anything out of the ordinary.

There are nationalistic types of issues such as passporting rights, collateralization requirements, profit repatriation and tax domiciliary status that can and will nibble around the edges of this great game of international insurance and reinsurance but we don't see how it can fundamentally change the industry. There are simply too many customers, current and prospective, who need either protection or earnings stability. No other industry is capable of providing that kind of support and that support is predicated on a global market of both capital and risk. Winding back the globalization clock in international insurance would be impossible. Page 15 of this report from Swiss Re sums it up nicely.

Advantages of traditional reinsurance gaining


In a long interview with Intelligent Insurer, Munich Re's Torsten Jeworrek said many of the things we expected to read.  We noted his comments about how it will take more than a single large loss to move the markets. We noted his comments about his belief that a change in the market climate will come from "a series of losses and other incidents --including further consolidation, or even insolvencies, worsening of results."

We've noted in the past that it may not take a major catastrophe to tip reinsurers to a negative underwriting ratio so Jeworrek's observation validated the idea that some highly placed executives are monitoring claim losses reported by competitors and matching them against reported surplus. We noted, too,  Markel's Global Reinsurance president Jed Rhoads observation that "Some reinsurers are perceived as too big to fail, but we've heard that before in the banking industry."

We noted too, Jeworrek's belief that "Large amounts of previously not available data and sophisticated analysis methods will improve risk assessment and claims handling." After we realized it would be indelicate to immediately email him about the CATEX Data Vera product, we ticked the box indicating that Munich Re remains in the vanguard of those looking for ways to monetize "big data".

Then we noticed this. Jeworrek said that he believes that the durability of so-called alternative capital is yet to be tested by a big loss and some investors will inevitably leave the market in the aftermath of such an event.  He went on to say that some of the business models being used by alternative capital, such as hedge fund reinsurers, were unsustainable and noted that "Pension funds provide the majority of the alternative capital. They search for stable returns and diversification and continuously increase the share of alternative asset classes within their investment portfolios."

He continued with the clincher --"But their sustainability hasn't yet been tested by a huge cat loss. I assume that a certain amount will stay in the market following an event or change in the interest rate environment but some will leave for sure."

Torsten Jeworrek is one of the most respected voices in the industry and his comments were a surprise to us.  After all, everything we have been reading is talking about the increasing convergence of alternative capital and traditional reinsurance. There is hardly a week that goes by without some reinsurer noting that it has successfully incorporated alternative capital as part of its offering being able now to better match less expensive capital with lower premium producing risk.

But then we noted other comments this month from Kean Driscoll, CEO of Validus Reinsurance. Speaking at an event in Bermuda, Driscoll observed that he believes that the ILS market is going to increasingly look to the benefits of a so-called rated balance sheet in the future rather than focus exclusively on collateralized products. He said "I expect we're actually going to see the ILS community shift towards rated-balance sheets. They're realizing that buyers like rated paper, they like the promise to pay, they like the temporal flexibility, so I think we're going to see more rated paper."

Rated paper or a rated balance sheet has always been central to insurance. A promise to pay for a loss might not mean very much if the promisor won't have the money to pay a claim. Ratings agencies review insurer and reinsurer balance sheets and it's an arduous process. The A.M Best methodology is an example. If done properly, and there is a great deal of incentive to insure that it is, there is little a ratings agency doesn't know about a risk bearer's finances before they assign it a ratings grade.

From the perspective of a buyer of coverage this assurance is key. Most cedents have so called "security lists" that mandate that coverage can be purchased only from reinsurers maintaining a certain minimum ratings level.  When ILS capital was introduced to reinsurance ILS investors could hardly apply for a ratings agency rating.  The invested funds essentially would come together only to underwrite a specific risk or instrument. The solution was for those investors to put the money in up front and fully collateralize the buyer against a loss. The ILS community reasoned that if the cedent could see the money sitting in a designated financial institution, and was contractually permitted by the policy to access the money in the event of specified losses, then the need of a cedent for "rated paper" would be mollified.

This process has worked well and has enabled the growth of the role of alternative capital in reinsurance.  For the ILS investor the premium paid by the cedent is potential profit, as is any interest gained by the deposited funds sitting in escrow.  But if there were claims then not only was the profit upside from the paid premiums and interest lost, but the potential of the loss of the entire invested principal amount itself existed.  We're possibly seeing this unfold right now with the Gator Re CAT bond which at last report was at 94% of the way to hitting its attachment point figure. With two months of 2016 left to accumulate losses it's possible that investors could lose principal.

That's why we were surprised when we saw Alleghany's EVP Joe Brandon observe at the same conference " Having this collateralized capital has actually highlighted the benefits of a rated balance sheet, which is not an outcome I would have expected a couple of years ago."

These were surprising observations we thought.  One of the reasons alternative capital has been successful is because it can compete effectively (and less expensively) against the cost of maintaining a rated balance sheet composed of shareholder equity, surplus and premium float possessed by traditional reinsurers.  It's a bit like a "one-night stand" compared to a long marriage, but if pricing is the cedent's primary motivation then non-traditional solutions seem to fare well.

Apparently though the observations of Brandon and Driscoll mean that something else is driving cedents and it's not just price.  We were tipped to this in an article in Intelligent Insurer headlined "Buyers show mercy on pricing".  Apparently larger buyers of reinsurance are concerned that reinsurers are struggling to make profits in the soft market with one big buyer, Allianz, going so far as to say that they won't seek further rate reductions but are interested in only stable, sustainable pricing.

We do understand that a buyer of any product could come around to having genuine concern about the industry that supplies that product if that supplier sector has fallen on hard times. If the product is important the buyer wants to be certain it can continue to be obtained.   Theoretically we understand that, but practically speaking we are hard pressed to recall any purely altruistic actions similar to what buyers such as Allianz demonstrated.

Then we noticed several articles noting that reinsurance buying patterns have shifted among several large buyers from safeguarding their own balance sheets to include protecting against earnings volatility. Mike Foley, CEO of Zurich North America, a reinsurance buyer, says "There are places that we might have been purely focused on balance sheet and capital protection but given the market and where we are now we see opportunities to protect against some of the earnings volatility too."

Munich Re's president of US reinsurance Steven Levy told Insurance Insider that a "growing number of large clients, most of whom are in possession of very strong balance sheets are buying more reinsurance to 'enhance their earnings ability'"

Obviously Allianz and Zurich have quite strong balance sheets already but as Amer Ahmed, CEO of Allianz Re (which is charged with reinsurance buying for Allianz) says "The decision to manage the volatility in its earnings is a conscious one made by management at Allianz." He said that while Allianz has the balance sheet to bear large losses it was conscious of the variance it's willing to accept in its earnings (caused by potentially large losses) and uses reinsurance to hedge this.

Now the comments made by Brandon and Driscoll began to come into better focus.  If cedents are concerned about the effects of unfavorable reserves, diminishing primary insurance pricing or an end to the period of benign CAT events, and have used reinsurance to protect their balance sheets then buying more coverage in this soft market to further hedge against earnings volatility is a very logical move.

Perhaps we are gaining a view of the future dividing line between so called "one-night stands" and long term marriages --or the differences between ILS and rated balance sheets --and this may have been what Brandon and Driscoll were thinking when they noted the increased importance of strong reinsurer rated balance sheets to cedents.

We would note though that there are always arguments for both sides.   Alternative capital providers can replicate rated balance sheets via transformers and in many cases by joint ownership ventures with rated reinsurers.  Suffice to say that one takeaway from this discussion though is that the importance of a rated balance sheet on the part of a traditional reinsurer means that predictions of impending doom for traditional reinsurers may be premature.  
 
Lloyd's Beale comments and ILS regulations follow

 

 
Inga Beale, the CEO of Lloyd's speaking at the annual Baden-Baden conference said "For whatever reason it happened, I feel that Bermuda stole the ILS market from London."

As the Bermuda Royal Gazette reported "It is understood that top members of the financial sector on the island (Bermuda) were stung by the remarks --but reluctant to hit out at a major trading partner."

The gist of Beale's comments, in terms of Bermuda being in the pole position in the ILS market, is understandable. As a statement from Bermuda Stock Exchange CEO Greg Wojciechowski released in response to Beale's remark stated, "Bermuda was one of the first jurisdictions that embraced the creation, support and listing of ILS structures and is now the leading centre of excellence for this business with the greatest global market share of ILS."

The response from Bermuda was largely factual. Some commentators noted that Bermuda commercial insurers provide nearly a quarter of Lloyd's capital and capacity.  Clearly no one wanted to embark on a war of words, but the Bermuda response did note that Beale's comment was curious in that it was just last year that then UK Chancellor of the Exchequer Osborne said that the UK did not have in place the tax and regulatory regime to accommodate the multi-billion dollar market.

Perhaps though Beale's message was aimed not at Bermuda but at UK regulators because within several weeks the UK government did finally publish its draft ILS regulations for a new tax and regulatory regime that will be brought to Parliament early next year.  

Inga Beale has always struck us as a person who is careful before she speaks. If there is one thing we in the US have learned in this election season is that the people in the room listening may not be the intended audience for the speaker. Her exact intentions may have been served because the UK government responded when the Lloyd's CEO spoke.
 
Roger believes Parliament will render a "do-over" to the Brexit vote



roger
Roger Crombie
 




American readers, rightly consumed by extraordinary domestic events, may not have paid great attention to an equally wide-reaching political development that occurred this month.

On June 23 this year, Britons were asked to vote for or against leaving the European Union. A pamphlet delivered to every voter by the Government a few days before the referendum stated: "This is your decision. The Government will implement what you decide."

The vote was to leave. When the result was known, many of my American and Bermudian friends wrote to ask me what the vote meant. I wrote a lengthy reply, containing the following paragraphs:

 "After a period of toing and froing and public posturing, a deal will be struck that changes the existing arrangements, and Britons will be told to vote again, on the new terms. Scared witless by (the) events (following the first referendum), they will vote heavily to stay in. There will be no Brexit, despite the vote.

"Markets will fluctuate. Boris Johnson will not become Prime Minister this year. He will allow Theresa May (probably) to take the poisoned chalice."

In this column, published in July, I wrote:

"Fear of the unknown rules the markets, and all bets are off when that happens. But the good news for you is that there will be no Brexit. I've been saying this for months, and it has never been truer than it is now that we've had a sneak preview of how it would go.

"There'll be a lot of toing and froing, and hoohing and hahing, but there'll have to be a second vote. The exact mechanism by which this will be achieved is not clear in my crystal ball, but in a few months, it will happen. Trust me."

During the first week of November, just two days ahead of the national celebration of Guy Fawkes trying to blow up the Houses of Parliament in 1605, a panel of three British judges issued their verdict on an argument set before them. Only Parliament may decide important matters, the court ruled, and therefore British voters lack the constitutional ability to make the decision to leave Europe.

The Members of Parliament (MPs) are more than 80% in favour of staying in the European Union and believe the electorate to have made the wrong decision. The judges effectively said that the electorate is irrelevant to democracy. The judges concluded that only MPs are entitled to make such a decision, because they were elected. (The judges themselves were not.)

This decision greatly angered many people because one of the three judges had founded a pro-European legal institute, and another was a close pal of Tony Blair, and a former partner at his Law Chambers. Mr. Blair is keenly pro-European. He took Britain to war in Iraq against stiff Parliamentary opposition, because of his disdain for the institution. Knowing that the overwhelming majority of Members of Parliament are Remoaners (those who voted to remain, and will not accept their defeat), he now insists that Parliament knows best.

My crystal ball has cleared up. The British Government led by Mrs. May, herself a Remainian who has valiantly tried to carry out the Brexit for which people voted, is to appeal the judges' decision to the Supreme Court. The appeal is an exercise in futility. Whatever the result, a further appeal will be made, amusingly enough, to the European Court of Justice. Guess how that verdict will go?

The British Constitution is unwritten. It exists in every legal decision made in the past 500 years, in every Act of Parliament, in European court rulings, and in conventions that have stood the test of time. Perhaps its key element is the division of power between the executive, legislative and judicial branches of government.

Aleister Crowley, an English occultist who declared himself the leader of a new religion he had founded, famously said: "Do what thou wilt shall be the whole of the law." He died as he lived, a laughable figure considered by many to be a dangerous maniac.

As of this month, he is rehabilitated and installed, bizarrely, as the greatest exponent of jurisprudence ever to have lived. To his statement, however, must be appended the words "... but only if what thou wilt accords with what some unelected judges, some reviled politicians, and a small elite who feel their interests might be threatened think would be good for you."

Footnote: In that e-mail to friends after the Brexit referendum, I also wrote: "Boris will step forward nearer the 2020 election date and win, also bigly. That might follow a Trump victory, for which some people need to be prepared."



**************************
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  roger.crombie@catex.com.

 
Copyright CATEX Reports
November 17, 2016
 
Quick Bytes


More than 50% of Lloyd's managing agents want to see Stephen Catlin named Lloyd's Chairman. Lloyd's is searching for a replacement for outgoing Chairman John Nelson...newly approved Lloyd's syndicate Blenheim Syndicate 5886 led by former Cathedral CEO Peter Scales confirmed that Nephila Capital will be the largest single contributor to Blenheim's syndicate stamp...Validus CEO Ed Noonan noted that a 30 mile westward shift in Hurricane Matthew would have caused a $38 billion insured loss which would have shocked the retro market and forced a correction is US property CAT pricing. Noonan said "Everybody says it needs a $100bn event to move the market and that just displays a lack of understanding of the mechanical functioning of the market and how reliant it is on a retro market that is thin and fragile"...Something statistically has been noted by Aon Hewitt about lower rates of improvement in UK mortality rates--so much so that the firm has advised pension plans to hold off on any longevity swaps until the data is better understood. Aon Hewitt said since 2011 UK mortality rate data suggests there has been a "sea change" in recent trends with mortality improvement much lower than expected...Dirk Spenner of Willis Re, in Baden-Baden, told Insurance Day that broker facilities are "not suitable for the reinsurance sector." He said that broker facilities have a place in primary lines, but they are not fit for purpose within the reinsurance sphere."...Reports indicate that AIG is once again ready to do business with Berkshire Hathaway after AIG cut the reinsurer from its reinsurance programs three years ago after Berkshire Hathaway lured several top AIG executives to run its new Berkshire Hathaway Specialty Insurance operation...While the insurance industry was on edge as Hurricane Matthew became the first named storm to make a landfall in Florida in ten years Typhoon Haima was the 22nd typhoon to strike China this year. Industry sources said Matthew, even though it ended up as a glancing blow, "woke people up to the fact that risk is still there and that Florida is not a free source of profit."...John Berger, Third Point Re CEO, speaking about risks involved in mergers and acquisitions noted that "Just like marriage, in M&A the 20% that work are so beautiful it inspires us all." however "50% of marriages end in divorce."...Atrium Syndicate 609 active underwriter Toby Drysdale warned investors that Lloyd's will lose money in the near future as soft pricing continues to pile margin pressure on carriers. He said it would be much harder this year for carriers to continue to be "lucky"...BASF, the German chemical giant, experienced an explosion and plant shutdown that killed three employees at its sprawling Ludwigshafen facility on the Rhine River. Initial fears that the site would be closed for months have eased but notifications are being made to BASF customers about delivery delays due to the explosion...Kanye West, the hip hop performer does not normally come to our attention, however his recent confinement and hospitalization at UCLA Medical Center in Los Angeles has resulted in the cancellation of 21 concert tour dates. No doubt there is a non-appearance and cancellation policy in place although no information is available yet concerning details of the policy limits and which markets provided the coverage...
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