Reports
Issue 61
September 2016
In this Issue
  • Reinsurers running out of options on eve of Monaco meetings
  • Ajit Jain fires a warning shot over Gen Re's bow
  • Renaissance Re licenses CATEX Pivot Point application
  • Arch is now the biggest mortgage insurer in US
  • Apple's Irish tax problem with the EU captures Roger's attention
  • Quick Bytes: Zurich to fire executives; Chinese reinsurance to reach $198 bn; RMS lists global port exposures; Marsh CEO says reinsurers will continue to write unprofitable business; VW cars can be hacked; 58-story San Francisco building is tilting; unpaid Indonesian tanker crew takes ship instead; Germans heading to mattresses to hide cash 

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James.Cogger@catex.com
Dear Colleague, 
  
We are preparing for our trip to Monte Carlo for the annual Rendez-Vous de Septembre.  We have over forty meetings already booked but can certainly squeeze in a few more if you're interested in meeting us.

We think that there will be a different tone to the meetings this month than in the past.  The influx of alternative capital has now been digested by the traditional markets but prices remain stubbornly low.

We note that premiums still maintain their downward trajectory. At the same time rising CAT costs and increased expense levels have taken their toll on markets. When the continued lack of available investment income is added to the mix you can understand why companies are thinking of new ways to make money in this seemingly endless soft market.

That's why we noted Arch's acquisition of AIG's mortgage insurance unit as a story worth looking at more closely.  We also noted Ajit Jain's analysis of Gen Re's current operation and his exhortation that they can write more business without sacrificing underwriting integrity.

CATEX has some news too. Renaissance Re has licensed the Pivot Point Binder Management System for use in its delegated authority business. The application's Data Vera component i mports, validates, and auto corrects data, while maintaining detailed audit logs. Data Vera exports data in a variety of formats.

Our regular Roger Crombie  column is here too. Roger is concerned about the recent European ruling about the tax arrangement between Ireland and Apple. His views may surprise you!
 
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
 

Strange times for Monte Carlo meetings

Writing a monthly newsletter for the reinsurance industry can seem, as Yogi Berra said, like "deja vu all over again." Each month we read a spate of articles that include comments from well-meaning observers who have strained to glean evidence that the end of the tumbling rate cycle is finally in sight. Just as certain, each month there are at least that many articles by industry observers saying that rates will continue to decrease.

Over the past few months we've begun to notice articles warning that reinsurer expenses seem to be rising. Initially this rise was ascribed mainly to M&A activity undertaken by companies as they sought to better diversify and increase their underwriting portfolios. Then we read the news that Ajit Jain has instructed Gen Re to cut expenses and noted that even travel and entertainment costs for internal meetings needed to be reviewed.

We've also noted the warnings about the use of claim reserve releases being used to boost earnings. The thinking apparently is that the reserve releases might both mask poor underwriting results and deplete reserves that should be more prudently maintained for future claims.

A review of the news from the past six weeks again produces more of the deja vu effect. The same rate "optimists" are balanced out by rate "realists"; a sharper focus has been leveled on increasing expenses; and just about everyone is warning that soon there will be no more reserves to release.  The industry remains on the knife edge of profitability. We could probably cut and paste this from prior editions of CATEX Reports.

There are new developments though and they could be important.  The first concerns what had been only speculation earlier this summer about the effects of a quantum sized CAT loss. A few months ago there was speculation that even a loss of $50 billion would possibly not stop the fall in CAT premiums but not cause a spike in rates as in previous cycles. After a month or so of mulling this over it seems now that the consensus is that even a mega-CAT won't kick-start a steep climb of rapidly rising premiums.

The next subtle change we've read has to do with claim reserve practices.  Our friend Steve Evans at Artemis notes that "Building up reserves from prior accident years and then using the funds to mitigate adverse market conditions and catastrophe losses, for example, has long been a feature of the risk transfer landscape, enabling insurance and reinsurance firms to benefit from prudent loss picking and lower-than-expected catastrophe loss years."  

Without making judgment on motives there is no denying that reinsurer Q2 results have been boosted by claim reserve releases that in some cases have meant the difference between an underwriting profit or an underwriting loss.

Some observers believe that there are precious little reserves left to release at this stage. Remember that reinsurers have been waging war against low premiums and abundant capacity for several years now. The fight has not been exclusively limited to CAT pricing. Read this quote from JLT RE: "Arguably the largest 'catastrophes' ever to befall the risk transfer business have not been the mega property-related events which feature prominently in the headlines, but the slow build-up of reserve weakness driven by aggressive pricing in longer-tail, non-catastrophe lines over extended periods of time."

If JLT is right, there already are less reserves available to offset negative underwriting results.   So if future reserve releases will be limited, we have to hope for underwriting to be profitable on its own?  Are prices sufficient after these years of aggressive competition? They might have been if we had continued to enjoy quarter after quarter of light CAT claims.

Unfortunately,  Munich Re  reports that "Losses borne by the insurance, reinsurance, and insurance-linked securities (ILS) industry increased by $8 billion to $22 billion when compared with last year, staying in line with the inflation-adjusted average for the last 10 years, but above the average of the last 30 years, of $15 billion."   Q2 losses contributed approximately $6 billion of that increase .

Much of that Q2 loss stemmed from the Alberta fire in Canada. Alex Maloney, CEO of Lancashire said "the Canadian wildfires aren't even that big a loss --it's below $5 billion, but the effect it's having on firms' returns shows us that the market is so close to the edge. You really don't need a lot more to happen before people are in the red."

Analysts warn that the diminishment of reserve amounts mean that companies will begin to lose flexibility to prudently release claim reserves. In an era when underwriting ratios are already marginal, and a loss that's not "even that big", is enough to push the market to the edge, analysts fear that carriers could be facing negative loss ratios soon enough.

This scenario could get worse. We've noted concerns in the past that some insurers are already writing certain risks below the cost of capital or below so-called technical levels.  If the "buffer" of earlier reserves is gone what would happen if claim losses actually normalized? Some believe that even a return to normal CAT loss activity could be enough to tip certain carriers into a negative underwriting ratio.  

This is like a lake that has had the water drained out of it.  We can now see everything on the bottom. There are markets that admit that they've written certain business below the required price. Those markets have decided that, when combined with the balance of their geographic exposure and diversity of business, its better to hold on to a client rather than lose them.  Given the costs of client acquisition these days it's hard to argue with that rationale.

This year, first half CAT losses actually were "normal" and a number of carriers paid the price in their Q2 results. The Canadian fire, US hailstorms and the Kumamoto earthquake caused underwriting losses at several insurers.  The concern that many have is that we're now in the middle of the Florida hurricane season and that if the industry is running this close to the edge, so much so that a return to normal CAT claim activity for even one quarter produced losses, what could happen if there is a major hurricane strike in the US?

Remember that this discussion is going on in the context of an understanding that even a major CAT claim won't send rates up sharply.   Deutsche Bank thinks even a $50 billion claim won't move the pricing parameters. If premiums don't increase after a $50 billion industry loss there is little room for recoupment of losses.

Amidst this gloomy picture we noted two stories that didn't fit this tableau.  We already noted Ajit Jain's warning to Gen Re about controlling expenses.  Apparently what Ajit is really concerned about is that he believes Gen Re is under-leveraged and could be writing more business than it is. By reducing unnecessary expenses he can generate more capital to write more business. In addition to the expense issue, he's lit out after a bonus structure that, he believes, rewards underwriters for keeping rigidly to a target combined ratio, a practice he thinks that is leaving money on the table. 

Remember, Berkshire Hathaway looks at the world a little differently than most insurers. Adhering to a targeted combined ratio is all well and good but in Gen Re's case Ajit thinks "There is room for Gen Re to absorb greater volatility without necessarily increased margins." Gen Re premium dollars are included in the fabled Berkshire "float" that generates investment income.  For Berkshire, if the policy even holds its own from an underwriting profit and loss perspective, that still leaves ample room from the investment income side for the business to be profitable. 

The second story we noted  was this article : "Insurers can break free of market challenges: Willis." The broker conducted a study of  UK non-life insurance insurers and determined that 
difficult insurance market conditions are no excuse for poor performance.  Willis conducted an analysis of financial returns of insurers which showed that those operating in similar classes of business had delivered markedly different return levels over the last five years. 

Willis concluded that "T here is of course no magic formula, but most companies should be able to make gains from re-examining approaches in core areas, including capital, investment, business mix and disposals, reinsurance and uses of technology and analytics."

From our perspective we were heartened to see that although the study was limited only to primary UK non-life carriers there are measures that can be taken to "break free" of the current environment. Willis noted that there is about a 15% spread between the highest and lowest performing companies.

You might have noted that the Willis analysis did not focus on reinsurers. Fitch Ratings did look at reinsurance when they observed that the group of 44 reinsurance companies which it tracks saw operating results suffer a "steep decline" in the first half of 2016. Fitch noted that return on average common equity decreased by 36% compared to the same period last year.

Fitch noted that reserve releases continue to be important to reinsurer results with releases contributing 7.3 points to the combined ratio.  Without the addition of the reserves Fitch said the combined ratio would have been "verging on the unprofitable" at 99.6%. The same metric for the same group of reinsurers in 2015 was 95.5%.

The ratio increased because of first half CAT losses which added 6.2 points and an increase in spending.  The expense ratio increased from 32.1% last year to 33.2% in 2016.  The increase in spending seems counter-intuitive as it comes during a time of decreasing premium levels but Fitch notes that certain reinsurers are incurring increased expenses as they expand into different lines of business including insurance in order to hopefully generate more premium.  

The increased expenses have been termed "spending your way out of a soft market" by some.  According to some, or at least Lancashire's Maloney, it's not possible to "grow your way" out of a soft market. 

As we come into the Monte Carlo meetings later this month there is a definite sense that there are no longer any margins anywhere. The industry, it seems, has made about every move it can make. It's been inundated by new capital; premiums have decreased substantially; CAT losses have been lower than usual (which means lower claim payments but eliminates justification to increase premiums); investment returns are at historic lows; analysts indicate reserves available for release are drying up; and everyone agrees that even when a mega-claim emerges it still won't be enough to dissuade new capital entrants or precipitate a steep rise in rates.

In the face of all this where does a reinsurer even begin if they want to boost their business?

Ajit Jain completes 90-day review of Gen Re

Gen Re is part of the Berkshire Hathaway group. It's far from being a small player although its numbers are rolled into the Berkshire group for reporting purposes.  Estimates are that the annual premium is about $6 billion, which would safely place it as one of the ten biggest reinsurers in the world.

As part of Berkshire,  Warren Buffet's famous "premium float" directive is integral to calculations performed on Gen Re's premiums.  Some $90 billion in annual premium float is at Berkshire's disposal. We noted earlier this year that Kara Raigul replaced the retiring Tad Montross as CEO.  Last month news came that Ajit Jain and Raigul completed an initial review of Gen Re operations and had several "suggestions".

Apparently the review was contained in a five page memo written by Jain.  There were a number of laudatory comments about employees, corporate integrity and dedication but what clearly was of the most interest to Ajit was the current premium leverage at Gen Re.

Berkshire, remember, can essentially write business at a 99% loss ratio but use the premiums from that business to contribute to the $90 billion of investment float that Berkshire invests. Far be it from us to suggest that an underwriting profit is less important to Berkshire than elsewhere but when one of your main goals is to generate as much premium float as possible, and contain your exposure, you do have a slightly different view of the world than does a stand alone reinsurer.

The memo noted that one of the findings of the three month long review at Gen Re was that the bonus structure of underwriters was based on the marginal profit of the underwriting loss ratio.  Again, from a stand alone carrier this metric would make eminent sense but not if you're Berkshire.  If the bonus system incentivized underwriters to pass on risks that were not profitable enough  -- because their loss ratios would likely fall outside the bonus pool target --then that means that underwriters are passing on business that would produce an underwriting profit, albeit a profit smaller than the loss ratio needed to target for the bonus structure.  

From Jain's perspective this means that business which will in itself likely be profitable (if only slightly) was being passed on and prospective premiums which could be added to the premium float were being missed.

Keep in mind that Gen Re is a direct writer and as a result does not pay broker commissions.  This practice allows for savings but in a slack market like the present can present challenges to finding new business. Many have speculated that this is why Gen Re engaged in the capacity arrangement with Trans Re earlier this summer. Gen Re capacity is backing broker produced business but Gen Re is not incurring broker costs. 

Possibly what has Ajit most exercised is that since Gen Re does not pay brokerage the only costs it does have are internal. This means that any decrease in those internal costs, or increase in written premium, has a greater proportional impact than if Gen Re was paying brokerage or acquisition costs.

When you boil it down what we think Berkshire is trying to do is a little bit of a behavioral shift at Gen Re.  Ajit is reminding them that Berkshire has an overwhelming advantage over competitors in any market environment and in a soft market that advantage increases.  If the prospective business looks like it will produce an underwriting loss then don't write it.  But if the business looks like it will produce only a small underwriting profit than you had better think long and hard about it --even if you need to loosen terms and conditions to get it.

Berkshire wants the premium float that the business will produce to use to earn investment income. If you're an underwriter, Ajit seems to be saying, don't trouble yourself with the size of the margin of your underwriting profitability --instead focus on how much written premium you can produce --and still maintain underwriting integrity.  Written premium, generated by "sane" underwriting, is the goal of any Berkshire operated underwriting unit.  Ajit's memo called on employees to tackle the issue "intelligently" to give the carrier "a shot at making a real dent in the expense-to-premium ratio", according to reports.

The memo reportedly closed by saying: "If we can't, we will need to explore other ways to do so."  

Stay tuned.

Renaissance Re licenses CATEX Pivot Point Application

 
Princeton, N.J. September 8, 2016 - The Catastrophe Risk Exchange, Inc. (CATEX) announced today the completion of an agreement providing Renaissance Re, a leading global provider of reinsurance and insurance, a worldwide license to the Pivot Point Bordereau Management Application.

The Pivot Point Bordereau Application is a SaaS application that manages the full range of a delegated authority, binder or program transaction. Pivot Point is a web-based application and offers features including; the recording of coverholder or MGA information; ability to record and ensure that delegated authority parameters are adhered to; the processing, cleansing and validation of imported bordereau files utilizing "learned behavior"; validation of incoming files against coverholder and facility parameters; ability to upload written, premium and claim bordereau to be applied against correct written policy; the tracking of bordereau due dates and alert users when premiums have been missed, partially paid or remain outstanding; and manage specific rules and validations pertaining to different lines of business.

The Pivot Point platform currently supports client operations in 21 countries; processes premium volumes of more than USD $7 billion annually; settles transactions in 75 currencies; and distributes invoices in 6 languages. 

Arch makes major move in mortgage insurance



Arch Capital has suddenly popped up as "the largest mortgage insurer out there" with its acquisition of AIG's United Guaranty Corporation for $3.4 billion. UGC had been the largest insurer of US mortgages and Arch's own mortgage insurance business already had captured 3% of the US market.

In the US if you buy a home and put down less than 20% of the purchase price the mortgage lender will require that you purchase personal mortgage insurance (PMI). Homebuyers quickly become versed in the ratio nuances that mandate purchase of PMI and buyers understand that reaching the "20% down level" can save them the monthly PMI charges.

Most fixed rate mortgages are generally 30 years in length so mortgage insurance is fairly classified as long-tail business.  As the principal is paid off, year after year, most home buyers monitor the remaining unpaid loan amount and ask the lender to drop the PMI requirement once the remaining loan balance falls below the 80% level. 

Monthly PMI premiums do add up when included with the monthly principal and interest payment; local tax payment escrow and hazard insurance premium escrow.  You can't change the requirement for paying the P&I, tax or hazard insurance payments but you can get the PMI removed as you pay off principal.

Arch is a successful insurer and reinsurer and its CEO Dinos Iordanou is regarded as one of the best executives in the business. We were curious about what, at first glance, seemed to be an unusual move for Arch.  Perhaps, our long memories of the mortgage crisis of 2008 led us to instinctively wonder why anyone would want to increase their exposure in this area.

As we delved more deeply we saw that the move makes sense --possibly a great deal of sense.  We read stories everyday about reinsurers struggling with low premium rates seeking to expand their exposure portfolios to get closer and closer to the risk by dipping into insurance. What could be closer to a risk than an insurance coverage that is mandatory for those who put down less than 20% of the purchase price of a new home? 

Arch's mortgage insurance business already made up 11% of its premium revenue so they were quite familiar with the business. According to the Wall Street Journal  "Arch got into mortgage insurance after the financial crisis and the bursting of the housing bubble, when numerous U.S. mortgage insurers posted large losses."

But you still may be uncomfortable with the "specialty" aspect of mortgage insurance and have an idea that it's a bit far afield for a major P&C insurer/reinsurer.  You shouldn't be, says Iordanou. He says that mortgage insurance "basically behaves in the same fashion as any specialty, long-tail class of business", with upfront underwriting discipline being the key. 

Of course it's "upfront" as that's the one and only time the insured applies for the PMI policy and to that point Iordanou notes that "Most of the problems mortgage insurers had (in the wake of the housing bubble) from a profitability point of view were self-induced." He argues that while economic conditions certainly played a role --people losing jobs and being unable to continue paying monthly mortgage payments -- that most of the losses were due to the mortgage industry's willingness to write "no-verification bonds".  

As he points out "How stupid is that statement? I'm underwriting a loan where I don't verify any of the information. So basically you are blindly writing the insurance without knowing what the exposure is."  

If you need a refresher course in this reality be sure to see the film "The Big Short". It's a useful reminder of just what those days were like in the early 2000s.  At the time people thought that property values would always increase. Mortgage lenders made loans based more on their belief that, no matter what, the value of the underlying asset (the home) could only increase and paid increasingly less attention to the financial viability of the mortgage applicant.  If the applicant went bankrupt the lender could repossess the property and sell it at a price higher than what the applicant paid for it.

This fiction worked for a while until it didn't. Once the bubble popped and home prices began to tumble the loans were underwater. Many homeowners did the math and began to simply walk away from the properties and the loans. Mortgage insurers, many of whom apparently hadn't done proper vetting of the mortgagor, were faced with losses as the loans defaulted. Mortgagees, who had been betting on ever-increasing home values, were forced to foreclose on properties. 

The entire lending and mortgage insurance process has been strengthened considerably. A decade ago you could get approved for a jumbo mortgage in an afternoon. Today you can encounter approval challenges for a normal mortgage if you've been late on a credit card payment. The inevitable tightening up of standards apparently was enough to convince Arch that they could compete successfully in the space, and do proper underwriting, when they decided to enter the mortgage insurance business after the crash of 2008.

Iordanou has an interesting take on all of this. He's not too worried about whether its mortgage insurance or P&C insurance but only asks the question "Is Arch capable of providing the underwriting performance and capable of providing the investment performance? Once the answers are yes and yes, don't worry about the structures and don't worry about the product lines either."

There is one big unknown of course and that is the effect on the mortgage sector of another big slowdown in US home sales.  But from Iordanou's viewpoint that's just another risk to evaluate. If the flow of prospective mortgage insurance buyers slows, or the quality of applicants deteriorates, clearly Arch has no intention of weakening its underwriting standards just to gain premium. If the applicant is risky or the business slows his point is that it shouldn't be viewed as any different from any other insurance product which of course is susceptible to the same dynamic.

In Iordanou's case though he is betting on the overall American economy which as Warren Buffett often says is a pretty good bet.

There's another aspect to mortgage insurance that's worth noting. It's pretty much risk that's correlated to the US economy and not specifically to natural catastrophes. This feature is presumably attractive to a big multi-national like Arch. Here's a quote from an article written by Adam McNestrie in Insurance Insider: "As with P&C insurance, Iordanou said that the key to measuring the 'cat component' of the mortgage book tied to an economic downturn is controlling the number of policies written, carefully determining the characteristics of the mortgages to write and pricing in the cat losses."  

The success or failure of the UGC purchase will depend on Arch sticking to its underwriting principles and with Iordanou in charge it's probably as safe a bet as wagering on the US economy that they will succeed.
 
Roger ruminates on outcome of Apple-EU tax fight
Given US tax laws Apple's arrangement is understandable


roger
Roger Crombie
 


The EU has ordered Apple to pay €13 billion ($14.6 billion) to the Irish Government, for what amounts to back taxes.

The Obama Administration is appalled. The Irish Government is reportedly not thrilled either, although the money it would receive would equate to a major chunk of its annual spend. The Irish fear is that, if they must follow the rules, international companies might relocate elsewhere.

The iPhone maker itself is what might be called Apple-plectic about the whole thing. Unused to paying its share, the company has reacted with shock and horror to the potential loss of about 4% of its total untaxed offshore stash.

Apple cut a tax deal with the Irish Government a dozen years ago. The arrangement reportedly limited Apple's corporation tax in Ireland to as low as $50 per million of annual profit. (Last year, Apple paid tax at a lower rate than I did.)

To earn the break, Apple claims that its headquarters is in Ireland, although it has no buildings, employees or operations there - or anywhere else, for that matter. Its European home office is conceptual, rather than actual, Apple claims.

The EU has ruled that the deal constitutes an illegal corporate subsidy by the Irish Government. Further moves are expected against other major US corporations who have taken advantage of weak politicians.

Several issues arise.

First, Apple has apparently not broken any laws, anywhere. Ireland's corporation tax, at 12.5%, is the lowest in Europe. Many companies, including some in the insurance and reinsurance industries, have based themselves in Ireland to take advantage of the low rate.

Apple merely asked the supine Irish Government if it might pay rather less than 12.5%. The Irish reportedly agreed to let Apple pay a tiny fraction of a tiny fraction of 12.5%, presumably to ensure that the company didn't set up somewhere else. The Irish shouldn't care: last year, their GDP rose by 26%.

Second, the EU is absolutely within its rights to make the Irish obey the law. The Irish Government has abandoned much of its national sovereignty to the EU, which now sets domestic financial policy for its members. (That, not immigration, was the reason why a majority in Britain voted to leave the EU.)

Third, should Apple eventually pay the tax - a final judgement might be years away - it would deduct the amount paid from its US taxes due. Stripped of the middlemen, the EU ruling is the start of what would be a significant financial transfer from the US Government to various European Governments. No wonder Obama is peeved.

Such an outcome would be entirely fair. The US maintains two utterly outdated fiscal policies that cause its corporations and individuals to contort their financial affairs. One is the tax on a company or individual's worldwide income. Another is the 35% rate of corporation tax, wildly high by global standards, on top of which as much as 5% more can be levied for state taxes.

A US company that earns the majority of its income outside the US must pay the full slate of US taxes, after deducting any tax legitimately paid overseas. That's why companies 'invert' and transfer their home office outside the US or into outer space: directors have an obligation to maximise shareholder returns. Legally minimising tax is one way to do so.

Some reports suggest that $2.42 trillion in untaxed earnings has been parked offshore by US companies, supposedly in anticipation of a tax cut or a tax holiday. No one can criticize them for behaving in accordance with the law.

The shareholders of Apple, Google, Starbucks, Facebook and other smart corporations who have brokered deals to reduce their global tax rate to insignificance, are being indirectly subsidised by the rest of us, thanks to Uncle Sam's heavy-handedness.

Successive US Governments have turned a deaf ear to the problem, and are now being asked to pay the price. The tax dispute, however, is not a fight between equals. The US is a heavyweight, and the EU is, at best, a flyweight.

With the EU on the road to collapse, tying up its brightest minds and significant financial resources to inevitably lose to the US Government will start to seem less appealing. The journey through the court system might take a decade.

            A fellow I worked for in Bermuda once showed me, with elegant precision, how deferring taxes for a decade has the same net effect as taxes never paid. Inflation and the uses to which the tax money can be put in the interim take care of that.

            Apple's management is embarrassingly more efficient than that of the EU. American tax dodgers will need American bluster to seal their deals, but, even before the fight starts in earnest, Apple and its ilk, with Uncle Sam as their second, have already won.

**************************
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
September 7, 2016
 
Quick Bytes


Zurich Insurance announced it will cut about 20% of 1,900 executive roles globally as part of CEO Mario Greco's overall restructuring plan. The insurer told the media that it required fewer employees for management as it reduced the complexity within the company...A new study says that by 2020 the reinsurance market in China will reach $198 billion in premium. Estimates place the market at about $50 billion presently...Lloyd's is postponing release of its "risk index". Apparently the delay is due to concerns from the Prudential Regulatory Authority which fears potential market manipulation in the operation of such an index. Lloyd's indicated it wouldn't publish the index until the PRA was satisfied "that appropriate safeguards are in place"...RMS says that the port of Nagoya in Japan and the port of Guangzhou in China are the riskiest ports in the world when calculated against 1 in 500 year loss events with estimated marine cargo losses of $2.3 billion and $2 billion respectively...We have a metric for costs to airlines due to flight cancellations from computer system issues. The July cancellation of over 2,000 flights at Southwest Airlines will cost the carrier $54 million. Costs incurred by Delta Airlines when similar issues caused the cancellation of the same number of flights in August may hit $100 million...Researchers say that a "sizable proportion" of 100 million Volkswagen Group cars sold since 1995 can be unlocked remotely by hackers using commonly available tools. Volkswagen notes that although the cars may be able to be unlocked starting the car's engine was "not possible"...Marsh McLennan CEO Dan Glaser said that in a soft market insurers and reinsurers are likely to keep underwriting even when returns are below their cost-of-capital. He says it's due to the industry's reliance on both long-term relationships and the need to maintain risk diversification...The 58-story Millennium Tower in San Francisco, the city's tallest residential building, is said to be sinking and listing. A group representing homeowners in the tower says the building has tilted 15 inches when measured from its roof. The Transbay Transit Center is being built next door, causing the "biggest hole the city has ever seen" to be dug next door to the Millennium supposedly removing lateral support needed to buttress its foundation...The Indonesian crew of a tanker ship who hadn't been paid for well over a month decided to take the ship instead. The fuel tanker, Vier Harmoni, carrying 900,000 liters of diesel oil disappeared from a Malaysian port and had been feared hijacked...It's not just the reinsurance industry which deals with poor investment returns. Negative interest rates on savings accounts as well as bank fees on safe deposit boxes may prompt some in Germany to withdraw their savings and hide the cash at home. Even Munich Re said it would cache over 20 million EUR in a safe alongside the gold bars the reinsurer stockpiled two years ago... 
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