Friday, 25 January 2008

SocGen, subprime, lots of news

Kudos to Aon's marketing discipline. Within hours of the announcement of the SocGen fraud, they issued a report on the implications and promoting their product to cover just such an incident:

“Employee fraud, and in particular unauthorised trading, is insurable but the
challenge has been persuading some banks to admit such exposure will
be interesting to see how the take up rate of the unauthorised trading product
{marketed by Aon I presume} is influenced by today's news."

Our sources indicate that their D&O policy had a specific unauthorised trading exclusion, but with their stock taking a big hit and this perhaps being an indicator of lack of management oversight, a more run-of-the-mill case might be forthcoming.

Back to subprime, Clear Capital reported that certain Lloyd's syndicates were particularly exposed to subprime and reduced their price forecasts for their shares.

I was floored by Clear Capital's statistic that there have been 50 credit crunch-related notifications in Lloyd's already. Given that Advisen is tracking nearly 150 subprime-related lawsuits, 50 seems logical for the global insurance market, but not London, and not Lloyd's only. The source of this data appears to be a survey of London brokers. Anecdotally, I can count in single digits the number of subprime-related notifications in the London market.

This is why the RIMS Benchmark Survey is so popular, unlike other studies of premiums, it's the only one to be based on actual data versus what a subset of insurance brokers say they are seeing.

Not to be outdone, David Small of Bear Stearns found that the number of companies in the Russell 3000 that have lost more than 40% of their market cap through 2007 has jumped 7 times and thus revised upwards his potential subprime exposure figure from $3b to $9.3b.

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