Law firm Barlow, Lyde & Gilbert LLP wrote an excellent story concerning the relationship between the reinsurance contract and the original insurance contract. We covered it in Advisen Front Page News Europe today (see here).
The English Court of Appeals ruled in favor of the reinsured (a ceding insurance company from the U.S.) over the London market reinsurer in saying that the spirit of the reinsurance contract was to match the coverage terms of the original insurance contract.
Never mind that the case deals with the original insurance companies having to pay for losses which occurred outside the term of the insurance contract. The ruling is an important one for the London reinsurance market signalling that where the insurance company pays the reinsurance company must honor the legal ruling that led to this payment.
Being an American in London, I particularly enjoyed the following conclusion from the article:
"Reinsurers' arguments in the present case had a whiff of an assertion (although they were careful not to say so expressly) that Lexington were an American Corporation and had therefore to take unsatisfactory decisions on the chin, while reinsurers were English (or doing business in the English market) and could not be expected to do so. That, of course, will not do."
Barlow, Lyde & Gilbert have just subscribed to Advisen and join the list of law firms with insurance industry practices that use Advisen for our database of large losses and for our wordings comparison analytics.
To subscribe to Advisen Front Page News Europe click here.
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Thursday, 13 March 2008
Tuesday, 11 March 2008
Complaints about Capacity at Lloyd's
Advisen Front Page News Europe ran a story today entitled "Some of Lloyd's Biggest Underwriters are Crying Foul Over Bloated Capacity" which piqued my interest.
The story by AM Best details the soft market in commercial lines insurance pricing, which I have covered here, but what interested me was the public statements by the heads of two of the largest Lloyd's Managing Agents.
The background is that Lloyd's total capacity is forecast to be down 2% in 2008 and yet some of the largest players are instilling their own underwriting discipline and cutting capacity further. From the article:
Quotes in the article from the head of Catlin and the head of Hiscox expressed disappointment in the move by Lloyd's. What struck me is that Lloyd's doesn't mandate a minimum that Hiscox nor Catlin nor any syndicate must write, so why the complaint?
How it works: Lloyd's sets a maximum capacity that any syndicate may write - the aggregate was that which was lowered by 2%. How it's changing: Rolf Tolle pointed out that Lloyd's will no longer announce this number in advance and will instead report previous year's performance only - in keeping with competitors' practices.
What is really behind these complaints, then, is that these managing agents are not happy that there are new entrants at Lloyd's. Syndicates have increased from 66 to 75 in 2008 (including 5 Special Purpose Syndicates (SPS's) and Managing agents have increased to 46 in 2008 (see here).
With new money in from other underwriters, and from the capital markets (Goldman Sachs, Bank of America), current Managing Agents don't like the increased competition.
You can sign up for Advisen Front Page News Europe here and follow this and other stories from the commercial lines insurance industry in Europe and globally.
The story by AM Best details the soft market in commercial lines insurance pricing, which I have covered here, but what interested me was the public statements by the heads of two of the largest Lloyd's Managing Agents.
The background is that Lloyd's total capacity is forecast to be down 2% in 2008 and yet some of the largest players are instilling their own underwriting discipline and cutting capacity further. From the article:
Even before the Lloyd's announcement, many Lloyd's underwriters in the fourth
quarter last year were announcing 2008 capacity cuts well above 2%. Liberty
Syndicates cut its capacity by 9.5%, R J Kiln cut 2008 capacity 14%, and Hiscox
reduced capacity for its Syndicate 33 by 20%.
Quotes in the article from the head of Catlin and the head of Hiscox expressed disappointment in the move by Lloyd's. What struck me is that Lloyd's doesn't mandate a minimum that Hiscox nor Catlin nor any syndicate must write, so why the complaint?
How it works: Lloyd's sets a maximum capacity that any syndicate may write - the aggregate was that which was lowered by 2%. How it's changing: Rolf Tolle pointed out that Lloyd's will no longer announce this number in advance and will instead report previous year's performance only - in keeping with competitors' practices.
What is really behind these complaints, then, is that these managing agents are not happy that there are new entrants at Lloyd's. Syndicates have increased from 66 to 75 in 2008 (including 5 Special Purpose Syndicates (SPS's) and Managing agents have increased to 46 in 2008 (see here).
With new money in from other underwriters, and from the capital markets (Goldman Sachs, Bank of America), current Managing Agents don't like the increased competition.
You can sign up for Advisen Front Page News Europe here and follow this and other stories from the commercial lines insurance industry in Europe and globally.
Monday, 10 March 2008
Capital Markets & (Re)Insurance - Unstoppable Momentum?
Some further data highlighting how the convergance of the capital markets and the (re)insurance industry is picking up steam:
According to today's edition of Trading Risk, 2007 Catastrophe Bond issuance was 49% above 2006 issuance and 251% above 2005 issuance.
Also in the news today, Lehman Brothers, which reports (here) 70% market share in issuance of US Life Insurance, Reg XXX/AXXX/Embedded Value insurance linked securities and claims to be the "leading trader of catastrophe bonds in the secondary market", hired Stephen Matanle from Marsh.
Steve was very senior at Marsh and had a long and distinguished career of 32 years with Marsh including (from the press release) "the role of Global Placement Leader. He had previously been Chairman and CEO of Marsh Global Broking."
Last fall Lehman launched Libero Ventures which markets itself as leading the charge in "Reinsurance Financing" which it defines here. The main points of differentiation are in the structure (cedants can opt for multi-year deals and take an equity stake in the Notes created by Lehman) and the origination (Lehman Re acting as principal to speed the process).
As Michael Spencer, ICAP's founder and CEO, pointed out in Trading Risk, the secondary market for these instruments must become more liquid, but tapping Matanle and his proven deal-making ability is big news for Lehman and the whole new issue market of insurance-linked securities.
Friday, 7 March 2008
Report from a Subprime Conference
Lexis-Nexis subsidiary Mealey's ran a conference on litigation from subprime yesterday. Advisen's Anne Wallace attended and reported:
Advisen's estimate that subprime will be a $3.6b D&O event just from securities class action suits (see here) was discussed as were the worst-case estimates from Bear Stearns and Lehman Brothers (who can't track the insured amount).
Look for Advisen to announce a webinar series on the broadening underlying exposures (beyond subprime to other credit markets) and where litigation will go and how this will impact on the commercial lines insurance industry. Meanwhile you can follow our coverage on Front Page News (subscribe here).
It looks like we are facing a bigger nightmare than first thought. Less
D&O risk, but a larger E&O and Fiduciary Liability and an additional
EPLI with regards to whistleblower charges.
Advisen's estimate that subprime will be a $3.6b D&O event just from securities class action suits (see here) was discussed as were the worst-case estimates from Bear Stearns and Lehman Brothers (who can't track the insured amount).
Look for Advisen to announce a webinar series on the broadening underlying exposures (beyond subprime to other credit markets) and where litigation will go and how this will impact on the commercial lines insurance industry. Meanwhile you can follow our coverage on Front Page News (subscribe here).
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