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Pastimes : The Hot Button Questions:- Money, Banks, & the Economy

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To: maceng2 who wrote (602)	4/7/2004 4:05:53 PM
From: maceng2	Read Replies (1) of 1417

Re reinsurance and concentrated risk. Message 19986548 Been thinking about this one. Yes reinsurance does concentrate risk. Not only that but any insurer worth his/her salt will find out all the real crap stuff they have insured (like risks with potential claims for asbestos recently found on premises etc) and pass em along to the reinsurer. However, if the reinsurer is real big and has friends at the Fed or BoE, when a big hit occurs all they have to do is borrow some more money from the money printers. They then plan to pay it back over ten or twenty years and pass along the costs in increased premiums to the customers. Make sure all your competitors equally have the same risk exposure (even if you need to sell em a little reinsurance) any hey it's the next best thing to a guaranteed winner! No need for higher mathematics degree!! So there is a little more cash slopping about in the system after a mega insurance pay out. A little inflation perhaps, always better for biz then deflation, the banks and insurance business win. Pass some more laws making insurance mandatory for businesses to operate, thats the thing. Just my musings -g- ----------------------------------------------------- Lloyds of London update.. news.ft.com Underwriting business lifts profits at Lloyds By Robert Orr Published: April 7 2004 15:43 \| Last Updated: April 7 2004 15:43 Lloyd's of London on Wednesday reported a profit of almost £2bn last year and warned syndicate operators they must continue to focus on underwriting profits rather than chasing market share. Profits of £1.9bn was up from £834m in 2002, before which Lloyd's made losses for five consecutive years. "2003 was a year of low catastrophe losses for the market. But it [2003 profit] was also a function of our underwriting," said Nick Prettejohn, chief executive. Insurance premium rates continued to rise last year, although they have started to come off the highs in areas such as property, energy and aviation. Partly to counter this, Lloyd's has set its 2004 capacity at just under £15bn, roughly the same as 2003. Mr Prettejohn said: "2004 is a year of choice for the industry not of complacency. The market needs to be focused on underwriting for profit rather than chasing premium". He warned operators they could no longer rely on investment income to make up for underwriting losses. He also noted the continued danger posed by prior-year losses. Reserves were raised £545m last year, largely related to US casualty business. Lloyd's is beefing up the regime in which its syndicates operate and has established the Franchise Board to monitor and weed out poorly performing syndicates. Syndicates are required to complete annual business plans and are subject to quarterly reviews, while under-performing syndicates can be expelled from the market - as happened with Goshawk and Dex last year. Mr Prettejohn said: "We don't measure our success on how many [syndicates] we throw out. A lot of the influence the Franchise Board has is in modifying the underwriting boundaries that syndicates operate in". Often in the past, Lloyd's has followed profitable periods with a number of years of losses. Mr Prettejohn said: "This is a cyclical business and we deal with large risks. We can't avoid losses forever but we should be able to avoid excess losses". Lloyd's central fund - which is in place to pay policies in the event of syndicates defaulting - grew from £563m to £781m last year. It paid out a total £196m. Lloyd's said its ongoing dispute with the reinsurers of the central fund would go to arbitration later this year. Lloyd's net resources - equivalent to shareholder's equity - rose 35 per cent to £10.1bn. The combined ratio - a measure of claims and costs as a percentage of premiums - was cut from 98.6 per cent to 90.7 per cent. Lloyd's said it was interviewing a replacement for Andrew Moss, the director of finance who is leaving to take up the role as finance director at Aviva.

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