Oops, cats out of the bag – Swiss Re & Munich Re holding chunk of Freddie/Fannie

Raise your hand if you’re surprised! I caught wind of the official announcement on our link to Sam Friedman’s blog.

European reinsurers in total have billions of dollars invested in the troubled Fannie Mae and Freddie Mac mortgage finance companies, according to a study by Highline Data.

Highline–a unit of Summit Business Media, the parent of National Underwriter–reported that Munich Re Group, as of the first quarter, had combined Fannie Mae and Freddie Mac investments of some $4.9 billion, representing 27.5 percent of the carrier’s bond holdings.

Highline also noted that PartnerRe Group, with European headquarters in Dublin, has Fannie/Freddie investments of $911 million.

According to Highline, Zurich-based Swiss Re had combined Fannie Mae and Freddie Mac holdings of some $255 million, which represented 18.9 percent of the carrier’s total bond investments.

Swiss Re, after disclosing its involvement with the two lenders, saw its stock drop today by 2.3 percent in Zurich trading.

There was no “unofficial announcement” just an educated guess that some of those “cats” I’ve been writing about were “house cats” in a manner of speaking. Continue reading “Oops, cats out of the bag – Swiss Re & Munich Re holding chunk of Freddie/Fannie”

Bet your sweet potatoes on the weather and take the pot!

Insurance has a steep learning curve – and understanding what a policy covers, believe it or not, is the bottom of the curve. Some say learning is more caught than taught; and, if that’s the case, I caught a lot more than I bargained for last week – and learned even more from research over the weekend.

Before I explain why you need to invest your sweet potatoes on the weather, you need to take a look at this picture of the the insurance industry. It’s the one I had in my head – although far more developed (understatement) – when I posted this link on the ALL Board in response to a comment from Slabbed’s friend cominglatersooner.

Now. about those sweet potatoes – or commodities as they’re known when they’re not groceries. Continue reading “Bet your sweet potatoes on the weather and take the pot!”

I Noticed This On Our National Underwriter RSS Feed

The National Underwriter is reporting that a Travelers Risk Management VP proposed Federal reinsurance paid for by insurers. Remember folks, when an individual asks the government for help it is called a subsidy, when an industry goes with it’s hand out it is called good policy. At least potential solutions to the coastal wind insurance crisis are being discussed Nowdy.

A Travelers executive speaking at a rating agency conference last week said his company’s proposal to deal with insurance issues arising after natural catastrophes now embraces the concept of a federal reinsurance program.

Distinguishing the concept of reinsurance from proposals for a federal backstop, Eric Nelson, vice president of risk management for Travelers Personal Insurance and Small Business in Hartford, said under the Travelers concept insurers would pay the premium for reinsurance coverage of extreme catastrophic events. Continue reading “I Noticed This On Our National Underwriter RSS Feed”

Spike needed in US economy, keep the soup!

Bermuda is what “Insuranceland” would look like if Disney added such a unit to its Epcot Center. On practically every block in downtown Hamilton, you see a major insurance company or brokerage office. It’s almost impossible to sit down at any public place and not run into someone you know from the business.

Sam Friedman paints an interesting picture of Bermuda – You’ve got to love a place that spikes its soup! – and a troubling one as well. While covering Professional Liability Underwriting Society conference, Friedman filed this report.

Bermuda faces a number of threats to its supremacy as a global insurance center, including a potentially “catastrophic” challenge to its relative tax advantage, the U.S. consul general warned in a speech here. Continue reading “Spike needed in US economy, keep the soup!”

Reinsurance lobby credited with defeat of Wicker’s amendment

Senator Wicker’s attempted amendment adding wind coverage to the National Flood Insurance Program failed on a 73-19 vote. Sop reported the vote here using the McClatchey story from the Sun Herald. The Associated Press carried a slightly different versions of the story.

Sen. Roger Wicker, R-Miss., who has pushed the measure in the Senate, noted that a review by the Congressional Budget Office estimated that the proposal would create no “significant budgetary impact.”

“By covering wind and flood risks in one policy, the multiple peril option will allow coastal homeowners to buy insurance and know that hurricane damage would be covered,” Wicker said. He called it a “commonsense proposal” that would prevent homeowners from having to go to court to determine whether a house was damaged by flood or wind.

Unfortunately, commonsense was in short supply when the vote was taken. “It’s not that we disagree, it’s a legitimate issue,” Dodd said. “But this amendment could end up costing us billions more than we anticipate. We don’t have any idea.”

Rebecca Morbray provided background in GAO report criticizes plan to add wind coverage to National Flood Program. Continue reading “Reinsurance lobby credited with defeat of Wicker’s amendment”

Chip Merlin Weighs In on Allstate and McKinsey

The weekend before April 15th typically means I’m working and this year is no different.   I took a break from checking returns and surfed my blogroll and followed a link my friend Russell sent that he knew would capture my interest.

Before we get to Chip’s blog and the cyber stops it entails I’ll share some concepts that help pull together this post on insurance, statistical theory and economics. The best place to start is with Russell’s link to Bloomberg and a fantastic story they did on Nassim Taleb late last month. The piece is biographical in nature but does delve into Taleb’s thought processes and how some of his theories have shaken up the status quo in the statistical community which is where we find our intersection with insurance theory.

Taleb has made enemies, too. In August, The American Statistician, the quarterly journal of the American Statistical Association, came out with a special Black Swan issue that published a series of critical reviews alongside an article by Taleb.

“He characterizes statisticians as people who blindly assume things, and nothing could be further from the truth,” says Peter Westfall, the journal’s editor and a professor of information systems and quantitative sciences at Texas Tech University in Lubbock. Continue reading “Chip Merlin Weighs In on Allstate and McKinsey”