I have a super busy day ahead but wanted to throw up a few links for the Slabbed Nation because I think we have another banner day shaping up here in cyberspace. Let’s start with Chip Merlin’s blog where he writes about the value of listening to other points of view:
Slabbed is a blog that grates on those in the insurance industry, its legal counsel and proponents. My impression is that because those from the insurance industry do not like the criticism, positions and strong rhetoric, they stop reading Slabbed and read only those that criticize policyholder advocates, policyholders, and others who pander to the insurance industry. Nobody likes to be criticized or cast in the role of the villain. That is human nature. Yet, I agree with comedian Chris Rock, who stated that “anyone who makes up their mind before hearing the issue is a … fool.”
I was thinking of this while reading the August issue of the Insurance Fraud Letter by Barry Zalma. Zalma, like many in the insurance industry, takes great glee in publicizing when the well known consumer champions fall. I appreciate that those that make a living serving the insurance industry have an allegiance to it and a utilitarian need to pander to those that provide for their living. Still, those self righteous antidotes have worthy lessons and, within the rhetoric, there are often a few jewels. Zalma gave one in his recent newsletter
Chip may be surprised to learn that we are read religiously by certain insurers and insurance professionals though our industry traffic count did take a hit when they started filtering us in Bloomington. His point is well taken though because we have experienced the other kind of reader as well; people so trapped by their beliefs and ideology they are incapable of seeing other viewpoints. Chip has singled out Zalma in the past for doing just that, which is part of what makes today’s entry over at his blog so rich. Continue reading “Slabbed news miscellany: Chip Merlin on the value of listening to other points of view, stealing beer and drinking what can’t be fenced, Swiss Re rings the Bell and the cash register, Michael Grimm to appear at the Silver Slipper in 2 free shows and “for sale” issue advocacy”
Since writing about an insurer who tried to “do right” by his policyholders and was allegedly “done wrong” by his professional liability insurer is a Who’s on First assignment, we begin this story of “no good deed goes unpunished” with an introduction of the cast of characters St Helena v Ungarino & Eckert and Swiss Re:
St. Helena Corporation: “Successor in Interest to Powell Insurance Agency, Inc. (“Powell”)”
Powell: “a Louisiana corporation licensed to do business in Louisiana…
During all times relevant herein, Powell was a licensed insurance agent in Louisiana. When Hurricane Katrina struck Louisiana, it had served its clients in the New Orleans metropolitan area and southern Louisiana for over forty years.
Powell is the primary insured under claims made professional insurance policies provided by Defendants Westport Insurance Corporation and Swiss Reinsurance Company Ltd.
Ungarino & Eckert: “a Louisiana limited liability company with offices located…in Jefferson Parish” (Louisiana)
Westport Insurance Corporation: a Missouri corporation…[and]…wholly-owned subsidiary of Swiss Reinsurance Company.
Swiss Re: ‘a Swiss corporation with main offices in Zurich, Switzerland” and the parent of Westport Insurance Corporation “hereinafter referred to collectively as ‘Swiss Re’ “
Jack Alltmont: “an experienced attorney” retained by Powell “who had previously represented Powell in similar insurance agent disputes”
Prior to Hurricane Katrina, Powell regularly sent a written letter to customers who did not have flood insurance. The letter advised those customers that they did not have flood insurance, and that their hurricane policy would not cover flood insurance. The letter recommended to the customers that they should consider obtaining flood insurance in order to recover if any flood damage were to be inflicted on their house. Continue reading “No good deed goes unpunished in Jefferson Parish – St Helena v Ungarino & Eckert and Swiss Re”
They knew which factories to burn, which bridges to blow up, which cargo ships could be sunk in good conscience. They had pothole counts for roads used for invasion and head counts for city blocks marked for incineration.
They weren’t just secret agents. They were secret insurance agents. These undercover underwriters gave their World War II spymasters access to a global industry that both bankrolled and, ultimately, helped bring down Adolf Hitler’s Third Reich.
Newly declassified U.S. intelligence files tell the remarkable story of the ultra-secret Insurance Intelligence Unit, a component of the Office of Strategic Services, a forerunner of the CIA, and its elite counterintelligence branch X-2.
Though rarely numbering more than a half dozen agents, the unit gathered intelligence on the enemy’s insurance industry, Nazi insurance titans and suspected collaborators in the insurance business. But, more significantly, the unit mined standard insurance records for blueprints of bomb plants, timetables of tide changes and thousands of other details about targets, from a brewery in Bangkok to a candy company in Bergedorf.
“They used insurance information as a weapon of war,” said Greg Bradsher, a historian and National Archives expert on the declassified records.
I am reminded of those war tactics today and the bodyguard of lies that have been so carefully constructed over the years to conceil some ugly truths about the insurance business. At slabbed we’re firm believers in knowing our adversaries and this story from the archives of the LA Times gives excellent background on the orgins of AIG. Continue reading “AIG and CV Starr: The Spies Who Shagged Us”
Dr Ed Duett of Mississippi State has all the finest insurance crooks coming to speak at MSU’s annual insurance day set for April 23, 2009. Our readers may recall he brought in Rossie for I day 2008. This year’s list of crooks and charlatans is very impressive and includes a record number of participants with ties to companies under current federal investigation and/or hogs at the taxpayer TARP trough. The complete speaker list is here but I thought I’d summarize the various sessions for our reader’s convenience:
The Revolving Door Panel:
Mike Chaney, MS DOI
Jim Ridling, AL DOI
Scott Richardson, SC DOI
George Dale, Adams and Reese
Walter Bell, Chairman of Swiss Re America
What happened to Robert Wooley?
The White Collar Crime Panel:
Walter Bell, Chairman of Swiss Re America
Jay Barbour, Carroll, Warren & Parker
Lorrie Brouse, Regional Counsel, Allstate
Steve Iler, President, AIG Claims
Wade Sweat, Copeland, Cook, Taylor & Bush
The Policyholders, what policyholders? You mean those schmucks? Panel:
George Dale, Adams and Reese Continue reading “Be Sure to Mark Your Calendars….”
Time is short so I’ll not offer much analysis and what analysis I offer is in the form of the questions I asked myself while reading it?
- What money “made the market” and how and to whom are the bonds placed (ie sold)? See this lengthy post I did a week or so back to understand why that question is important.
- What role is TARP playing in financing this deal? Inquiring minds in policymaking positions what to know. (See first bullet point)
- Who are the players making money from the act of doing the deal and how is it structured to avoid past mistakes?
Reuters has the story:
LONDON, Feb 27 (Reuters) – Standard & Poor’s has assigned a preliminary BB rating to U.S. insurer Liberty Mutual’s planned $200 million catastrophe bond, to be issued via special purpose vehicle Mystic Re II, the credit rating agency said.
In a pre-sales report published late on Thursday, S&P said Mystic Re II’s Series 2009-1 notes will transfer some potential losses by Liberty Mutual and affiliates from U.S. hurricanes and earthquakes to capital markets investors. Continue reading “News from the cat house……”
The sun will come up tomorrow and the next day. Still in all working at AIG, Swiss Re or the Hartford these days must really suck, kind of like Chinese water torture.
AIG – 60 Billion tax dollars really wasn’t enough.
ALL – Down another 7+% with a new 52 week low.
Swiss Re – See earlier post.
Hartford –Working on a new 52 week low and worse.
Russell emailed me the answer and as is typical of what Russell digs up on complex securities and derivatives the answer is not only fascinating but begs additional questions. First let’s do a quick refresher on why this question is topical here on Slabbed by starting with the then breaking news that Allstate’s special purpose entity Willow Re’s cat bonds were facing “imminent default“, followed by my explanation of the events that brought about the then imminent default (subprime mortgages backing the bonds). Then we linked a Reuter’s story reporting the actual default:
Willow Re and three similar deals used a unit of Lehman Brothers as total return swap counterparty, contracted to ensure the collateral backing the bonds was sufficient to meet interest and principal repayments, and to make up any shortfall.
When it collapsed, investors were left with direct exposure to market losses on assets held as collateral. S&P had said on Oct. 9 that it believed payments on Willow Re were at risk.
The default will not trigger a termination of the underlying reinsurance agreement between Allstate and Willow Re, meaning the bonds could still pay out to Allstate in the event of a severe windstorm in the northeastern United States. In that case, the exact payment received by the insurer would depend on the value of the collateral pool.
The loss of Lehman Brothers as the counterparty to the embedded total return swap is the direct cause of the Willow Re cat bond price plunge as the above story indicates. We can also reasonably infer the market “perceived” the value of the Lehman Brothers financial guarantee was around 50 cents on the dollar and the logic for that inference is straightforward because after Lehman imploded the value of the bonds went from around 100 to 50 (as in 100% of par value to 50% of par value). Is the implied value of the Lehman financial guarantee also a signal that Lehman was in for some troubled times? Continue reading “Anyone else curious why Allstate’s SPE WillowRe’s bonds are trading at half their par value?”
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”