April 16: One is better than two

The lede:

Light week as I had a heavy-duty gig.

Lots of mergers on the horizon, sez Conning and PwC. I was taught, on the other hand, that mergers were what smart companies did at the bottom of the soft market.

Low prices mean extra capacity. Extra capacity means naive capital. Naive capital means people who don’t know your business move into your market, and underprice it. Faced with that, the smart money buys a competitor. That increases your NWP – which the market likes – but keeps you from writing business that will develop too adversely.


  • PERILS, the European PCS, pegs Xynthia, at $1.74 billion.
  • Eyjafjallajokull erupted, sending many Icelanders to shelter at the local elementary school, Hvolsvollur. This all tells me that Iceland needs to do a better job of distributing its consonants and vowels. This of course is no joke if you are cooling your heels in a European airport. Insurance angle is still emerging. (Airlines typically don’t buy business interruption cover. Travel insurance – depends on the policy.) More here.
  • In other volcano news, stay away from Vesuvius.
  • 2009 was a pretty good year for P/C insurers with a combined ratio of 101, vs 105 a year before. Bob Hartwig has an interesting take, one that systemic regulators should probably pay attention to:At its zenith the crisis consumed approximately 16 percent of the industry’s policyholders’ surplus—more than any other “capital” event in history including Hurricane Katrina (13.8 percent) or the September 11 terrorist attacks (10.9 percent). Unlike most banks, insurers and reinsurers continued to operate normally without any disruption to their operation.
  • This insightful commentary from Iowa’s leading journalists:

State lawmakers who questioned Wellmark and the state insurance commissioner realized the actuarial insider baseball is virtually impossible for average people to understand. More transparency is needed.

Do physicists have this problem?


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