The 10th edition of the European Insurance Forum (EIF), held at Dublin’s Four Seasons Hotel and sponsored by the Dublin Insurance & Management Association (DIMA) April 7-8, focused on some major issues of worldwide concern, as well as the state of Ireland’s insurance industry.
Outgoing Taoiseach (Prime Minister) Bertie Ahern (he’s stepping down May 8) welcomed delegates with a keynote speech highlighting the progress Ireland has made over the last 10 years. It’s now the world’s 13th largest financial center, and the “Irish economy is relatively solid,” said Ahern. “Employment is still OK and our banks are healthy,” with little exposure to the subprime lending crisis. He warned that the country shouldn’t be too complacent, however, as there are always competitors, especially in Asia, which presents both a challenge and an opportunity.
Topics covered over the two-day event ranged from the preparation for and the impact of the Solvency II regulations, through climate change, the global credit crisis, hurricanes and cat modeling.
Some of the highlights were:
- Karl van Hulle, Head of the European Commission’s (EC) Insurance and Pensions section, who characterized Solvency II in Maoist terms as “a great leap forward,” adding that it is one of the rare occasions where Europe has taken the lead in addressing the need for fundamental changes in regulations. The general consensus among delegates who addressed the subject was that half of all U.S. insurance companies would not meet the standards.
- Prof. Mike Lockwood’s success in showing just how complex global weather really is with a diagram that included the sun, volcanoes, clouds, the sea (surface and deeper), ocean currents, wind, rain, ice, greenhouse gasses and cosmic rays. Their interaction greatly resembled a deranged and overloaded pinball machine gone completely haywire, which, however, elegantly demonstrated just how complex the earth’s climate system really is, and therefore how hard it is for scientists to make accurate predictions of future events.
- “Garbage in, gospel out” was Karen Clark’s variation on an old theme, when the pioneer of hurricane models explained that “cat models are guides.” Their findings are only as good as the data that is analyzed, which is frequently based only on historical events. Models need to be “stress tested” to take into account new possibilities.
- Professor Peter Bofinger’s cogent analysis of the credit crisis with the observation that most of the financial world had “no experience and insufficient data to analyze what they were buying in the form of collateralized debt instruments (CDO) and asset backed securities (ABS).” Instead they relied on the rating agencies. The onslaught of anonymous debt instruments that promised high short-term returns created a crisis that will take a long time to resolve.
Did John McCain really propose a NAFTA for Europe? The presumptive Republican presidential candidate said as much in a speech to the World Affairs Council. As reported by Reuters, he said the U.S. should build on the North American Free Trade Agreement by negotiating a new free trade deal with the 27 nations of the European Union.
McCain described himself as “an unashamed and unabashed defender of NAFTA,” adding that he continues to support free trade agreements, while his potential opponents have expressed reservations on the subject. “In fact, it would be interesting,” he added, “to have a free trade agreement between ourselves and the European Union. They are one of the largest economic blocs in the world, if not the largest. I think to head a free trade agreement with the European Union would be a great thing to happen,” McCain told reporters on board a plane bound for his next campaign event in Monterey, Calif.
According to the CIA Factbook (updated March 20, 2008), the EU’s population is over 490 million. Its GDP in terms of purchasing power parity exceeds $14 trillion, slightly higher than the U.S., and more than 67 percent of its labor force works in service industries. McCain noted: “Some of their environmental standards and labor standards are higher than ours, not lower. So it would be very interesting to see how … the opponents of free trade agreements in general would react to that.”
The Unites States and the EU already have low tariffs on most of the manufactured goods that cross the Atlantic, and recently began an initiative aimed at eliminating regulatory barriers that impede commerce. Some members of Congress have already called for a free trade agreement in services that would reduce or eliminate barriers to trade and investment in areas such as banking, insurance and telecommunications.
Lloyd’s pre-tax profit of $7.622 billion for 2007 exceeded the record results — $7.26 billion — of 2006. Gross written premiums were down slightly at $32.346 billion from $32.454 billion in 2006. Forty-four percent of Lloyd’s business came from the United States and Canada, with 24 percent from the U.K., 14 percent from Europe and 7 percent from Asia/Pacific and South America.
Lloyd’s insures a valuable nose for $7.8 million. While the average nose may be worth considerably less, if in the wine business, being able to “taste/smell” the wine is vitally important. Tasting, which is essential to guarantee the constant quality of the wine, involves as much smelling as drinking.
So, when Ilja Gort, the Dutch owner of Chateau de la Garde in Bordeaux and producer of Tulipe Wines, got worried about the impact of losing his sense of smell, he went looking for a solution to the risk.
Despite its zealous pursuit of internal reforms Lloyd’s hasn’t lost its appetite for writing coverage on unusual (and sometimes bizarre) risks. Working with Allianz Nederland and reinsurance broker Benfield, Lloyd’s created a bespoke policy that covers Gort for the loss of his nose and sense of smell.
On the technical side, Lloyd’s explained: “Whereas the tongue has only five areas of taste, the nose can distinguish millions of different scents.” Jonathan Thomas, lead underwriter at Watkins Syndicate who co-insured the policy with Allianz Nederland, called the coverage “an insurance policy not to be sniffed at, adding that the “nose and sense of smell of a winemaker are as important as the fingers of a chef.”
Lloyd’s pre-tax profit of £3.846 billion ($7.622 billion) for 2007 exceeded the record results — £3.662 billion ($7.26 billion) — of 2006. Gross written premiums were down slightly at £16.366 billion ($32.346 billion) from £16.414 billion ($32.454 billion) in 2006. Forty-four percent of Lloyd’s business came from the United States and Canada, with 24 percent from the U.K., 14 percent from Europe and 7 percent from Asia/Pacific and South America.
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