Good point Wally. I think the answer is that the Dept of Ins. in most states,such as our Tarheel version here in NC, is staffed by politicians, lawyers that don’t know anything about insurance and of course, 9-5 bureaucrats, with no “inshonce” backgrounds!
Very good point earlybird. Many of the folks employed by the insurance departments of many of these states have no insurance experience, but are rather political hacks and appointees of other political hacks. The former insurance commissioner of the State of New York during AIG’s collapse comes to mind. He oversaw the worst collapse of not just an insuarnce company, but of any company and afterwards used his experience as insurance commissioner on his resume to run for public office. How abuty that for chuptza?
Don’t know if any of you watch American Greed on CNBC, but Alexander Chutfield Burns looks like a good subject for an upcoming show.
You guys all make great points. Until the States pay the going price for public servants who have the knowledge, experience and backbone to police their own kind we will have inept and impotent bureaucrats. Why would someone like us do this thankless and unappreciated job for the money the States are willing to pay. I would love to go after these guys and clean up our industry, but who is then going to support my family!
Maybe the Insurance Departments should start looking in this forum for some appointees… We may not all agree on everything or nothing, but at least we know the industry.
The funny thing is that when the sale happened, most everyone in Texas thought Southport got taken because of Dallas National’s track record with the Texas Department of Insurance and deteriorating financial condition. Guess not.
Looks like Texas did pass the hot potato to Southport: See the DNIC report on page 18 of this NAIC study-http://www.naic.org/documents/committees_c_wctf_related_150819_lg_deduct_policy_role_in_failures.pdf
my DOI has people who worked in the industry before coming to work for the state. some of the political hires are clueless, but those of us doing the work know our way around insurance.
don’t forget the AIG thing was not the insurance part failure. the problem was in the unregulated part of AIG.
The collapse of AIG may have been caused by the unregulated part of AIG, but absent the $182 billion bailout I assume much of it would have gone belly up. And perhaps that part was unregulated by the insurance regulators, but should it have been unregulated? It was insurance, wasn’t it? Insurance against bonds failing, right? Why would an insurance regulator have no interest in that?
Right on Dave. It was “insuring” the credit default swaps that made AIG fail. Read the Mike Lewis book, The Big Short, and it can be seen that the insurance covering those fraudulent financial products caused AIG to fail. The AIG top management folks knew what was going into those shoddy loan packages.
It is not the “incompetence” of insurance regulators that should be looked to in regards this debacle, so much as the fact that in many states the staff and budgets of insurance regulators are not what they once were. I know here in Illinois, experience people have retired from DOI or just left when the stress got to be too much, never to be replaced. Those who remain, with the best of intentions, are overwhelmed just trying to keep up with routine matters. In Illinois, at least, I am told this was a deliberate strategy, hatched years ago by then Governor Blagojevich, with the approval of insurers. I am told there was a meeting, years ago, in the office of the then-Senate President, Emil Jones, where representatives of insurers were asked about the winnowing and withering of the department, and they all enthusiastically signed on.
I suspect something similar has happened in other states as well.
Edward…. Of course the carriers especially in IL want less regulation. Workers Comp Reform seemingly screwed the small business man. Used to find several Bidders for Mono Line comp under $5000 premium. Now, its all pool business. I would tend to think small business in Il would be for less regulation too. The constant approval of Comp Benefits on questionable claims is insane…
Hindsight is 20/20. If everyone knows about accidents beforehand then there would never be any accidents. The Tom Cruise movie Minority Report comes to mind. On the other hand, if you are sending out first time driver into the Highway with no seat belt, no instructor, and shoddy brakes then expect no accidents then that is another story. Maybe the chap was clever enough to bypass the initial set of regulators. He seems like a modern day con-artist to me. And everyone thinks that he/she would never get duped!
A 23 year old punk with no insurance experience and a history of some shady deals. A 10 minute interview with an experienced insurance person would have probably exposed the fraud before it started. But a political appointee with little if any insurance experience was easy to bamboozle. 20/20 had little to do with this.
Insurance regulation is stuck in the era of the early 20th century-they still want to physically look at underwriting and claims files and have a long hardcopy set of financials prepared that are set along NAIC guidelines from years and years ago. And the process of filing and approving hundreds ofthousands of rate filings state by state by thousands of carriers does little to add value or protect the consumer. So stuff like this happens from time to time.
And its not really the regulators-the bulk of the laws on the books dealing with insurance are old and don’t reflect today. Maybe the NAIC can help facilitate change?
Did this fund actually have any outside investors of any size? Or was it more that he did his conglomerating – if that’s the proper conjugation – using intercompany notes and overvalued affiliate equity interests? E.g. “my” cat is worth $2 billion and “your” dog is worth $3 billion, so we’ll merge and now we have a $5 billion company. As a side note, on one US Based hedge fund fraud I’m working on, they had only one offshore investment: a Bermuda-based life insurance company. While this company was less than 10% of the assets, the defendants ran almost half of the fraudulent transactions through it.
I’m a fund fraud guy, not an insurance fraud guy, but I found Southport a very interesting read. Did this fund actually have any outside investors of any size? Or was it more that Mr. Burns did his conglomerating – if that’s the proper conjugation – using mostly intercompany notes and overvalued intercompany equity interests? E.g. “my” cat is worth $2 billion and “your” dog is worth $3 billion, so we’ll merge and now we have a $5 billion company. As a side note, on one US Based hedge fund fraud I’m working on, they had only one offshore investment: a Bermuda-based life insurance company. While this company was less than 10% of the assets, the defendants ran almost half of the fraudulent transactions through it.
No outside investors. Just combining a bunch of insolvent companies and bringing them back to solvency by saying that the “dog” was now worth $1 billion.
Why is it that insurers can be fined for having the wrong font on their policies, and this guy is allowed to buy, own and operate insurance companies?
Good point Wally. I think the answer is that the Dept of Ins. in most states,such as our Tarheel version here in NC, is staffed by politicians, lawyers that don’t know anything about insurance and of course, 9-5 bureaucrats, with no “inshonce” backgrounds!
Very good point earlybird. Many of the folks employed by the insurance departments of many of these states have no insurance experience, but are rather political hacks and appointees of other political hacks. The former insurance commissioner of the State of New York during AIG’s collapse comes to mind. He oversaw the worst collapse of not just an insuarnce company, but of any company and afterwards used his experience as insurance commissioner on his resume to run for public office. How abuty that for chuptza?
Don’t know if any of you watch American Greed on CNBC, but Alexander Chutfield Burns looks like a good subject for an upcoming show.
You guys all make great points. Until the States pay the going price for public servants who have the knowledge, experience and backbone to police their own kind we will have inept and impotent bureaucrats. Why would someone like us do this thankless and unappreciated job for the money the States are willing to pay. I would love to go after these guys and clean up our industry, but who is then going to support my family!
Maybe the Insurance Departments should start looking in this forum for some appointees… We may not all agree on everything or nothing, but at least we know the industry.
And we know a crook when we see one. This punk sounded like a crook from the get-go. Something the incompetent regulators could not see.
The funny thing is that when the sale happened, most everyone in Texas thought Southport got taken because of Dallas National’s track record with the Texas Department of Insurance and deteriorating financial condition. Guess not.
Looks like Texas did pass the hot potato to Southport: See the DNIC report on page 18 of this NAIC study-http://www.naic.org/documents/committees_c_wctf_related_150819_lg_deduct_policy_role_in_failures.pdf
Guess it is now Delaware’s problem.
my DOI has people who worked in the industry before coming to work for the state. some of the political hires are clueless, but those of us doing the work know our way around insurance.
don’t forget the AIG thing was not the insurance part failure. the problem was in the unregulated part of AIG.
The collapse of AIG may have been caused by the unregulated part of AIG, but absent the $182 billion bailout I assume much of it would have gone belly up. And perhaps that part was unregulated by the insurance regulators, but should it have been unregulated? It was insurance, wasn’t it? Insurance against bonds failing, right? Why would an insurance regulator have no interest in that?
Right on Dave. It was “insuring” the credit default swaps that made AIG fail. Read the Mike Lewis book, The Big Short, and it can be seen that the insurance covering those fraudulent financial products caused AIG to fail. The AIG top management folks knew what was going into those shoddy loan packages.
It is not the “incompetence” of insurance regulators that should be looked to in regards this debacle, so much as the fact that in many states the staff and budgets of insurance regulators are not what they once were. I know here in Illinois, experience people have retired from DOI or just left when the stress got to be too much, never to be replaced. Those who remain, with the best of intentions, are overwhelmed just trying to keep up with routine matters. In Illinois, at least, I am told this was a deliberate strategy, hatched years ago by then Governor Blagojevich, with the approval of insurers. I am told there was a meeting, years ago, in the office of the then-Senate President, Emil Jones, where representatives of insurers were asked about the winnowing and withering of the department, and they all enthusiastically signed on.
I suspect something similar has happened in other states as well.
Edward…. Of course the carriers especially in IL want less regulation. Workers Comp Reform seemingly screwed the small business man. Used to find several Bidders for Mono Line comp under $5000 premium. Now, its all pool business. I would tend to think small business in Il would be for less regulation too. The constant approval of Comp Benefits on questionable claims is insane…
Hindsight is 20/20. If everyone knows about accidents beforehand then there would never be any accidents. The Tom Cruise movie Minority Report comes to mind. On the other hand, if you are sending out first time driver into the Highway with no seat belt, no instructor, and shoddy brakes then expect no accidents then that is another story. Maybe the chap was clever enough to bypass the initial set of regulators. He seems like a modern day con-artist to me. And everyone thinks that he/she would never get duped!
A 23 year old punk with no insurance experience and a history of some shady deals. A 10 minute interview with an experienced insurance person would have probably exposed the fraud before it started. But a political appointee with little if any insurance experience was easy to bamboozle. 20/20 had little to do with this.
Insurance regulation is stuck in the era of the early 20th century-they still want to physically look at underwriting and claims files and have a long hardcopy set of financials prepared that are set along NAIC guidelines from years and years ago. And the process of filing and approving hundreds ofthousands of rate filings state by state by thousands of carriers does little to add value or protect the consumer. So stuff like this happens from time to time.
And its not really the regulators-the bulk of the laws on the books dealing with insurance are old and don’t reflect today. Maybe the NAIC can help facilitate change?
Did this fund actually have any outside investors of any size? Or was it more that he did his conglomerating – if that’s the proper conjugation – using intercompany notes and overvalued affiliate equity interests? E.g. “my” cat is worth $2 billion and “your” dog is worth $3 billion, so we’ll merge and now we have a $5 billion company. As a side note, on one US Based hedge fund fraud I’m working on, they had only one offshore investment: a Bermuda-based life insurance company. While this company was less than 10% of the assets, the defendants ran almost half of the fraudulent transactions through it.
I’m a fund fraud guy, not an insurance fraud guy, but I found Southport a very interesting read. Did this fund actually have any outside investors of any size? Or was it more that Mr. Burns did his conglomerating – if that’s the proper conjugation – using mostly intercompany notes and overvalued intercompany equity interests? E.g. “my” cat is worth $2 billion and “your” dog is worth $3 billion, so we’ll merge and now we have a $5 billion company. As a side note, on one US Based hedge fund fraud I’m working on, they had only one offshore investment: a Bermuda-based life insurance company. While this company was less than 10% of the assets, the defendants ran almost half of the fraudulent transactions through it.
No outside investors. Just combining a bunch of insolvent companies and bringing them back to solvency by saying that the “dog” was now worth $1 billion.