BD-Basiliensis

for whom the bell tolls

série:	Assurance/Réassurance
éditeur:	Mandarin
auteur:	Mantle Jonathan
classement:	biblio334A
année:	1993
format:	broché
état:	TBE/N
valeur:	5 €
critère:	*
remarques:	English book for whom the bell tolls the scandalous inside story of the Lloyd's crisis, the lesson of Lloyd's of London contents: 1/ an empire within iself 2/ A1 at Lloyd's 3/ the broker barons and the Fisher report 4/ profits without honour 5/ the heralds of free enterprise 6/ the killing of mr. Clean 7/ into the spiral 8/ nightmare on Lime Street 9/ for whom the bell tolls comments under point 3: the broker barons espc. the Howden gang of four being: - Kenneth Grob surnamed Grobfather - Ron Comery, surnamed Mr. Commonry - the other two being their associates Page and Carpenter + as an accomplice: Ian Posgate surnamed Goldfinger who was an underwriter at Howden (Underwriting) Ltd the gang of four had created in Geneva the reinsurance company Southern International Re (under Panamanian name) with their own bank: la Banque du Rhône et de la Tamise the three big active underwriters accused of fraud were: Green, Posgate and Cameron-Webb n.b. the Cameron-Webb underwriting organisation had prospered mightily under the umbrella of the broker baron J.-H. Minet, it was so important tohave "PCW 918" syndicate on their slips that brokers would sometimes queue for days on the little benches around the great Cameron-Webb box >> a good book, a very inside story but sometimes not so easy to follow, espc. among syndicates, names, agents, members, etc find below an extract of the American investors' lawsuit against Loyds's of London dated October 21th, 1991: generally, Lloyd's names are investors in Lloyd's sponsored syndicates that write insurance and reinsurance for aviation, maritime, transportation, liability and other risks; the syndicates operate for a calendar year, the names are recruited annually by members agents who are approved and regulated by Lloyd's, the syndicates are managed by management agents who are also approved and regulated by Lloyd's; Lloyd's names generally have unlimited liability for their shares of syndicate losses, the plaintiffs, like all Lloyd's names, have pledged cash, letter of credits, bank guarantees and other form of collateral with Lloyd's to secure their losses; the plaintiffs have been notified that their personal losses for 1988, 1989 and 1990 syndicates already exceed US $ 9 million, their personal losses for those years, earlier open years, and 1991 could be far greater (situation 1991), the suit charges that investments for each year in Lloyd's syndicates are "securities" under the Security Act of 1933 that require registration with the SEC in addition, in charging anti-fraud violations under section 12 of the 1933 Act and SEC rule, the suit alleges that Lloyd's, the members agents that have actively recruited American investors and other defendants have actively downplayed the practical import of the Names' unlimited liability, while misrepresenting of failing to disclose serious risks in plaintiffs' syndicate investment these include denying plaintiffs participation in profitable syndicates (called baby syndicates), inadequate reinsurance coverage, secret and excessive compensation paid to insiders, the so-called "LMX spiral" by which catastrophic risks reinsured by a particular syndicate were transferred back to that syndicate (pass the parcel) without the knowledge of the member names (while the syndicate was paying exorbitant commissions for the placement of this inefffective and detrimental reinsurance), the secret withdrawal of 80% of one syndicate's capital by Lloyd's resulting in massive losses to its member Names and secret assumption by syndicates of losses earlier incurred but not reported by other syndicates under their RICO claims, the plaintiffs seek treble damages and attorneys' fees n.b. RICO stands for Racketeer Influenced Corrupt Organisation, being a provision of the Organised Crime Control Act of 1970 Information Lloyd's of London, generally known simply as Lloyd's, is an insurance market located in London unlike most of its competitors in the industry, it is not an insurance company, rather, Lloyd's is a corporate body governed by the Lloyd's Act 1871 and subsequent Acts of Parliament, it operates as a partially-mutualised marketplace within which multiple financial backers, grouped in syndicates, come together to pool and spread risk, these underwriters, or "members", are a collection of both corporations and private individuals, the latter being traditionally known as "Names" the business underwritten at Lloyd's is predominantly general insurance and reinsurance although a small number of syndicates write term life assurance, the market has its roots in marine insurance and was founded by Edward Lloyd at his coffee house on Tower Street in around 1686, today, it has a dedicated building on Lime Street in the City of London financial district which was opened in 1986, its motto is Fidentia, Latin for "confidence" and it is closely associated with the Latin phrase uberrima fides, or "utmost good faith"] In 2017 there were 85 syndicates managed by 56 managing agencies that collectively wrote £33.6 billion of gross premiums (up from £29.9bn in 2016) on business placed by 287 approved brokers, fifty per cent of premiums emanated from North America and 29 per cent from Europe, direct insurance represented 68 per cent of the policies written, mainly covering property and liability ("casualty"), while the remaining 32 per cent was reinsurance, the market reported a pre-tax loss of £2bn and a combined ratio result of 114 per cent for 2017 (up from 97.7 per cent in 2016, which represented a £2.1bn profit) in the late 1980s and early to mid-1990s, Lloyd's went through perhaps the most traumatic period in its history, unexpectedly large legal awards in US courts for punitive damages led to large claims, especially on APH (asbestos, pollution and health hazard) policies, some dating as far back as the 1940s, many of these policies were open peril policies, meaning that they covered any claim not excluded, other policies (called standard or broad), only cover damage from listed perils such as fire the classic example of "long-tail" insurance risks is asbestosis/mesothelioma claims under employers' liability or workers' compensation policies, an employee at an industrial plant may have been exposed to asbestos in the 1960s, fallen ill twenty years later and claimed compensation from his former employer in the 1990s, the employer would report a claim to the insurance company that wrote the policy in the 1960s, however, because the insurer did not fully understand the nature of the future risk back in the 1960s, it and its reinsurers would not have properly reserved for it, in the case of Lloyd's, this resulted in the bankruptcy of thousands of individual investors who indemnified general liability insurance written from the 1940s to the mid-1970s for companies with exposure to asbestosis claims in the 1980s, Lloyd's was also accused of fraud by several American states and external Names among the more high-profile accusations, it was alleged that Lloyd's withheld its knowledge of asbestosis and pollution claims until it could recruit more investors to take on these liabilities which were unknown to investors prior to investment, meanwhile, enforcement officials in eleven US states charged Lloyd's and some of its associates with various offences such as fraud and selling unregistered securities since claims can take time to be reported and then paid, the profit or loss for each syndicate took time to realise, the practice at Lloyd's was to wait three years (that is, 36 months from the beginning of the year in which the business was written) before "closing" the year for accounting purposes and declaring a result; to calculate the profit or loss, reserves were set aside for future claims payments, for claims that had already been notified but not yet paid as well as estimated amounts for claims that had been incurred but not reported (IBNR), this estimation is difficult and can be inaccurate; in particular, liability (long-tail) policies tend to produce claims long after the policies are written the “LMX spiral” – whereby Lloyd’s syndicates reinsured each other rather than laying off risks elsewhere - brought that venerable insurance market close to collapse, the reinsurance contract is almost as old as insurance itself, the insurer cedes part of the premium in return for an agreement to bear losses in excess of an agreed sum, the modern innovation was to reinsure not just a single contract but a package or even the total losses of an underwriting syndicate or an investor, these losses might themselves include claims on similar policies, as such structures proliferated, it became increasingly hard to understand the nature of the underlying risk participants found comfort in two ways: a conventional wisdom told them that these sophisticated arrangements spread risks widely across the market, historical analysis showed that very little had ever been paid out on excess-of-loss policies the spiral began to unwind when Piper Alpha, a North Sea oil rig, caught fire in 1988: 167 lives were lost and the rig was destroyed, the initial charge to Lloyd’s of about $1bn was one of the largest single insurance claims ever made, the claim triggered excess-of-loss policies which triggered other policies: the total of claims across the market was about $16bn the most avid participants in excess-of-loss syndicates discovered that they had, in effect, insured Piper Alpha over and over and over again, this, and analogous events, meant that a few syndicates incurred horrendous losses, the contributions required put in jeopardy the stately homes of England and the Surrey mansions of the nouveaux riches who had been attracted by the social cachet of being a name at Lloyd’s greed mingled with self-delusion, honest incompetence with conscious deception: it was impossible to say which had caused the crisis, Lloyd’s was, in fact, a microcosm of what was happening in other financial markets, if trading was motivated not by differences in attitudes and preferences but by differences in information and understanding, risk would gravitate not to those best able to bear it but to those least able to comprehend it; the ever-expanding scale of business was not a measure of market efficiency, but of inefficiency, the volume of incestuous trading within the market itself far outpaced the volume of business with the outside world, the accumulation of fees as the same risk was passed round and round raised costs to levels the business would ultimately be unable and unwilling to support Nemesis could be delayed, for a time, by lowering the quality of external business accepted, Nemesis could be also delayed, for a time, by expanding the range of investors induced to underwrite Nemesis could be delayed, for a time, by official reassurances, at least half true, that business fundamentals were sound, but again only for a time the structured credit markets of the new millennium have reproduced events at Lloyd’s, there are only a few basic models of financial folly, each generation repeats the experience of its predecessors, not in broad outline but in considerable detail, the Ponzi scheme was the basis of speculative excess in the roaring 1920s and the boisterous 1990s, the financial version of the card game Old Maid brought Lloyd’s to its knees and is replayed in today’s credit markets, the only certainty is that, sooner or later, the party ends, the most costly investment advice of all is the expert assurance that it’s different this time
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