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1996
A Year of Structuring Furiously
Promises, Promises, January 31, 1997. Also Published in Energy Insurance Review, Spring 1997.

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If it's good enough for Warren Buffett...
December 15, 1996.

On November 18, Chuck Quackenbush, the California Insurance Commissioner, announced that Berkshire Hathaway would underwrite an entire layer of the California Earthquake Authority (CEA).  This layer, $1.5 billion XS $7 billion, was originally intended to be the underpinning for the precedent setting California Earthquake Bond.  This bond was seen as a defining moment for the direct entry of capital markets into reinsurance and the subsequent securitization and derivatization of insurance.  It is obviously a great disappointment to Morgan Stanley, the bond underwriter.

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"Arbitraging"
November 26, 1996. Also published in The Risk Financier, May 1997.

Three times in the last ten years, annual aggregate catastrophic losses for the entire US, as measured by PCS, have exceeded $8 billion* (1994, $16 billion; 1992, $27 billion; and 1989, $14 billion).  Prior to 1989 no year’s aggregate exceeded that level.  In 1995, losses approached $7.8 billion. Losses for the first eleven months of 1996 are $6.8 billion.  Actual numbers are illustrated in the graph on the following page.

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Strategy for the Grand National
November 12, 1996.

Introduction of the new National Annual PCS contract (October 7, 1996) makes for some interesting trading opportunities.

Consider the following trade:

Sell the 1997 National Annual 80/100 call spread at 9.0 points
Buy the 1997 Western Annual 80/100 call spread for 2.1 points
Buy the 1997 Eastern Third Quarter 80/100 for 2.5 points
    for a credit for the position of 4.4 points.

QUESTION:  Is a 22% RoL enough return for the non-western, non-hurricane quarter U.S. annual aggregate risk?

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