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Unlovely Rita's Market Meter |
September 24, 2005
By: Morton N. Lane, President
Thefollowing tables update the exhibits from last week’s note “Respondingto Katrina” in light of the potential impact of hurricane Rita on theTexas – Louisiana coast. The message of the markets as of Fridayevening, when exact landfall and strength was unknown, is contained inthese updated tables.
To read the full version of this article with graphs:
 Download the PDF Here |
September 16, 2005
By: Morton N. Lane, President
As
of this writing it has been two and one half weeks since Katrina first
made landfall (in Florida) and two weeks since Louisiana and New
Orleans suffered their landfall and subsequent devastation. And, as of
yet, no one has a definitive estimate of the insured losses that will
be suffered by the insurance and reinsurance industry as a result of
Katrina. The now most widely quoted estimate is by Risk Management
Services (RMS) who released an estimate to their clients on Friday,
September 9th that the total industry losses would be between $40
billion and $60 billion. Shockingly high, but it is not exactly
precise.
To read the full version of this article with graphs:
Download the PDF Here
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Arbor I-Xth Series - Still a Win-Win? |
September 1, 2005
By: Morton Lane, PhD
On
Aug. 19, Swiss Re announced the tenth issue in its Arbor I series.
Interest is currently being solicited and the contract will settle on
Sept. 15, 2005. Strictly, “being solicited” is inaccurate.
Technically, and more accurately, the window is open for investors to
express any interest they have at the offered price. Swiss Re is
agnostic about whether they would want more or less at that price. It
has happened before that Swiss Re has announced a price and received no
bids (Sakura in its sixth take down in September 2004). It may happen
again given that hurricane Katrina may spook investors. However, one
question we raise here is whether Arbor I is a fair deal at the current
price. Given the time of writing it is reasonable to ask the question
in two parts. First was the pre-Katrina price reasonable? Second, how
does Katrina affect the evaluation now (Sept 1)?
To read the full version of this article with graphs:
Download the PDF Here
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A Look at Avalon Re and ILS Pricing at Mid-Year |
September 1, 2005
By: Morton N. Lane, PhD
In
Arthurian legend Avalon was the island paradise in the western seas to
which King Arthur went at his death. In naming its inaugural insurance
linked security (ILS) Avalon, Oil Casualty Insurance Ltd. (OCIL) may
have been trying to invoke the calming effect of a (risk-free?)
paradise reached with this instrument, or it may have been alluding to
(shareholders in) western seas. Then again it may have just been a
colorful first letter of the alphabet for what will be a series of such
ILS. Whatever its descriptive intention, however, Avalon has
transported the world of ILS to a new insurance arena, namely the
securitization of liability risk. Heretofore, ILS have been dominated
by catastrophe bonds, or at the very least short-tailed risk. Avalon
has changed that. It has opened the door to a wider class of
securitization of insurance risk – general liability.
To read the full version of this article with graphs:
Download the PDF Here
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April 30, 2005
By: Morton N. Lane, President and Roger G. Beckwith, Vice President Lane Financial LLC
It
has been a mantra for several years that the insurance and capital
markets will converge. The arguments are too compelling. Capital
markets are looking for uncorrelated risk, “searching for alpha”;
insurance markets are always looking for sources of risk-taking
capital. Insurance risks are, by and large, uncorrelated with the
financial market and, as of this writing, capital markets are searching
for higher rewards (the usual complement of higher risk). This
juxtaposition of sound rationale and contemporary circumstance has
caused a rapid advance in insurance/capital market convergence in the
last twelve months. It is no longer a speculation about if there will
be convergence. It is a situation, as sportscasters like to say, of
“Game On!”
To read the full version of this article with graphs:
Download the PDF Here
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