Spitzer and SEC question Lloyd's

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Spitzer and SEC question Lloyd's
By Jason Nisse
Published: 21 August 2005

Eliot Spitzer, the New York State Attorney General, and the US financial regulator, the Securities & Exchange Commission, have dragged Lloyd's of London into their investigation into insurance market abuses in America.

Investigators from the SEC and the Attorney General's office contacted Lloyd's last month with a list of questions, The Independent on Sunday has learnt. These relate to a practice called "finite reinsurance", a system of complex long-term transactions which the regulators contend may have been used to make insurance companies' accounts look in better shape than they were.

The investigation has centred on particular contracts between American International Group, one of the US's largest insurers, and General Re, a subsidiary of Warren Buffett's Berkshire Hathaway investment giant. Berkshire admitted earlier this month that it was the target of the investigation and that the Financial Services Authority in London was also involved.

The probe has led to the departure of Milan Vukelic, the chief executive of a Berkshire subsidiary with links to the Lloyd's market, and to questions being asked about the reputation of Mr Buffett, one of America's most respected businessmen.

http://news.independent.co.uk/business/news/article307267.ece

GO SPITZER! My hero.

[Burried News]

1. Oh the Crown isn't going to like this.

That's a shame. Never go against the family - and the family ain't always an Italian thing.

From Wikipedia:
Members

For most of Lloyd's history, rich individuals ("Names") backed policies written at Lloyd's with all of their personal wealth (unlimited liability). Since 1994, Lloyd's has allowed corporate members into the market, with limited liability. The losses in the early 1990s devastated the finances of many Names (1,500 out of 34,000 Names declared bankruptcy) and scared away others. Today, Names provide only 20% of capacity at Lloyd's, with corporations accounting for the rest. No new Names with unlimited liability are admitted, and the importance of individual Names will continue to decline as they slowly withdraw or die off.


Syndicates

Members do not write insurance policies directly, but through syndicates. There are currently 66 syndicates competing against each other for business. Some syndicates specialize in niche insurance areas (such as aviation, marine hull, etc.) while others are generalists. Syndicates employ underwriters who decide which policies and at what prices the syndicate should write. A syndicate is similar to, but not, a partnership, differing in that each participant typically underwrites, and is therefore on risk for, differing amounts.


Managing agents

Managing agents sponsor and manage syndicates. They canvas members for commitments of capacity, create the syndicate, hire underwriters, and oversee all of the syndicate's activities. Managing agents may run more than one syndicate.


Lloyd's brokers

Outsiders, whether individuals or other insurance companies, cannot do business directly with Lloyd's syndicates. They must hire Lloyd's brokers, who are the only customer-facing companies at Lloyd's. Lloyd's brokers shop customers' policies among the syndicates, trying to obtain the best prices and terms.

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2. Whether there be a surplus or a famine the Merchants of grain

always have full stomachs.

I wonder how a war in Iraq affects the business.

Making money from other peoples' tragedies.

Put rubber gloves on when you handle this Elliot.

[AX10]

3. Thanks

[DoYouEverWonder]

4. Reinsurance is one tangled and complex world

It's an industry that's easy pickings for fraud because there are very few people who even understand it. It will be interesting to see where this goes.

[woosh]

5. This guy is awesome.