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Who Has the Net Loss? – Part 1
 More than $40Bn in gross losses incurred
Less than $25Bn in net pre-tax losses reported by known
participants
Where is the rest?
Who Has the Net Loss? – Part 2
Some (but not all) of the "dirty dozen" purchased Per Risk
reinsurance covers without occurrence caps for man-made
losses. This has caused much of their larger policy losses to be
ceded, largely to Lloyd's and other reinsurers.
At least one of these insurers has ceded over $2Bn per company,
notably to London and Bermuda reinsurers.
Lloyd's has reported a gross loss of $8Bn, of which $6Bn is ceded.
Six large publicly-traded reinsurers account for between 1/3 and
1/2 of Lloyd's outward reinsurances, or $2 - $3Bn.
Among these six reinsurers, there are "Super Cat" retrocessions
that further focus the loss within a smaller select group of very
large, very strong companies.
The ultimate net loss is falling disproportionately on the strongest
reinsurers. We expect few, if any, insolvencies or
liquidations as a direct result of September 11 losses.
Who Has the Net Loss? – Part 3
To date, reinsurers have received few claims for Liability, BI and
WC latent injuries.
As a result of this, and some blind hope, we believe these
exposures are still under-reserved by many or most reinsurers.
Some non-public reinsurers outside of the US and UK do not
have to report results and are not admitting to their losses. We
believe this will be more common for Aviation and WC/AD&D
exposures.
French, Swiss, German and other reinsurers can use
"Equalization" reserves to avoid booking losses. We believe that
$3Bn - $5Bn may ultimately be treated this way
Life market reinsurers of WC can discount the claims they have
assumed.
Financial reinsurance contracts are designed to provide a similar
discount. They can and DID transfer economic loss to reinsurers.
They also allowed $5Bn - $10Bn in losses to be deferred by
the ceding companies. These deferred losses will ultimately flow
through results as additional ceded premiums or reduction to
ceding commissions or less of future interest income.
We believe that 3 - 5 large, prominent and publicly-traded
reinsurers have not yet recognized their full losses and will be
forced to do so over the coming quarters. Old-fashioned
underreserving.
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