Our insider begins to doubt his hero Buffett and has new respect for the partying Markels
I’m a bit worried that Warren Buffett is not the savvy investor I thought he was. What’s all this about buying Berkshire Hathaway being a $200bn blunder? We’re all used to him admitting the odd gaffe in his annual letter to shareholders, but that’s a pretty expensive mistake for the Sage of Omaha to be making, even if it was back in 1964. And as for his admission that he should have bought a good insurance company rather than a textile mill, I could have told you that, mate. It doesn’t take a genius to work out that you can make a lot more peddling insurance cover than cushion covers.
The cats get the cream
That said, I’m still with the Sage on the whole issue of cat bonds. They’ve been doing the rounds for a fair few years now; I remember them being all the rage when I was cutting my teeth as a junior broker back in 1998. But I still don’t get them. Why go to all the trouble of setting up a special purpose vehicle, hiring loads of bankers and getting investors involved for something that only pays out if the whole world blows up? Tell you what: pay me the equivalent of what you would to set up a cat bond, and I’ll sort you out with some choice reinsurance coverage.
Now that floats my boat
You probably know all about the Markel International story, and how Markel came over from the States to sort out Terra Nova. If you’re a diehard socialite like me, you’ll be pleased to know that the Markel family are just as good at putting their capital and ingenuity into the tough business of schmoozing. Rumour has it that a couple of years ago, Tony Markel and his brother Gary were sailing around in their rather large yacht when, realising that the Monte Carlo Rendez-Vous was in full swing, they decided to moor up in the harbour for a bit of an impromtu do. Now that’s what I call a creative approach to the reinsurance business.
You often hear people say that (re)insurance executives have short memories, and that this means they are destined to keep repeating the mistakes of the past. Try telling that to Jack Graham, chief executive of ICAT and now Paraline Group. He can recite on cue the names of all eight storms that hit the USA in 2004 and 2005. “We paid out a lot of money in those 15 months,” he said. I’ve often wondered how people with lots of kids remember all their names but I think I’ve worked it out now: heavy capital expenditure clearly helps to lodge certain things in the memory.
Do us a favour …
It’s all go at Lloyd’s these days, isn’t it? If it’s not Brit and Apollo, then it’s Beazley and Hardy. What next, Chaucer and Novae? Oops, no, that one’s been tried already. I have to admit, a bit of M&A at Lloyd’s wouldn’t go amiss: it’d save a lot of running around on the trading floor. Not that I’m out of shape, you understand, but this slip case isn’t getting any lighter.
Nobody in the wings
You’ve got to feel for Joseph Taranto at Everest Re. There he was, all set to put his feet up at the end of the year after a job well done, when Ralph Jones, the bloke he’d lined up to take over, slings his hook. I’d love to know what tempted Ralph away from such a high-powered job, but the old grapevine has been remarkably quiet on that front. If you hear anything, you know where to find me … GR