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Sometimes hurricane is a "good" thing


naboo
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Sad to say, the feeling in the business is there is so much excess capacity right now even a major hurricane won't move the market to better pricing.

 

Any theories as to why there is a perception or feeling of excess capacity?

 

Is it because there is a lot of capital being invested in P&C by investors? Or is it the appreciation of there bond holding due to low interest rates? Or is it that we companies have been unrealistic in reserving for losses?

 

I am thinking the latter.

 

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What makes things interesting is some are suggesting that there is a high degree of variability among companies (some have excess capital and others have none) meaning another large catastrophe hit and will likely start to see who has been swimming naked.

 

Berkley says the hard market will happen when CEO's start to fear they do not have enough capital and suddenly begin to cut back on business and raise prices (one of those 'whocoodanode'? moments).

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What makes things interesting is some are suggesting that there is a high degree of variability among companies (some have excess capital and others have none) meaning another large catastrophe hit and will likely start to see who has been swimming naked.

 

Berkley says the hard market will happen when CEO's start to fear they do not have enough capital and suddenly begin to cut back on business and raise prices (one of those 'whocoodanode'? moments).

 

So how does one seek for excess capital?

 

Of course you could use the statuatory ratio as a metric but it's kinda useless if the company is unreserved.

 

BeerBaron

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In the short term, I even doubt if Irene will effect the stock price negatively.  Almost every Fairfax shareholder knows that their elephant gun is loaded for a hard market.  Fairfax is also no longer tied to the US exchanges where a typical hedge fund would short the entire sector.

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