Earlier this month, Swiss Re hosted its 2009 economic forum and, as always, had an amazing wealth of data and insight to share. I was just going through the presentation from the event again today while researching a story and was once again taken aback by how well one of the slides illustrated just how unique the 2008 financial meltdown was.
The dates are tough to make out at this resolution, but the point here is the colors. Look at how even other recession years fall into the normal distribution bell curve while 2008, the lone red rectangle, sits nearly by itself alllllllllllll the way off to the left.
Scary stuff.
The data credit got clipped off, but the chart should read “Source: Axa”
Despite yesterday’s passage of Wall Street Reform and Consumer Protection Act (HR 4173) in the House, regulators across the globe are still dragging their feet on financial sector reform. Paul Volcker continues to tell everyone who will listen — and even those who won’t — about the grave need to restructure the industry, but no one is doing anything tangible about it. “Two years after the start of the deepest recession since the 1930s, no U.S. or European authority has put in force a single measure that would transform the financial system, based on data compiled by Bloomberg. No rule- or law-making body is actively considering the automatic dismantling of banks that Volcker told Congress are sheltered by access to an implicit safety net.” Acclaimed economist and Nobel-winner Joseph Stiglitz says Volcker is “spot on” and Robert Creamer makes a similar “if it’s too big to fail, it’s too big to exist” plea over at The Huffington Post. Bankers, for their part, assured Obama today that they are willing to play ball during their visit to the White House. We’ll see.
The IRS has ruled that the captive reinsurance of fronted pools will be treated as insurance going forward. What exactly does that mean? “The ruling says two things … It says that the reinsurance to the (captive) is insurance, and then that the captive — because the only thing it does is insurance — is insurance as well.” Got it?
The New Yorker‘s 12-page feature “The Most Failed State” profiles Somalia’s President Sheikh Sharif Sheikh Ahmed and details the desolate national landscape that has given rise to the pirates that dominate the country’s coastline. (Subscription required) Ahmedou Ould-Abdullah, the U.N.’s special representative to Somalia, offers this bleak analysis: “Somalia is just as bad as it has ever been, perhaps worse. I know that it is politically incorrect to say so, but there can be no humanitarian ’emergency’ that should continue for twenty years — it’s a contradiction in terms.”
Some are concerned that China’s rush to embrace nuclear power in lieu of dirty coal plants could lead builders to cut corners in regards to safety. “China must maintain nuclear safeguards in a national business culture where quality and safety sometimes take a back seat to cost-cutting, profits and outright corruption — as shown by scandals in the food, pharmaceutical and toy industries and by the shoddy construction of schools that collapsed in the Sichuan Province earthquake last year.”
Find an interesting link? Email me any stories, videos or images you come across and would like to see included. Or just follow me on Twitter @RiskMgmt and pass it along that way.
To advance our mission of bringing you all the risk management news that’s fit to print, we will be doing these “Risk Management Links of the Day” posts roughly … you guessed it … every day. Hopefully, it will be a nice blend of things that you need to know and things that are just interesting and you might not have otherwise come across in your daily internet travels.
Shifting through all the news of the day takes some time, of course, so please do send along any interesting news items or off-beat, risk-related stories you come across to me at jwade@rims.org. Enjoy.
In October, our own Emily Holbrook discussed the dangers of text messaging while driving in the Risk Management article “Unsafe at Any Speed.” Well, according to this “Driven to Distraction” piece, it seems that the problem of driving dangers related to phones goes back well before even the cell phone, and has in fact been a controversial topic since the 1960s, when car phone manufacturers used advertisements (like the one above) and other strategies to help encourage users to talk while they drive. “Critics of the [mobile phone] industry argue that its education efforts over the years provided a weak counterbalance to its encouragement of cellphone use by drivers and to its efforts to fight regulations banning the use of cellphones while driving.”
In boneheaded government regulator news: The TSA inadvertently made many of its passenger screening protocols public knowledge when it posted its 93-page operating manual online last Spring. It addition to detailed technical info about x-ray screening and bomb detection, the error revealed 12 countries whose passport holders are automatically given heightened security scrutiny and contained pictures of the credentials used by CIA officials, Congress members and the federal air marshals. “Stewart A. Baker, a former assistant secretary at the Department of Homeland Security, said that the manual will become a textbook for those seeking to penetrate aviation security and that its leaking was serious. ‘It increases the risk that terrorists will find a way through the defenses,’ Baker said. ‘The problem is there are so many different holes that while [the TSA] can fix any one of them by changing procedures and making adjustments in the process . . . they can’t change everything about the way they operate.'” Real Cracker Jack job on this one, TSA.
A federal court ruled that an attorney’s personal emails remain private even if sent from a work computer. Says one of the attorneys involved: “Where someone who uses their company e-mail, whether with the Justice Department or someone else, intends the communication to be confidential and takes reasonable steps to ensure the confidentiality … there is no waiver of the attorney-client privilege.”
Of all the fallout from the September 2008 market collapse, the Bank of America acquisition of Merrill Lynch has been the most controversial. The Atlantic featured the best (and most accessible) article I’ve seen on the topic, detailing the unusual nature of the meetings that BoA’s leadership had with the SEC and the Fed as the merger was being finalized and strongly suggesting that Hank Paulson and Ben Bernanke essentially strong-armed the bank’s CEO Ken Lewis into acquiring Merrill, despite strong reservations about the book-keeping info that was being revealed through due diligence. This piece by Corporate Counsel, however, suggests that BoA did plenty of bullying of its own in forcing the DC officials to pony up more bailout money than they wanted to in order to mollify the bank’s concerns about Merrill’s balance sheet and prevent BoA’s leadership from using it’s last-minute opt-out provision (known as a “material adverse chance” or MAC clause) to cancel the deal before it was finalized. The SEC has been investigating the details of the merger for some time. And on Friday, the watchdog announced that the investigation is being ramped up. Further developments are certainly forthcoming in the month’s ahead. In the meantime, you can also check Corporate Counsel’s exhaustive coverage of the controversy.
An analyst with Celent sees rough times ahead for the P/C industry. Says Mike Fitzgerald: “The negative rating outlook issued by Fitch Ratings [Wednesday] for U.S. property and casualty is warranted and, in addition to the pricing and demand concerns mentioned in the press release, there are loss and expense pressures which should dampen expectations.”
Find an interesting link? Email me any stories, videos or images you come across and would like to see included. Or just follow me on Twitter @RiskMgmt and pass it along that way.
In Risk Management‘s December issue this year, we are including a “Decade of Risk” feature that will recap how the events of the last ten years have seen — or more accurately, forced — a rapid evolution of the risk management.
We hope this will not only add some good perspective on just how far the discipline has come, but also provide a good complement to our annual “Year in Risk” feature, which is also being presented in new way this year that I think you will all enjoy. We wanted to do something a little different and hope you like it as much as we do.
Predictably, however, we’re not the only people who realized that 2010 will soon be upon us and that this makes a good time to look back. Newsweek, for instance, created the really good video I’ve included below, which will “give you every thing you need to know about the first decade of the 21st century.”
Like us, they also recognize that they know they didn’t have the time nor the memory to include every thing important that happened in the past ten years. And like them, we ask that you readers write in to let us know what other things we should have included — or simply to share your thoughts on those things that we do discuss.
So please do look out for our “Decade of Risk” and “Year in Risk” features in the December issue in a few weeks and please do tell us what you think.
(video via Urlesque’s really great Wrap Up of Wrap Ups, which features a bunch of similar videos like “The History of Music in 5 Minutes” and the fantastic “40 Inspirational Speeches in 2 Minutes.” There probably isn’t a better way to end your day than watching that one.)
