Can anyone recommend an insurance book with with stories about the lack of discipline?

[LongHaul]

Can anyone recommend an insurance book with with stories about the lack of discipline?

I am looking to read one or a few books that show how insurance companies become undisciplined and take on a lot of risk and go into the ditch.  

Stories about how decisions are made and the psychology around that interest me.

[oscarazocar]

Fatal Risk by Roddy Boyd on AIG and its blowup is excellent and exactly covers the topics you describe.

https://www.amazon.com/Fatal-Risk-Cautionary-Corporate-Suicide/dp/0470889802

[Poor Charlie]

There are several good books on the underwriting issues at Lloyd’s.  They do a good job covering the causes and consequences of poor underwriting discipline.

[Morgan]

8 minutes ago, Poor Charlie said:

There are several good books on the underwriting issues at Lloyd’s.  They do a good job covering the causes and consequences of poor underwriting discipline.

Could you share any book titles about Lloyd's? 

[Poor Charlie]

Quote

Could you share any book titles about Lloyd's? 

Ultimate Risk

On The Brink

Risky Business

[wondering]

There is a book about Prem Watsa's old employer Confederation Life that may be applicable

https://www.amazon.ca/Who-Killed-Confederation-Life-Inside/dp/0771056311/ref=sr_1_1?dchild=1&keywords=confederation+life&qid=1619561317&sr=8-1

[Jurgis]

8 hours ago, Poor Charlie said:

Ultimate Risk

Probably not this one... https://smile.amazon.com/Ultimate-Risk-R-I-S-C-Book-6-ebook/dp/B083BGX9VR/ref=sr_1_1?dchild=1&keywords=ultimate+risk&qid=1619569713&sr=8-1

Quote

Risky Business

Hmm, probably not these either... https://smile.amazon.com/s?k=risky+business&crid=38JRGNCI7UFR1&sprefix=risky+busine%2Caps%2C189&ref=nb_sb_ss_ts-doa-p_3_12

Edited April 28, 2021 by Jurgis

[Cigarbutt]

On 4/27/2021 at 12:26 PM, Poor Charlie said:

Ultimate Risk

On The Brink

Risky Business

i just finished Ultimate Risk. Thank you for the recommendation.

@LongHaul, AFAIK, there is no book about the following story but it seems relevant to your quest: Conseco, a life insurer with an unusually growth-oriented strategy and an unusually ego-centered CEO ended up buying a manufactured housing financing entity in the late 1990s. Mr. Buffett got involved in the bankruptcy proceedings after. As usual, red flags were defined afterwards (by most).

[LongHaul]

Thanks for the replies Poor Charlie and everyone else. 

I remember Conseco well.  The CEO married an exotic dancer for his 6th wife.

https://www.wsj.com/articles/SB107058914336380400

[LongHaul]

Cigarbutt - How was the book Ultimate Risk?

This was a decent link to why insurers fail

https://link.springer.com/article/10.1057/gpp.2008.14

 

 

[Cigarbutt]

4 hours ago, LongHaul said:

 How was the book Ultimate Risk?

This was a decent link to why insurers fail

https://link.springer.com/article/10.1057/gpp.2008.14

 

 

Ultimate Risk is interesting and the author does a good (and balanced) job at describing the events that led to the crisis. But like in the paper you refer to, the main reason for trouble at Lloyd's was growing capacity in a soft market (of course the softness is not appreciated in real time) in the absence of governance safeguards.

You will like the book if you have an unusual interest in insurance (history etc) and Lloyd's evolution over time. The author does discuss the key players but basically it's a story about greed being stronger than controls, in a cyclical fashion. The book helps to understand why certain decisions were made (and not made) and looks into the 'psychology' behind those decisions.

You may like the following also, which has some specific case studies:

Actuarial Review of Insurer Insolvencies and Future Preventions Phase 1 – A Review of Root Causes of Insolvencies (soa.org)

If you read what regulators have been writing about this topic lately, you will find that the idea that cycles have been conquered (with better understanding, risk grading etc etc) has permeated through the markets, an idea which, by itself is not worth very much and may be, in fact, a contrarian indicator.

Going back to Conseco, the manufacturing housing financing crisis of the late 90s shared several common elements with the real estate bu**le that formed in the next decade across the board. Many who have dissected what went wrong at Lloyd's tend to focus on asbestos and pollution developing issues (as "black swan" events) but often forget the root cause(s) that build up over many years.

[LongHaul]

Thanks Cigarbutt!

[Cigarbutt]

^My pleasure.

i saw that you posted about the Robinhood platform and retail investing today and it's interesting to note that for Lloyd's, even if that aspect was neither necessary nor sufficient, the relative democratization of access for Names to supply capital into the Syndicates in the 70s and 80s played a role in the eventual outcome. When things turned out the way they did, the Names were not happy and complex court cases were initiated based on the concept that they had not been sufficiently informed...At least modern-day crowd investors don't have unlimited liability although there seems to be a belief that there is an unlimited ability to print money.