He didn't invest any MONEY into the Insurance company.
He has offered REINSURANCE. Which means he thinks todays premiums are adequate, This dosen't have anything to do with the past hole they've dug.
The soft market was not really the RESULT of chasing the equities market. The two always go hand in hand. It is difficult to claim a chicken-and-egg relationship. After all, the money has to be invested somehere.
The current market is particularly driven by the demands of reinsurers-all of whom faced enormous losses stemming from the terrorist attacks and are charging the insurance companies they insure much higher rates. More than 50% of reinsurance contracts expired on January 1, 2002, the current rates and terms were negotiated during the tumultuous times following September 11 and during the early stages of the military invasion of Afghanistan.
Sept DID NOT cause this cycle. The market started to turn hard at the end of 1999.
The Soft Market was a result of Ins. companies chasing the equitites market.
Another words, they told their sales staff to go out and get as much business as possible, at any price.
Then they took in $100 Million, bought MSFT stock (in 1995) watched it double by 1996, and showed modest losses on the pure insurance side.
Then in 1996, They said drop another 10-20% in prices (we'll ultimately lose 25% on ins. business) collect $300 Million, Buy Microsoft stock again and watch it double.
The bubble (began) bursting end of 1999. The Loss ratio's for Ins business was spiraling which caused under reserving
As far as management, no matter how capable, thats something else
My guesstimate comes from 1) They have been underpriced for the past three years. Probably, running a 180% Loss ratio in the Ins. Bus., but only showing 120%.
They have their ins agents setting the reserve #'s on claims! If these claims reserves are set too high, the agents $50 Million dollar program will be canceled or prices will be increased (during soft market) and the "Managing agency" will not make their 17% commissions.
If they keep the reserves low, the Managing agents program will be renewed for next three-five years.
Of course, sooner or later, you must pay out these claims (which takes upwards of five years to settle all claims)at that time, the reserve numbers turn into Paid numbers and you can't hide it.
Their just now closing out most claims for 1995 & 1996. Their basing their "underreserving" practices (BY their commission agents) on how much those older years ultimately developed out.
The "soft Market only got worse between 1997 and 2001.
If they hit thier statement for $90 Mill through 3rd quarter (ONLY FOR THE YEARS 1997-2000) They've probably got an equal or larger amount still to go.
What Trenwick is saying is even they don't know how much it is.
Check Yahoo News on TWK. This same information was given out by TWK when they announced their $138 3rd quarter Loss!
Every Credit rating agency is down grading on a daily basis, look at news!
Today, it was Moodys downgrade, and they specifically state: "...uncertainties surrounding the valuation of intangibles, the adequacy of LOSS RESERVES."