911, reinsurance and the God Clause


At 9:03 a.m. on September 11, 2001, Britt Newhouse stood in the lobby on the 52nd floor of the south tower of the World Trade Center. After United Airlines Flight 175 banked above the harbor behind him, it was pointed at the 50th floor. If not trimmed correctly, an airplane will rise as it accelerates, and the man who had killed and replaced the airplane’s pilot added power until he hit the south tower 24 floors above Newhouse. He doesn’t remember the sound of the impact.

At the time, Newhouse ran Guy Carpenter’s Americas operation. Guy Carpenter brokers reinsurance treaties, which protect insurers when a catastrophe—a hurricane or an earthquake—causes losses on a large number of policies. Reinsurance, in essence, is insurance for insurers.

Consumers don’t tend to know what reinsurance is because it never touches them directly. Reinsurers, massively capitalized and often named after the places where they were founded—Cologne Re, Hannover Re, Munich Re, Swiss Re—make their living thinking about the things that almost never happen and are devastating when they do. But even reinsurers can be surprised. And the insurers who make up their market put them on the hook for everything, for all the risks that stretch the limits of imagination.

This is what the industry casually refers to as the “God clause”: Reinsurers are ultimately responsible for every new thing that God can come up with. i.e. Until they have excluded it, they are liable for it……
As losses grew this decade, year by year, reinsurers have been working to figure out what they can do to make the God clause smaller, to reduce their exposure. They have billions of dollars at stake. They like to think that are very good at thinking about the world to come. Others differ.

Interesting article. Read the rest here.

5 comments for “911, reinsurance and the God Clause

  1. September 12, 2011 at 5:39 am

    “…often named after the places where they were founded—Cologne Re, Hannover Re, Munich Re, Swiss Re..”

    I’d always wondered what the ‘Re’ in ‘Swiss Re’ stood for when I looked at the Gerkin. Now I know! 😉

  2. September 12, 2011 at 10:28 am

    Interesting that this one didn’t seem so interesting to people.

    • Bill
      September 12, 2011 at 4:17 pm

      Intrigued by James comment I went and read it.
      Heavy going about a world I didn’t know existed which makes a mockery of all the political terrorism scaremongering of the past ten years!

      Having been in earth for 51 years and counting and lived all of them in a town that builds nuclear submarines,with a fleet of nuclear waste transporters within one of the many docks just along the coast from Sellafield, across the bay from Heysham nuclear plant, all of which are allegedly terrorist ‘targets’ I have yet to be terrified of terrorists.

      What strike me as weird with all terrorists is that they go after the wrong targets.
      Assuming the cave dwelling nutjobs of Alky Ada were/are real and they managed to get the expertise/cash/contact/backing to hijack planes and crash them into a target of opportunity in the land of their enemies why didn’t they go after Bush or congress?

      Same goes for London. They can get a bomb on a bus and set it off so why not a taxi going to Parliament or crash a plane into Parliament or use a boat on the Thames to carry a bomb right up to the building?
      Decapitating the enemy is what the official military try and do so it must be the fastest route to change.

      • September 13, 2011 at 5:25 am

        “…why didn’t they go after Bush or congress?”

        It’s thought that Flight 93’s target was the White House or the Capitol Building.

        Terrorists want terror – they know the value of attacking symbols, rather than just people.

        • Bill
          September 13, 2011 at 9:02 am

          Terrorists don’t want terrified people in my humble they want change. I don’t but the theory that they change is brought about by terrorising oridnary people.
          Ordinary people have no influence on the rulers a this has proved every day of its existence.

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