Three bomb-sniffing dogs at the Philly International airport failed their recertification tests and have been relieved of duty. While laying off security dogs may sound like overkill, even in the new climate of airline security sensitivity, one expert notes that “these dogs are not ornamental. They are there for a purpose. If the purpose is not being satisfied, that’s a serious issue.” There is a “built-in redundancy” at the airport so other screening methods can be used in the meantime until new dogs can be brought in. As for the dogs who failed … Do they just get to go on vacation and relax playing billiards like the pup above? Nope. It’s back to school for them: “TSA spokesman Greg Soule said the agency could not comment on the status of its dogs. He said, however, that the rigorous nature of yearly certification tests means that some of the nation’s 700 TSA-led dog teams deployed in air, marine and mass transportation systems may not pass and must go through a remedial program.”
A scary-to-think-about report was released today from the Sector Risk Research Programme stating that risks that are poorly understood and thus not addressed properly by the commercial insurance sector could “prompt a new phase of the financial crisis.” More specifically, the report states: “Parallels can be drawn between large property and casualty insurance institutions today lacking the ability to fully understand changing risk exposures and more publicised past failures of financial institutions to understand risks assumed. While loss impacts naturally lag economic changes by several years, turmoil in commercial insurance is expected as a latter phase of the financial crisis.” Jeez. Let’s hope not. (via Risk & Insurance)
The 4th quarter of 2009 set a record for cat bond issuance volume. “More companies have put their toes back in the water after a slow start in 2009,” said Robert Stone, director with the RMS dedicated ILS team, RiskMarkets.
This is a little dated at this point, but I read it over my holiday break and was just reminded how much I enjoyed Vanity Fair‘s extensive look at Goldman Sachs. The article breaks down the disconnect between “the way Goldman Sachs sees itself (they’re the smartest) and the way everyone else sees Goldman (they’re the smartest, greediest, and most dangerous).” It seems like the further we get away from September 15, 2008, the more interesting the stories become about what actually happened between Wall Street and Washington during the market meltdown, and Bethany Mclean of Vanity Fair peels back a few more revealing layers of the onion here. They also devised this sweet chart illustrating that “Goldman’s influence is ubiquitous in the highest echelons of global political power.” That sure is a ton of former Goldman employees in a ton of the world’s most influential financial positions.
Speaking of political power over the financial system … David Leonhardt is asking “If the Fed Missed This Bubble, Will It See a New One?” in the New York Times. “The fact that Mr. Bernanke and other regulators still have not explained why they failed to recognize the last bubble is the weakest link in the Fed’s push for more power. It raises the question: Why should Congress, or anyone else, have faith that future Fed officials will recognize the next bubble?” Fair question, it would seem.
The catastrophe bond market saw a very slow recovery (if we can call it that) in the beginning of this year, with the number of bonds issued down 33% year over year. But the fourth quarter is looking much more promising, according to a report from Guy Carpenter.
The report, “Cat Bond Update: Third Quarter 2009,” says that various trends and activity within the cat bond market could result in a total of between $3 billion and $4 billion worth of issuance in 2009. Also encouraging is the report’s statement that new risk capital issued in the third quarter of 2009 rose 28.8% compared with the same quarter of 2008.
Though the cat bond market is still severely behind its 2007 performance, the conclusion of the fourth quarter of this year may see 2009 catch up to 2008 in terms of issuance.
David Priebe, chairman of global client development for Guy Carpenter suggests both caution and optimism with views of the cat bond market:
Given the increase in risk capital and the performance of the two bonds issued in the third quarter — both in terms of pricing and size — a fourth quarter that would account for more than 40 % of the year’s total issuance is not unattainable. [However], redemptions resulting from cat bonds maturing and a fairly light Atlantic hurricane season should also increase demand for new issuance.
The report offers the following fourth quarter 2009 outlook:
Improvement in global financial market conditions and advances in the insurance-linked securities (ILS) collateral solutions — coupled with a stronger demand for issuance and the increasing capacity of investors — have resulted in a shift in the ILS market relative to the beginning of 2009.
Investors are increasingly focusing on capital deployment and stimulating additional primary issuance, which is contributing to spread tightening.
The consensus estimate for 2009 total issuance remains from $3 billion to $4 billion, implying a fourth quarter issuance rate of $1.2 billion to $2.2 billion.
Eleven more weeks of cat bond market activity will prove this prediction right or wrong.