Thank you Mr. Roberts!

I was sad to hear about the recent passing of Burton Roberts who was purportedly the model for the judge in Thomas Wolfe’s “The Bonfire of the Vanities.” My sadness, however, was on a more personal note – Mr. Roberts is probably the reason I ended up in the insurance industry.

When I was looking for a job in NYC following my graduation from Law School, a friend who had graduated the year before and was an assistant DA in the Manhattan DA's office of the Frank Hogan era, arranged an interview for me. It turned out that the interviewer was the gruff, intimidating Burton Roberts, then a senior assistant to Mr. Hogan. After informing me about the rigors of the position and questioning me at length about my background and aspirations, Mr. Roberts informed me: “Young man, you seem like a smart, pleasant person, but you are far too nice to be working in the district attorney’s office.” It was not presented as a put-down, but merely an honest assessment of his view. After having had several condescending interviews with “white shoe” firms (“We only hire from Harvard or Yale, but I told [so-and-so] I would talk to you, so go ahead.”), I actually left Mr. Roberts’ office feeling a lot better about myself. He listened and then gave what was probably an accurate assessment.

Soon thereafter I accepted a position in the legal department of United States Life Insurance Company, and the rest, as they say, is history. So, thank you Mr. Roberts, for knowing more about me than I did at the time.

Insurance Exchange Update

In February 2010, New York Superintendent James Wrynn convened the first meeting of a Working Group of interested parties from the insurance industry, the investment community and others to consider the revival of an insurance exchange in New York. This Working Group, to which Superintendent Wrynn appointed me as a Special Advisor*, was divided into a number of sub-groups to consider various aspects of the Exchange issue, including: markets, government relations, taxes, operations and technology, capitalization, regulatory oversight and multi-state issues. Each of the various sub-groups met and conferred over the months following the initial Working Group meeting. These deliberations resulted in the presentation at the end of June 2010 of preliminary recommendations of the sub-groups. A copy of this presentation, prepared by the New York Insurance Department, can be accessed on my website at www.pbnylaw.com (on the Insurance Exchange page).

The next phase of this project is the preparation of an action/business plan to be presented for comment to the full Working Group. It is anticipated that an initial draft plan will be available by early Fall 2010.

*Although I am a special advisor to the Insurance Exchange Working Group and its various sub-groups, the views expressed by me at this blog site, my various articles or elsewhere on the Insurance Exchange topic are solely mine, and do not necessarily reflect those of the New York Superintendent of Insurance, the New York Insurance Department, the Exchange Working Group or the various sub-groups.

NEW YORK INSURANCE EXCHANGE: PLAYERS WANTED!

Marsh and McLennan Companies CEO, Brian Duperreault, reportedly told attendees at the recent Insurance Day Summit in Bermuda that the proposal to revive the New York Insurance Exchange would face an “uphill battle” to create a market in current conditions. While this view certainly has some truth to it, and many of his observations about the issues facing the effort to revive the Exchange are well taken, the concern is that these views are preventing engagement in a unique opportunity by many potential insurance and financial participants.

One of the most challenging hurdles being faced by the Exchange working group established by NY Superintendent Wrynn is the “wait and see” attitude of many key players – let’s see what “they” come up with before we decide if it will work for us. Hopefully, Mr. Duperreault is not placing Marsh in this category. Given all the publicity about the revival efforts, and the fact that the Exchange would be a brokerage market, why wouldn’t Marsh – or any major US based brokerage firm -- jump at the opportunity to actively participate in the effort – to help with the design, structure and scope of the Exchange? And why wouldn't any broker, underwriter, manager or investor that utilizes the Lloyd's market be interested in creating a similar market closer to home? Rather than leaving the decisions on the look, feel and structure of the Exchange to others, the time to participate is now while the input has meaning.

Mr. Duperreault reportedly stated, “The last New York Exchange started at absolutely the worst possible time in that market and that didn’t work out too well to say the least.” While it is true that the Exchange opened during a soft market, it was conceived and constructed during a seriously hard market. Now it is being considered during a soft market, but by the time it is constructed and operational it could very well be in a hard market. The lesson is that the exchange cannot and should not be viewed as a product for a moment. It should be viewed as a marketplace for the long haul, with the structure and flexibility to address changing market needs. With enabling legislation already on the books and the New York regulators providing the impetus and support for the revival effort, it would be disappointing indeed if the insurance and financial industry leaders did not take full advantage of the opportunity to support and participate in the initiative.

It is also disappointing when leaders like Mr. Duperreault feel the need to take a gratuitous shot at the experience of the old Exchange. Aside from perpetuating the misconception that the Exchange market failed*, the circumstances are far different today than they were 30 years ago!

What Superintendent Wrynn and his staff need now is insurance and financial industry leadership in helping take advantage of current circumstances to move the Exchange forward. Everyone agrees that there are many challenges in making this happen, but the gain in creating a potentially significant, modern and flexible market should be incentive enough to make it worth the effort.

This effort, however, needs Architects -- not cynics! Builders -- not fabricators! Players -- not spectators!

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*At the time the Exchange’s Board of Governors chose to close the facility there was a significant, well-structured and capitalized group of syndicates willing and able to continue with the Exchange. For more information on the history of the original Exchange, including the Board’s decision to close the facility, see my article “The Once and Future New York Insurance Exchange”, February 2010, at www.pbnylaw.com (on the Insurance Exchange page).

NOTE: Although I am a special advisor to Superintendent Wrynn's Insurance Exchange working Group, the views expressed by me above or elsewhere on this topic are solely mine, and do not necessarily reflect those of the Superintendent, the Insurance Department or the Working Group.

The Once and Future New York Insurance Exchange

Since the idea of re-establishing the exchange surfaced a couple of years ago, I have been repeatedly asked what has changed in the past two decades to make a Lloyds-style insurance exchange workable in the US today when it did not seem to work before? To help the dialogue on these and other questions about reviving the exchange, I wrote an article "The Once and Future New York Insurance Exchange," a copy of which I placed on the insurance exchange page of my website.

I am extremely pleased that Insurance Advocate magazine considered this topic of such interest that it published my article as its cover story in the March 8, 2010 issue, and that it has posted the article on its website at http://www.insurance-advocate.com/ (click on "preview article").

If you have any interest in this topic, I hope you will take a few minutes to read my article and possibly comment on your views about the topic to me.

Insurance Exchange Redux

After a bit of a sabbatical, I am back with a new focus: the revival of an insurance exchange in New York!

In January 2010 New York's Governor Patterson listed in his State-of-the-State message a number of economic initiatives to be pursued by his administration. Among them was a commitment to “rebuild the New York Insurance Exchange.” The Superintendent of Insurance, James Wrynn, has backed up this commitment by establishing a Working Group with several sub-groups to help formulate an action plan for the re-establishment of an insurance exchange in New York.

In February 2010, I was appointed by Superintendent Wrynn as a Special Advisor to the Insurance Department’s insurance exchange Working Group. Because of the interest in reviving the insurance exchange, the numerous requests I have received for materials on the old exchange, and my role as special Advisor to the Working Group, I have added a page to my web site with links to governing documents, articles, studies and publications relating to the original exchange. Click here to go to this new page, which includes links to pdf copies of the constitution and by laws and operating rules of the old exchange taken from my book Exchange: A Guide to an Alternative Insurance Market (NILS Publishing Co. 1987-1990), as well as the operative statute (Article 62 of the New York insurance law) and regulations (NY Regs 89, 89A and 89B) . It is hoped that making this information readily available to all interested parties will assist in the new effort.

Knowing the laws, regulations, rules, procedures and systems of the old exchange, however, is not the same as knowing which of those worked or did not work, and why. For that insight, there is no substitute for having been there; and having been there I plan to comment on a number of these matters as the Working Group moves forward.