Power List – Kings Of The Jungle.

Copyright 2008 Timothy Benn Publishing LimitedAll Rights Reserved Reinsurance Magazine

August 1, 2008 Friday

Pg. 22

2180 words

Power list - Kings of the jungle.

UK

Welcome to the second Reinsurance Magazine Power List 2007.

Before you start going crazy and reaching for the phone, please remember what follows is not science, but pure unadulterated art. It is divisive and probably controversial. There will undoubtedly be omissions, some of which are entirely intentional. Read on for a snapshot of who we believe are setting the pace as frontrunners in our global industry today, and why we think they are so powerful.

1. (5&6) Warren Buffett/Ajit Jain

Chief executive, Berkshire Hathaway/president, National Indemnity

Tricky markets such as today's were made for these two. They have the cash and they know what to do with it. Since last year they've sucked up a 20% quota share with Swiss Re, formed a bond insurance monoliner, and sold a $4bn put option to the good people of Florida. There'll be more deals before this turmoil ends, we wager. Putting these two at the top of the tree in 2008 is easy and a simple victory for the gentle reassertion of financial common sense we are now experiencing.

2. (1) AM Best

Ratings agency

Thought last year's top-rank finish was a gimmicky flash in the pan? So did we until the SEC published its damning report into the other three major ratings agencies it competes with - ouch!

AM Best came very, very late to the banking/credit party; so late, in fact, that the party was already over. Never can sticking to your knitting have paid greater dividends than for the boys from New Jersey.

We must remind you that AM Best is still the only major agency that will rate startups.

This means it has the power to shape how the industry forms new capital - and that is a lot of power for one organisation.

Yeah, you can go fully collateralised if you want, but without a rating how is a startup supposed to attract decent underwriters and regular repeat business? Rightly or wrongly, those newbies who fail to sport the A- badge always beg the slightly bitchy question, "So, why did AM Best turn you down?"

3. (8) Michael O'Halleran

Chairman and chief executive, Aon Re Global

Michael O'Halleran is the boss of the biggest reinsurance broker in the world - therefore making him the most powerful reinsurance broker in the world. Since broker power is increasing year on year, this means he must be more powerful than a year ago. And the fact that Aon Re has such a streamlined management structure makes him pack more power than a super typhoon.

4. (3) Rolf Tolle

Franchise performance director, Lloyd's of London

Another busy year for our Rolf. Oars aloft, he repels marauders to the good ship Lutine, yet still they keep coming. Wave after wave of capitalist convoys try to break through, seeking shelter, succour and access to the best business, but still he stands firm. One hears apocryphal tales of applicants' business plans being given such severe crew cuts that their prospective owners can no longer recognise them! Step up to our winners' rostrum and take a bow Mr Tolle, you deserve it. But remember, it is just going to get harder and harder from here.

5. (-) Greg Case

Chief executive, Aon

Sometimes you only know how good somebody is until you compare them with the competition. Last year we were impressed but felt it was too early to make any pronouncement. Mr Case makes his first appearance on our list in 2008 because we only hear good things about him from Aon employees. We see strategies and structures that are logical and easy to understand, and we see a steadily building share price. In short we see results and positive momentum - two extraordinarily rare commodities - and even rarer in a complex global organisation. It all adds up to bigger market share and more muscle for Aon.

6. (16) Don Kramer

Chief executive and president, Ariel Re

There's an admirable straightforwardness about Mr Kramer. He said he would do it and he did. Pairing up with Atrium was a very good move indeed. They are one of the best shops in the room, have almost no overlap with Ariel and bring instant diversification. The only thing that will cap this is if he can somehow conjure up an IPO that gets his stock trading at a healthy premium to book value - and to its class of 2005 peers. Now that would be a challenge!

7. (-) John Charman

Chief executive, Axis

Almost eight years on, Axis is still motoring and Mr Charman can take an awful lot of credit for that. The Axis underwriters we come across always seem to give the impression that they enjoy high levels of job satisfaction - and just check out that combined ratio. Here's a simple fact that speaks volumes: very few other top executives' contract extension deliberations are front-page news. Not so for Axis' chief executive.

8. (-) Peter Zaffino

Chief executive, Guy Carpenter

In with a bang out of nowhere is the other most powerful reinsurance broker on the planet. The manner of his arrival was something of a shock, but then we remember that shock and awe are key signs of real power. We must never forget that whatever the troubles at its parent, Guy Carp is still packing a massive reinsurance punch, especially in the core US market.

9. (17) Les Rock

Chief underwriting officer, Ironshore

The legend just keeps growing, as does the line of eager brokers stretching down Front Street. We'll wager the Pembroke syndicate will be the fastest growing entity at Lloyd's come 2009.Wherever there are brokers with clients who have capacity or coverage problems, you will find Ironshore taking on risk and playing for big bucks. Welcome to the liberating power of daring to do what others do not.

10. (-) Robert Willumstad

Chief executive, AIG

The chairman may have had to take over the reigns of the company after shareholder activists made life too hard for his predecessor, and, yes, AIG might have had a rotten year of write-downs, but it is still the biggest and best buyer of reinsurance on the planet. And remember, a client in need is a reinsurer's friend indeed. So there's no sense in scrubbing AIG from your Christmas card list just yet. Plain vanilla lines such as mortgage guarantee look a worry, but one senses that one more painful heave and the last of the sub-prime asset poison will be cleared from the system. At these prices, the shares look tempting, and that is a sign that blood should soon be coursing once more through the venerable giant's veins, as opposed to spilling further on the floor.

11. (11) Grahame Chilton

Chief executive, Benfield

Forget about the difficulty in gaining traction for the corporate risks unit, Benfield is still the biggest Cat reinsurance broker on the planet and a great place to work. Chilton has to take the credit for that - he's a charismatic and enthusiastic leader, with the best understanding of the market of any broking chief executive we have met. Startups, Cat bonds and other exotica are all cooked up in the Benfield research labs. We wait in awe for whatever it may come up with next.

12. (12) Dr Nikolaus Von Bomhard

Chairman of the board of management, Munich Re

Less is very often more - compare and contrast with Swiss Re. Restraint and diligence on the capital management front, no nasty asset surprises, no M&A splurge except for the odd bolt-on, sensible capital management, reassuringly dull and solvent, a pretty consistent global offering - what more could anyone wish for? Is it tempting fate to say that 2008's Munich Re is rock solid?

13. (18) Wilhelm Zeller

Chairman of the executive board, Hannover Re

Hannover has had another very solid year, of which its premium share price is a testament. AM Best thinks so too, putting the German giant on positive ratings watch. We hope we are not proved wrong at a later date, but Hannover seems to have been able to play the innovation game without getting burnt. Funky securitisations - yes; toe-curling asset write-downs - no. The most upbeat reinsurance chief executive in the business's stock is most definitely rising.

14. (20) Elliot Richardson

Head of Aon Global Re Fac

As the market softens, we have to put in a word for Fac power, and Aon Re and Mr Richardson are right at the top of the Fac tree. People have been saying the market is more disciplined than in previous soft cycles, and you know we don't buy into that idea here at Reinsurance. We say give it a bit more time, and as soon as the first market cracks, you can bet your bottom dollar it will be this man who knows about it first, ready to help the true market professionals use the amateurs for target practice.

15. (15) Robert Clements

Non-executive chairman, Integro; founder, Ironshore

He may have had a quiet year by his prolific standards, but that doesn't mean he can ever be allowed to drop off our list. Any man who can form billion-dollar startups with just a few phone calls has to have our vote. We're overdue a big loss event or a shock of some sort. If and when it happens, you know who you're gonna call ...

16. (-) Darren Redhead

DE Shaw Re

'Tete rouge' as we hear some of his former peer group in Lloyd's know the man, has been making something of a name for himself in the thinly populated retro world. Loaded up with freshly minted, non-correlating hedge fund dough and swinging a line the size of King Kong's forearm, here's a very big beast at the business end of the reinsurance jungle.

17. (-) Neil Eckert

Chairman, IFEX

In the exchange business, liquidity is everything. The beauty of the IFEX offering is that it takes a product our industry already understands and uses and spins it out into the capital markets - not the other way around. This is why, despite launching later than its rivals, it was able to report traction so much more quickly. There is only room for one catastrophe risk exchange and we're very impressed with IFEX's chances. Instead of beating it the others may soon want to join it and help its customers get on with the business of insuring peak risk. Why give away a vast premium every year when you can hedge your risks using a relatively small pot of margin capital?

18. (13) Charles Davis

Chief executive, Stonepoint Capital

A bit like Bob Clements, Chuck might have had a fairly quiet year by his standards - although a $500m Fiserv software deal wasn't to be sniffed at. We'd still love to know what he's thinking of doing next, and if we can please possibly have a slice of the action.

19. (-) Joe Plumeri

Chief executive, Willis

The HRH deal swings it for us and for the first time makes Willis a genuine critical-mass heavyweight contender in all 50 US states. We like the way Mr Plumeri has unrelentingly assaulted the old-fashioned traditionalist Willis mindset - and we love the company's new London building, too.

20. (4) Jacques Aigrain

Chief executive, Swiss Re

Oh dear. Look what we wrote last year: "Go to Swiss Re's New York office and you will see a whole new side to this venerable reinsurance institution. No stuffy suits, no Gnomic bespectacled ultraconservatives, just hungry execs on the wild frontier. Swiss Re is a progressive outfit straddling the capital and reinsurance markets. It has market power and reinsurance expertise, and it is making the most of it. Far from being the country cousin to Wall Street's big braces brigade, Swiss Re's Capital Markets division is pioneering forms of financial insurance and derivatives that the other guys can only dream of." Talk about giving a man enough rope. The write-downs were tough and the quota share with Berkshire is simply baffling and proof that today, hard cash is king - end of story.

5 Law firms

Edwards Angell Palmer Dodge After the merger with Kendall Freeman, could this be the biggest beast in the jungle?

Barlow Lyde and Gilbert Can any other firm claim to have the insurance business quite so firmly in its sights?

Reynolds Porter Chamberlain Who else could win an award for wordings technology?

Beachcroft Maybe smaller, but perfectly formed nonetheless. We'd certainly like Beachcroft on our side of a London courtroom.

Lovells You can't beat experience and we empathise with the well-worn market view of this firm's insurance practice.

5 Consultants

Ernst and Young Some bright cookies in this jar.

Navigant We like its refreshing ideas and outspokenness.

Pricewaterhouse Coopers Its executive briefings are second to none.

Tillinghast Towers Perrin Calm and methodical - just what you need, really.

KPMG It should win a Nobel Prize for some of its run-off schemes.

Who is notable by their absence vis-a-vis last year?

Dr Ewart Brown Bermudian Premier He may have won an election, but one gets the feeling that the global reinsurance community is ever so silently, ever so diplomatically, calling this man's (considerable) bluff. Who really needs whom more? We shall see.

Charlie Crist Governor of Florida Ditto Mr Crist. The debate has turned 180 degrees. Floridians are now worried they might actually get what they are paying for; in other words, an insolvent state insurer backed by an insolvent Cat fund. And what exactly do you call a promise to pay that isn't backed by hard assets? Hmmm ... better call Buffett and Ajit and do it properly.

Sorry guys, no longer in your posts

David Spiller - Former chief executive Guy Carpenter

Martin Sullivan - Former AIG chief executive.

August 29, 2008