Author: Ross Morton

Reinsurance looked like it was emerging as a significant part of the insurance landscape in Canada and for that matter in North America. Everyone wanted to be either a reinsurer or retrocessionaire. It looked like fun and a way to get relatively low cost premium income. There was no new expansion after 1990 and the best reisnurer had been bought by Swiss Re in 1988 so it was gone already. Look at the list of active reinsurers in 2003 and the volumes of risk they were paid to accept. The number is beyond the most optimistic of visionaries. Cheap prices by reinsurers and low risk tolerance by insurers plus the advent of the slogan “use of capital” all fueled the growth of reinsurers who then found themselves with almost too much business. Consolidation was fast and clean. Zap and you are down to less than half the active reinsurers. Even ERC who was a dynamo in Canada for 5 years ended its run for the gold in 2003 (officially in 2004).

I cannot fathom why such small amounts of reinsurance on so few policies can raise so many questions from some agents and home office employees. Believe me; reinsurance should never be intimidating or enigmatic. One big advantage in Canada is that eh players are few. So few, in fact, that I hope to introduce them all to you in this single article today.

Every year the Munich Re office in Atlanta, Georgia, compiles new business statistics from reinsurers and retrocessionaires throughout North America. In the U.S.A., the list for 1990 shows 26 active reinsurers chasing a ceding company’s excess insurance (over the individual company’s retention). That same market place produced $20 billion less reinsurance sums assured in 1990 than in 1988, ending at $152 billion. There were only 5 fewer active reinsurers in 1991 and the inactive dropouts could be viewed as casualties of a very aggressive market that could not continue to sustain so many corporate entities.

The Canadian numbers pale in comparison but who north of the border ever found comparison flattering? Please tolerate the fact that the Canadian industry numbers will be in U.S. Dollars and, for the lack of a calculator, this poor author is taking the easy way-out. In 1988 the Canuck insurance industry sent nearly $13 billion of new sums assured to reinsurers and the number tumbled in 1990 to just over $10 billion (out of $92 billion for the whole industry). By whatever measure the reinsurance industry in both countries took a beating in market potential. Fortunately it is still ticking and cooperative as ever in trying to help life companies of all sizes manage the mortality risk. (It does other things but I’m a uni-dimensional visionary on a roll)

There are many and sundry excuses for the demise of the market growth but suffice to say the time had come. Cheap, cheaper and cheapest term had taken its toll on in-force blocks. Smoker and non-smoker discrimination extended the feeding frenzy for new products at even lower pricing, culminating in sums assured escalating at a pace that outstripped retention. Along comes the ‘A’ word and fear halts some retention changes. Now we top the early nifty nineties nirvana with financial scrutiny of direct writers until it almost becomes wiser to reduce retention and spread the volatility of risk.

Enough pontification on the unsolvable and back to the hard facts of numbers, the root of our rewarding enterprises. The Canadian reinsurance numbers are split among 11 active reinsurers and pseudo-reinsurers (those with split or multiple functional personas operating as reinsurer, retrocessionaires and/or direct writers.) In reality, the number of players hasn’t altered significantly over the years but it has in actual key players. Many (at lease two) key reinsurers have left the active market and there exists a strong groundswell of opinion they were legends in their own time but I would not want to solicit a quorum on that issue.

Fig. 4 reflects the composition of the Canadian reinsurance world and highlights the diversity of reinsurers who are still active according to the Munich Re study. During the five year study, three reinsurers have shared the honour of being the host with the most new business and, if the study were to be extended backward, they remain the “Big Three” – the loving nickname created over a decade ago by a significant, yet perennial, “Number Four”.

In alphabetical order the Big Three are the Canadian Re, the Mercantile & General Re an the Munich Re. These three companies are all related to large head offices or parents in Europe who have zillions of years of history behind them. The parentage is obvious for two of them and more obtuse for the third. Reversing the order to protect my income, as a retrocessionaire should, the Munich Re is part of the world’s largest reinsurer out of Munich Germany. The M&G (an affectionate acronym coined and perpetuated by the industry) is of English/Scottish lineage with a well known owner in the international sphere – Prudential of England. The third player comes from the clocklike precision of Swiss workmanship under the more global nomenclature of Swiss Re, a leading reinsurer in the markets of the world.

The habitual holders of positions four through eight inclusive are there both by design or the sheer magnitude of the final step to turn the Big Three into the “Big Four” (or five or six). There one must stop or all you have is a cluster of the “Nondescript Eight”. With due respect to the future, I remain fixed on the alphabetic listing of General American, Life Re, Lincoln National, National Re, and St. Lawrence Re. This is a diverse group of companies that refuse to fit a homogeneous description and each has distinct roles to play in prodding and, in time, shaping the reinsurance dimensions in Canada. St. Lawrence grew slowly at first with modest beginnings soon overshadowed buy aggressive and novel marketing innovations that catapulted it into the limelight. Its roots are in Montreal where it retains its license base and corporate head office. Likewise, National Re has its origins in Quebec, yet has played an influential role in both facultative and automatic reinsurance from sea to sea. Both of the foregoing reinsurers are talented users of retrocessionaires throughout the world, spreading the mortality and financial risk.

Lincoln National is one of the earliest licensed reinsurers in the Canadian market. It is part and parcel of the large U.S. Reinsurer out of Fort Wayne, Indiana. The definitive nature of its marketing efforts and positioning has remained ever constant. Life Re (formerly General Re) has had a sporadic involvement in the Canadian market seeking particular market niches that reflects its particular strategy. Their head office is in New York. General American, operating out of St. Louis, Missouri, is both a reinsurer and a retrocessionaire in the Canadian market. In the U.S., it is the second largest writer of new reinsurance volumes. In both its Canadian roles it has been extremely influential in the setting of pricing standards.

The remaining contingent of also–rans is best described as peripheral players who neither set market price nor support the aggressive nuances of the leaders and aspiring leaders of reinsurance.

As the reader’s eye moves to the chart of retrocessionaires (Fig.5), it becomes noticeable that the names become better known while the new sums assured drop quite considerably. Ignoring one mother of all reinsurance deals in 1988, the early noted pattern of the reinsurers is replicated in the retrocessionaires – the market size has dwindled. The real deal makers in this group number only five with volumes dancing through the years without pattern. Three large direct writing companies play an exclusive role as retrocessionaires, while General American actively and directly supports the niche reinsurers. Sun is a big company with a definite professional approach to retro business that some say it learnt from Manulife. In reality, the two were active as reinsurers in old traditional reciprocity deals for a hundred years. The sheer size of these fortresses of financial integrity (it’s annual review time) make them both natural retrocessionaires. Manulife was the first truly active solicitor of retro business on a whole sale basis and leapt to the forefront in the 1980s. Equitable has been somewhat more modest in its overtures to the Canadian reinsurers and, at times, people mistakenly think they are the Canadian Equitable to Kitchener/Waterloo when in reality they are the Equitable Society of America.

Other players come and go in this arena of big cases which is a function of capacity wishes that fluctuate wildly. There are not that many jumbo cases to go around every year and reinsurers are increasingly looking at the financial credibility of the retrocessionaires to ensure the long term support for behemoth policies that require retro.

All the players are front and centre with nothing to hide. Each, I am sure, would give details of their operations should you make a polite request. They are an innovative and gregarious group who only bear close control when food and drink entices unbridled articulation. I am not saying that all of their stories are candidates for a Pulitzer Prize but each is an interesting piece of literature.

I wrote this paper to clarify what I said in numerous speeches at the time. As is often the case when I open my mouth and present a topic to an audience, be it large or small, I get asked to put my opinions or views in writing. Sometimes I forget what I said in the speech and thus the written word comes across as different, Perhaps I should write what I am going to say first but that would take the element of surprise (for both the audience and myself) out of the equation making it all boring.

In the early 1970’s when I was a mere novice to the world of life reinsurance, I was in awe at the purported depth of expertise and business acumen of my superiors. That quickly became a shattered dream when a humungous claim presented itself to several of the more significant reinsurance companies. One day prior to the anniversary of the policy the insured was found murdered in his home in Oklahoma. The spectre of a premature death claim for $15,000,000 (U.S.) was too much of a shock for the executives of the reinsurers.

A hastily called meeting at the Chicago airport resulted in a hastily concocted statement based on incomplete data about the claim. The message implied to the lay reader that the likely cause of death was suicide and thus under the contract no payment was forthcoming. End of story.

The problem was that someone forgot to await all the information and a subsequent note indicated there were two bullets through the man’s head. This case was eventually settled for one half the amount and ahs become a classic case of overreacting in too urgent a fashion. It also showed that reinsurance executives are human and thus prone to at least one error per decade. I hope I do not commit the ‘90’s only error.

Today, as a human being, I want to convey the message that over the past five years the insurance industry has struggled to find the most acceptable method of risk classification, especially for HIV positives. Beyond the actuarial numbers and the increased payment of claims, (Chart 1), I have witnessed the frustrations of applicant, agent, insurer and reinsurers in trying to cope with the issue of testing and confidentiality. The solutions have emerged as the wisdom of the industry discovered fair and equitable alternatives to just declining to insure certain “profile” individuals. “Wisdom is the ability to discover alternatives; there are many ways to reach solutions.” (From a fortune cookie by Far Eastern Cookie Co. Ltd.)

The past decades have been full of many instances of reducing the price of life insurances for the majority of purchasers. Pure life insurance in the form of term coverage has fallen to nearly 30% of the 1970 price, especially for those in their thirties who are non-smokers. The AIDS issue is almost the only example of a medical impairment that reverses the current trend. In the early days of applicants applying for insurance with a history of auto immune disorders the risks were quite often accepted due to the oversight and ignorance of the lay and medical underwriters. As evidence of rather early and thus unexpected claims emerged the industry found itself in a corner surrounded by the realization of mounting claims that surpassed the expected. How to correctly perform the needed risk classification process became everyone’s quest in all parts of the world that had a life insurance industry.

Insurers are able to provide protection because they can predict, with reasonable accuracy, how many individuals in large, fairly homogeneous group die from year to year. On the basis of this predictability, they assign to a given group those people with similar characteristics….mainly age, sex and health. The information provided by the applicant enables the insurance company to decide the level of risk that person represents and thus the group to which he or she belongs.

Like severe coronary artery disease or recurrent metastatic cancers, AIDS and HIV positive individuals presented the industry with a risk that is could not adequately classify and price for at this time. How to fairly perform the risk classification process, with what tools and at what cost became evolving challenge.

In Britain the industry adopted a series of new questions to be answered by the applicant as well as the use of HIV test. An excerpt from the typical application for insurance is as follows:

“1a) Do you belong to any of the following groups:

i) Homosexual men

ii) Bisexual men

iii) Intravenous drug users

iv) Hemophiliacs (although in the UK it was spelt with an “ae”)”

The representative questions were targeted at those groups of individuals who were deemed to be most at risk. A positive answer to any of the questions was considered as enough reason to refuse to provide a contract of insurance. Failure to answer the question ended any change of insurance coverage and failure to disclose the truth invalidated the policy. The questionnaire was required for all policies where the applicant was a “single/divorced/separated male” but only mid size policies on “married/widowed males” and for extremely large amounts on “females”. Coincident with the questions, HIV testing was mandatory in the aforementioned categories for similar varying amounts.

The following is the form of questioning adopted by the Australian Life insurance industry again in tandem with HIV testing similar to the British example. Should a proposed insured fail to answer yes to all of these type questions the insurance company proceeds to question deeper into the individuals lifestyle or just refuses to proceed with the file. As you can read, the question is extensive and is in addition to questions one would judge are similar in context to those included in the North American style of medical history questions. However, this question goes well beyond what is deemed reasonable in North America.

“6 Since 1980, I have not:

i) Worked as, or engaged in sexual activity with a prostitute

ii) Engaged in male-to-male anal sexual intercourse.

Iii) Injected myself, nor been injected, with a drug which was prescribed for myself by a registered medical practitioner.”

All those involved in underwriting in our market have helped construct a fair method of evaluating the risk presented to the industry. Our standard questions have been tested and refined but are all very similar in context and intend. The “AIDS” questions are included in all applications for all ages, sexes, marital status, etc. The questions reflect a universal need to screen all applicants as we would for other medical impairments, hazardous avocation and occupations. In addition the majority of Canadian life insurance companies now use the HIV test in all applicants for an amount of $100,000 or more.

On reflection, it is only five years ago or less that we did explore a more selective method of testing. Trying to categorize people into classes as the British and Australians do was found to be unacceptable to the industry, the agents and the applicants. As the accuracy of the insurance laboratories improved, their prices fell and the methods of collection expanded, thus the universal testing approach gained acceptance.

The chart you would see from any laboratory represents the flow of an HIV antibody test as the industry, with the assistance of the numerous independent laboratories, strive to ensure only the truly positive are faced with a rejection of life insurance due to the test. As an aside, in some U.S. States the serum antibody testing was not allowed and the so-called “surrogate aids testing” became the test of last resort. The poor predictive accuracy of these test (mainly the T Cell test) of around 10% meant that some U.S insurance companies found themselves declining to issue 9 out of 10 positives unjustifiably. To discriminate and try to pick out the true test on the basis of age, sex, marital status, etc. Might have created a field day for lawyers. Repetitive testing had a predictive accuracy of only 33%, so the industry was still faced with inappropriately declining 66% wrongly.

You all know the final chapter. In 1989 states like California allowed antibody testing for life insurance!

In 1989 one could estimate that 300,000 + blood profiles were completed on Canadians applying for life insurance. The blood profiles all included the HIV antibody test as well as the test for up to eighteen additional blood chemistries. The industry was witnessing about 0.05% positive as you could see from any labs monthly reports. In a representative mid size company, they had four positive HIV antibody tests discovered in the latest calendar year. A quick synopsis of each follows:

Case 1

Male, married, age 48

Earned income $200,000+ per year

Excellent medical history

Excellent finances

Applying for $1,000,000 of permanent insurance

Case 2

Male, single, age 38

Earned income $100,000+ per year

Excellent medical history

Excellent finances

Applying for $1,000,000 of Business insurance with 4 partners

Case 3

Male, single, age 33

Earned income $25,000+ per year

Admitted homosexual with history of numerous S.T.D.

Admitted to having HIV antibody test several times

Applying for $50,000

Case 4

Female, married, age 30

New arrival to Canada

Spousal rider $25,000

The last example also points out a practice of a growing number of companies. Individuals of all ages, sex and martial status who have not been a resident of Canada for one year or more are being tested.

The chain of custody for the blood sample, the pre-notification and authorization of the individual and the confidentiality of the record has improved ten fold in the past five years. The applicant now knows they are being tested. The sealed sample follows prescribed handling that strives to avoid loss, replacement and error. The test results, if positive, is communicated directly and under the strictest of control to either the chief underwriting officer or medical director of the life insurance company. That individual then takes on the responsibility of communicating the information that the case has been rejected by the company. This communiqué is forwarded to the applicant in the form of a letter that states that the application for insurance will not be proceeded with do to abnormal findings on one of the tests performed on the applicant. The company offers to send the complete results of all tests to the attending physician for review and discussion with the applicant. If permission is granted the information is sent to the doctor of choice with a recommendation to the doctor that they themselves have the tests corroborated.

In actual practice I have heard that in only 50% of the cases do the insurers receive permission to release the file to a doctor.

Complete new procedures have been developed within the paper storage or file administration areas of life insurance companies. A concentrated effort has been put to the task of ensuring even stricter enforcement of the confidential natures of the declaration regarding health and laboratory results. In some instance all medical evidence from any source has been purged from the financial contract synopsis. This set of confidential information is then restricted to the viewing by medical director or senior underwriting personnel. The professional insurance doctor and underwriter are cognizant of the need for confidentiality. Even in the instance of internal studies and statistics gathering, these prudent professionals use only a numerical reference as opposed to anything that could publicize the individuals identity.

Currently the chain of custody for blood sample and results is closely monitored and controlled. With the recent advent of urine HIV antibody testing the industry is faced with re-evaluating the handling urine samples. Historically the industry pre AIDS allowed agent and branch employees to collect, label and ship the urine sample. The ease and simplicity of the urine collection and the subsequent testing for sugar and albumin was comfortable. Not so for HIV urine test which has left the industry with three yet to be resolved issues:

(1) Only the Elisa will be done on urine. Thus who will do a follow up Western Blot for samples that are positive? Will the follow up request for a blood sample expose the potential of a positive test to the agent and thus fall outside of our controlled confidentiality?

(2) Tampering with urine samples has been evident for some time especially when drugs of abuse are being sought. By involving the agent in the collection of urine samples will we become counterproductive when more than drugs of abuse are being sought?

(3) The urine test will produce more false positives than the blood test. Is the industry prepared to acknowledge that almost all positive tests in an insurance population will be false positives?

The foregoing will be resolved because the industry will accept only what is reasonable as it searches for cost effective testing that is equitable to the insured and does not jeopardize confidentiality.

Stepping away from the HIV testing and returning to the eighteen other tests plus the test done now on urine, the life underwriter is faced with trying to discern the meaning of all the other tests. Unlike HIV testing there currently is no built in confirmatory test in the typical blood profile. In fact the underwriter sees fewer than 50% of the profiles falling within normal.

The following chart, taken from the Journal of Insurance Medicine gives one company’s opinion of the economics of certain actions prompted by a positive test. In the example we are faced with an abnormal GGT. In summary the chart shows a loss of $1,000 + if the company accepts the risk at standard; $50 if the company declines; and $119 if the company charges an extra premium. With those kinds of odds, no wonder the easy way out is to go on vacation and let someone else make the decision.

When the laboratories offered to throw in a test for cocaine on the standard urine test the industry was skeptical. People who are sold life insurance are not likely to be cocaine users. When the laboratories offered a three-month money back guarantee if not satisfied, the life insurance industry said all right, since we have nothing to lose. For only 80 cents per urine test we now are finding a surprising number of individuals who show evidence of cocaine residuals in their urine test positive for the substance cocaine. In fact most statistics reveal a rate of positive that is five times that of HIV infection. A positive cocaine test brings about the same insurance consequence as HIV positive…decline!

The confidential nature of this test like all others is protected with the same vigor. One difference in approach is that some companies will often write a registered letter to the proposed insured stating that a positive test for cocaine was why they were declined.

Billy Martin once said as skipper of the New York Yankees (a USA baseball team) once declared “I feel strongly both ways” when asked to take a position on something that had more than one side. Extending the immortal words of Billy Martin, I feel strongly all ways. The industry is not perfect as no industry is perfect. The public trust that rests in the confidential nature of the files within the insurance industry is well founded today in spite of ever more sensitive data being stored. The industry must protect its financial integrity as mandated by the share holder or par policy holder. On the other hand, while fulfilling that objective, we must continue to protect the individuals privacy and employ only the fairest of testing available. Assessing the risk is paramount to the private voluntary life insurance underwriting process. Risk classification allows the life insurance company to provide individual policies at the fairest prices to the greatest number of people. Fairness by definition means equal treatment for equal risks.

As a professional underwriter I can only hope that the various impairments that reduce our life expectancy or encumber our ability to enjoy our lives become as extinct as the following from three centuries ago:

1. Apoplex and Meagrom 17

2. Bloody flux, scowring and flux 348

3. Consumption 1797

4. Convulsions 241

5. Dropsie and swelling 267

6. Flocks and small pox 531

7. Rising of the lights 98

8. Teeth 470

Taken from Natural and Political Observations by John Graunt a citizen of London in his book on actuarial statistics 1632. Total buried that year was 9535.

The following article was written for the Canadian Journal of Life Insurance (a publication that was probably the best forum for information, debate and learning in the Canadian life insurance industry) at almost the midpoint of my tenure with Storebrand. It was a great company that did not survive the 1980’s in Canada. Swiss Re acquired its operations here in 1988. The history in Norway continues but a mere shadow of it glory days. My memories are mostly of a tremendous team of people who made Storebrand work in Canada and built a first class reputation far in excess of its size.

On May 4, 1981, the company which today is known as Storebrand could look back on 134 years of active life. The company was founded in Norway, and domiciled in Oslo, or rather Christiania, which was the name of the Norwegian capital at that time.

Christiania General Fire Insurance Company for Goods and Household effects has undergone several changes in the past 134 years to become what is known internationally as Storebrand International Reinsurance Company Limited. In 1971, the combined Storebrand group experienced a single year’s result which surpassed the growth of all years up until 1947, its centenary year. To appreciate the company’s present status, one must reflect on history.

Conditions in Norway in the early 1800s were described as hopeless and despondent. Norwegian independence occurred in 1814, but her true economic and commercial freedom failed to materialize until the fourth decade. Even the King of Norway voiced the fact that rarely in the annals of history had there been a country to which nature had been so unkind. Yet, out of this bleak beginning there came the entrepreneurs who strove to improve the economic conditions of Norway. New commercial ventures were launched and amongst their successes were several insurance companies.

Fire insurance on goods and effects was the single objective of Christiania General, but as demand grew in public sector, extension of the company’s operations was in order. In 1856, coverage was broadened to provide insurance protection for buildings. Management at the time felt the company name was too cumbersome and not reflective of the broadening scope of coverage being offered (and this before the day of the ‘ad men’). Popular sentiment proclaimed the name “Storebrand” (meaning he “big fire” insurance company in Norwegian). This name served to show the difference between Storebrand and the other newly formed “Lillebrand” or, as translated, “little fire” insurance company.

In the 19th century, Storebrand had its own fire brigade in Christiania. The choice of name, Storebrand, was a wise choice for the particular circumstances in Norway in the 1800s, but difficulty arose in the English-speaking countries where marketing of reinsurance expanded by the late 1900s.

It was no easy task to commence writing fire insurance under the prevailing circumstances in Norway at the time of Storebrand’s foundation. The experience of British and other foreign offices, plus the acquired seasoning of the building insurance companies, was a priceless bench-mark. However, the new companies were immediately faced with many Herculean tasks which have no equal in today’s environment.

A major conflagration totally destroyed several blocks in the center of Christiania in 1858. This great calamity produced damage to the estimated cost of over 4-million kroner – an unprecedented sum for any disaster of that period in Norwegian history. The five Norwegian insurance companies suffered financial strain as a result of the devastation. Storebrand, while enduring a 345% loss ratio, was relatively in good financial standing when one recalls that three other insurers were forced into liquidation. Lessons can be erudite from such an occurrence – the imperative need for reinsurance became very evident. Up until 1858, Storebrand, like so many other insurers, had virtually carried all of its gross liability for its own account.

Storebrand’s first obligatory fire insurance treaty was signed in 1862 with eth Phoenix Assurance Company of London, England. The treaty covered Storebrand’s excess Norwegian business. The reinsurance coverage was expanded 10 years later with a second treaty with Northern Insurance Company. Both these reinsuring companies have maintained their treaty connections with Storebrand for over 100 years (interrupted only by the Second World War period).

Norway was the only county in which Storebrand operated for its first twenty years of existence. This market was, by its size, very confined and it was evident to company management that they should expand into foreign market possibilities. Through market diversification Storebrand could spread very effectively its liability at a far more rapid rate than they could ever hope to accomplish within its domestic area. In 1868, a branch office was established in Sweden and direct business was commenced in other European countries. In a short span of time, further branches were established in England, Denmark, Finland and Germany. Early underwriting and sales results as a direct writer in most of these countries failed to do anything for Storebrand’s growth, and thus the concept of expansion through this method was abandoned.

Retrenchment within Norway became the theme for the next several years and activity outside the country came to a virtual standstill. By the end of the 19th century, international reinsurance was becoming more and more an obvious route for expansion into foreign markets, avoiding some of the pitfalls or earlier attempts at direct writing in those same markets. Christiania General and Vesta Central Office for Foreign Business was constituted in 1902 as a joint venture of Storebrand and Vesta Insurance Company of Bergen, Norway. This new company was given the mandate to solicit foreign fire reinsurance, an area of expertise in which both forming companies were proficient.

Vesta was the actual managing company for the first 18 years of operation. Storebrand during this period was not content to play the role of silent partner and thus slowly increased its own knowledge of the foreign reinsurance markets. Success in this area prompted Storebrand to simultaneously increase its activities under its own name. Storebrand offices, independent of the joint venture, were started in New York and London. On January 1, 1921 Storebrand formally became manager of the foreign business of the joint venture.

As is the case today, Storebrand’s operational style has been one of slow (thus somewhat unspectacular) and deliberate growth as an international reinsurer. By 1940, when the Second World War engulfed Norway, the foreign operations of the Storebrand Group had matured into a very major portion of the total – 75% of the group’s business was now in markets beyond Norway’s borders. Needless to say, the war’s impact was tremendous on an international reinsurer who found itself in a position of being amputated from most of its premium income. Management reacted quickly by changing the New York branch office into a U.S. Corporation, under the name of Christiania General Insurance Corporation of New York. Somewhat later during the war, a similar corporation was set up in London.

At the same time, the original joint foreign reinsurance venture with Vesta was abandoned through mutual agreement of all concerned parties. After 40 years a very cordial cooperative operation was ended on December 31, 1940. Both Storebrand and Vesta pursued independently their foreign reinsurance expansion from that point on.

After the war, the new management team, under the dynamic leadership of Mr. Per M. Hansson, looked to expand Storebrand’s international portfolio. The subsidiary in New York, Chrisiania, was progressing on schedule as a professional reinsurance company in the U.S. General insurance market. Meanwhile the opposite course of events was taking place in the U.K. Market place. Storebrand’s view of the U.K. Market, through its London office, after their original marketing thrust, presented a very limited potential profit picture. After a few years of operation, the London subsidiary was sold and Storebrand withdrew from that very particular type of reinsurance business.

A very close association started in 1952, as Storebrand helped with the formation of a reinsurance company in Mexico – Reaseguradora Patria. Some 29 years later, this reinsurance company has matured into a leading and profitable reinsurer in the Latin American world. Storebrand maintains to this day a very amicable and profitable relationship with this Mexican reinsurance carrier.

Elsewhere in the world, Storebrand continued on its path of well-planned expansion through both branch offices and subsidiary companies. Storebrand International Re of Australia is today a continuation of Storebrand’s licensed reinsurance branch in Sydney, which was originally established in 1962. Although only 12 years old, Storebrand (U.K.) has today a broad and well-spread participation In the London reinsurance market. After the initial problems of the 1950s the new Storebrand (U.K.) went after a market in which they had the expertise, namely, the writing of marine insurance business.

Alpha, Compania de Reaseguros ahs its base in Panama and was formed by Storebrand and local interests in 1976. This company has taken over the Storebrand Group’s Central and South American portfolio. At the end of 1977, Storebrand Ruck with headquarters in New Hamburg, got off the ground. With paid-up capital and surplus of D.M. 20 million plus management with local expertise and leadership, it has made inroads into the growing reinsurance needs of Germany and neighboring countries. A milestone was passed in 1972, when the foreign business accounted for about 50% of the group’s total business. By the end of 1979, Storebrand’s foreign subsidiaries had increased in importance to the Storebrand group – in excess of $50,000,000 of premium income was now in the subsidiaries.

STOREBRAND IN CANADA

Storebrand in Canada began when the company commenced its second hundred years in 1948. Christiania Almondelige Forsikrings – Akliesselskap Storebrand, better know in English as Storebrand Insurance Company Limited – appointed Verner R. Willemson of Toronto, as “Chief Agent” for Canada on the 16th of November, 1948. Storebrand was one of what were to be several foreign-based reinsurers to be represented by Mr. Willemson and Sterling Offices of Canada Limited. They were here in Canada in name and finances only. Sterling’s offices handled the local administration, sales of general reinsurance services and underwriting authority. The life reinsurance operation did not commence until much later. The relationship between Sterling Offices and Storebrand was to exist until 1975 (non-life) and 1977 (life). In 1975 the general reinsurance went under the umbrella of a newly-formed reinsurance brokerage – Universal Reinsurance Intermediaries Limited. U.R.I. By the end of 1980 was ranked number 1 (net premiums written) amongst reinsurance companies in Canada (Canadian Insurance, Statistics, April 1981 Annual Review). Since 1975 (non-life) and 1977 (life) Sidney Gordon, President of U.R.I has been Chief Agent in Canada for Storebrand International.

Active pursuit of life reinsurance in Canada commenced in 1967 with the formation of a life branch of Storebrand Insurance Company Limited. Securities of $213,000 were deposited with the Minister of Finance and Receiver General of Canada under the provisions of the Foreign Insurance Company Act. These original deposits were split between Government of Canada Bonds, Manitoba Hydro-Electric Board Bonds and Province of Newfoundland Sinking Fund Debentures. A local Life Manager was hired and the marketing of life reinsurance began in Canada.

The timing was perfect since the two main “professional” reinsurers in Canada were still under the control of one parent company and the third reinsurer was just starting to become a force to be reckoned with in the market place. The conditions could not have been better for an aggressive reinsurer, but unfortunately Storebrand approached the life market in a very modest fashion (contrasted with the dynamic impact of Munich Re and Victory).

Hindsight allows one to speculate, in a biased way, on the reasons for the ten-year performance 1967-77. The head office in Oslo was cautious during this period so far as life reinsurance was concerned. Thus they could be faulted for not appreciating the needs of the Canadian market. Local management was also “spreading’ itself too thinly – expanding into the U.S. Market place before fully servicing the Canadian Market. The combination of head office and branch management decisions meant Storebrand drifted through the years 1974-1977. Production fell in relation to insurance sales and Storebrand International Reinsurance Company’s reinsurance market share fell to less that 1% (based on new reinsurance sums reinsured).

From 1973 to 1976 the branch statements showed net losses totaling $528,295. These operating results plus the relative stagnation of Storebrand International Reinsurance Company’s life portfolio in Canada prompted the Head Office in Oslo to pursue a means of turning the situation around, in keeping with the Group’s international growth and prestige. By late 1976, an actuary was added to the Toronto staff and for the first time in 10 years, local actuarial talent would provide guidance. This was the start of Storebrand International Reinsurance Company’s rejuvenation program in Canada. Robert Smith, F.S.A., provided the impetus that led to a total change in Storebrand’s approach to the Canadian reinsurance market.

The latter part of the 1970s presented an ideal scenario for Storebrand to re-establish itself within the Canadian Market. The new management team in Toronto found itself in the midst of a period of rapid growth for reinsurance premiums in Canada. A look at the figures for the reinsurers (excluding companies who are direct writers in Canada as well as reinsurers) Shows reinsurance premiums doubled between the end of 1975 and the end of 1980[see accompanying table]. In force sums reinsured rose to almost ten billion dollars – an increase of 150%. The numbers for new business sums reinsured likewise increased by almost 190%.

Storebrand International Reinsurance Company took an aggressive stance in late 1977 and thereafter in its pricing of reinsurance both for facultative underwriting and actuarial quotations. A transfer of just over $1,000,000 was made from the Head Office in Oslo (supported by the two Danish partners) to the branch in Toronto. There was now no doubt that the company was in Canada to stay and encouragement to increase Storebrand’s prestige and market share was forthcoming in tangible terms.

In spite of the fact that Storebrand International had started to provide lower reinsurance costs to direct writing companies in late 1977 and thereafter, the early results were somewhat disappointing. Life insurance companies in Canada were, in 1977 through 1979 period, reluctant to change the status quo concerning their reinsurance outlets. Storebrand International, as well as other “new” reinsurers, were often providing the better (i.e. Lower) reinsurance costs but were losing at the final decision time to the existing reinsurer who was being asked after the fact to “match” or “beat” the lower cost. In fact, some 94% of all new sums reinsured in 1975 were going to the three larger reinsurers – Canadian Reassurance, Mercantile & General, and Munich Re & Victory. Comparable dominance of premiums (83%) and in force sums reinsured (93%) also existed at December 1975.

The early frustrations soon diminished, existing only in very isolated instances, as the “new” reinsurers including Storebrand International became acceptable alternatives in Canada to the big three. By offering an alternative reinsurer that was flexible and operated on lower expense margins, Storebrand International increased its market share of reinsurance premium income from 1.6% in 1975 to 7.5% in 1980. the impact on the three major reinsurers of the new competitiveness was a reduction to 70% of total reinsurance premiums, 82% of inforce sums reinsured and 80% of new sums reinsured.

The 1,000% increase in the number of cessions to be processed per year and the increase in facultative underwriting volume of the same magnitude, has meant a 50% increase in Storebrand International’s staff size over the last four years.

Storebrand International is now firmly entrenched in the Canadian life industry and has re-established itself as a viable alternative to the three major reinsurers. The market itself has changed and the decade of the ‘80s should offer life companies a competitive and varied source of reinsurance companies from which to choose.

We tried so hard to make things better for our new employees that we made them worse. For my reports’ reports, I’d like better. I’d really like for them to know about hand-cranked calculators, white shirts and ties, make shift calculations on paper and leaving some margins for future staff. I really would.

I hope you learn humility by being humiliated, and that you appreciate honesty by being cheated. I hope you learn to clean up your own desk and finish everything on time and proactively supply the answer not the question. And I really hope nobody gives you a brand new computer whenever you whine about megahertz slowing your productivity.

It will be good if at least one time you can see products make money and make tough decisions to cancel a dead end treaty. I hope you get embarrassed fighting for something you believe in.

I hope you have to share a room when traveling on business with your younger staff. And it’s all right if you have to draw a line down the middle of the room, but when he/she wants to hear your heart felt feelings on his career and your outlook on insurance free of corporate babble I hope you let him/her.

When you want to make a closing pitch to a customer and your inexperienced staff wants to tag along, I hope you’ll let him/her once in a while. Share the glory and the defeats.

I hope you have to take a train or bus to an insurer in a winter blizzard and that you work in a company that appreciates the dedication. On rainy days when you have to catch a ride, I hope you don’t ask your driver to drop you two blocks away so you won’t be seen riding with someone as eerie as an actuary or underwriter.

If you want an example of ethics, I hope your boss teaches you by example how to be ethical instead of buying a course for you to take. I hope you learn to dig in the dusty history for guidance and read books on a myriad of subjects. I hope being forthright takes precedence over subterfuge. When you rely so heavily on computers, I hope you also learn to add and subtract in your head and understand the present value of money.

I hope your peers tease you when you have your first notoriety of success, and when you talk back to your boss that you learn that frank debate can build a stronger company.

I hope, at whatever age you are, you forget the packaging and let who you are inside see whom she/he is inside. Remember that some of the most precious idiosyncrasies we hold so dear are brick walls our peers cannot get through. Make your own decisions and hide not behind the safety of the committee.

May you make mistakes both big and small but have the courage to admit them and move on, never duplicating the error again. I don’t care if you try a beer once, but not at the desk. And if a peer offers you dope or a joint to break the mundane cycle at work, I hope you realize he is neither your friend nor a friend of the company.

I sure hope you make time to sit on a porch with your senior cohorts from work and go fishing with your boss. May you feel sorrow at a failing insurer or reinsurer and joy during the growth of our industry. I hope your boss punishes you when you show arrogance and disdain for a customer and that he/she publicly praises you at your successes and diligence for service.

These things I truly hope fall in your path – tough times and disappointment, hard work and personal and company success. To me, it is the measure of life and the significance of our work, be it ever so humble at times.

I never dreamed that I would ever be writing a letter to a Town let alone a thank you letter. I give a lot of speeches and write a lot of articles for delivery all around this world of ours. Coming back to my roots is what keeps all the marbles in my head from becoming too frantic and thus colliding in delirious fashion. However it is the sad reality of death that has recently made me take a hard look at Harriston and what really does it mean to me.

My grandmother use to joke that I was a farm boy born to be in the city. I believed that to be true for my entire adult life. I was born officially in Palmerston Hospital during the cold and blizzardy month of January 1947. For my short stay in Harriston before my father and accompanying family moved to Toronto, I lived in two homes, neither of which has left a strong image in my gray cells (maybe that is the root of my gray hair). Reinforced by years of story telling by my elders is the story of my starting a fire under a peer when I was four — he being the cowboy and I being the Indian. That and the horrible episode with poison ivy in the backyard are all that linger as I reach middle age.

I remember though that Harriston was always home. We were regulars at the grandparents’ farm (Bert and Evaline French) although I never did get very far with milking and after a swat at my ear I was delegated to the separator. I could turn a handle at the right speed but never mastered the delicate and rhythmic squeeze of the teat. In my case practice did not make perfect it made for angry cows! The mere mention of Harriston brings back the smell and sounds of the barn. The fall harvesting, that brought out such strong bonds between neighbours as they raced to beat the rain, will always lead my thoughts to the Town of my Canadian heritage.

Many a winter evening was spent in the confines of the world’s best baby sitter — the old main street theatre. My younger brother and I would be parked in there regardless of what was playing on the screen while parents played cards or visited with relatives. As a youngster parents and their games were boring and the imagery on the screen was much better. This of course had its down side as younger brother and I came face to face with the movie Psycho. Even though it was a very adult theme and very scary we were admitted since Dad new the show owner and of course any idea of parental guidance rules had yet to be invented. To this day my brother still takes a shower without the shower curtain and I am sure our underwear is still as brown as the night we wore it to Psycho.

My older brother was always the envied one since he, being of considerable advanced age, had the local friends he made before we moved to Toronto. That meant he could play with peers and have a totally carefree Harriston visit. Five years makes a lot of difference in siblings. He was always the mature older brother who possessed all the strengths of any hero brother.

Uncles, aunts and kissing’ cousins seem to abound in the town and there was always someone celebrating something. I took the relatives just like the Town for granted during my adolescence. I drifted into the global village and international travel during my career development. Always a different country and different pressures of work. There were times I would fit in a weekend trip to visit Gramma and Grampa in their dollhouse in town. I always left fully nurtured both in spirit and stomach. I have the curse of having enjoyed the three best cooks in the world — my Gramma, my mom and my wife. You just had to look at the three Morton boys to realize that food was good and plentiful in our formative years — just look at our girth.

The tradition of weekend or day visits to Harriston continued as my parents returned to retire in Harriston. As I matured (a little) I came to appreciate my parentage and my roots. Not just the tangible items that were passed from generation to generation but also the intangible. I believe that my demeanor that has been successful in my career was molded by my parents and cultured by the Town. More than once I took pride when someone in the world would come up to me a say that I must be a small town person since my scruples and style were that of the rural background. Some would call it honesty and integrity. I would call it operating with a trust in people and a desire to see no one hurt and no one plundered. I was taught by parents and nurtured by the environment of rural heritage that I must treat all as I would want to be treated.

I owe my parents a lot. My Dad is gone but definitely not forgotten. My Mom is still thriving in the Town of Harriston and remains as the focus of not only the Morton clan but the larger clans of the Holtoms and Frenchs. Mom is a solid individual who quietly gives her all to family and friends. She shies away from centre stage and prefers anonymity to acknowledgement. Each of her three sons inherited and acquired her magnanimous style tempered by my father’s determination and “pig headedness”. We three sons were indeed blessed and each enjoyed a successful adulthood.

Holtom Family Reunion’s were joyous occasions where for half a day we could catch up on relatives near and far. Games and good food filled the day. There was something special that all enjoyed except for the teen who struggles with all nerdy things until the thunderbolt of maturity hits. To have a reunion or not was always the burning question. Events of the last few years have reinforced my desire to see the reunion thing continue at least every two years. To have it in Harriston confirms our roots and shows them off to the newer generations.

Now, why I am I writing this now? Where is this brief piece of literature going?

In the past three years the ideal world of the Mortons has been full of life’s downside. There has been years in the past when an uncle or grand relative died (the shock of Eldon French’s early demise and the sad passing of Great uncle Jack Holtom are etched in my brain). Many years earlier I lost a beautiful cousin at the mere start of her adulthood but time has a way of lessening the pain. Most recently the events seemed to come in rapid succession.

My Dad died almost three years ago at a grand age of almost 81. I was in Indonesia and struggled to get home when he was in his last hours. I had to accept the fact that I could not change the world to get home faster. The family carried the tragic end while I cried a lonely cry in airport and plane. I still miss my Dad and his quite presence across from me in life.

My Uncle Randal French told me the end was near and asked me to be strong and help Helen. It was difficult to even help myself since I had never before been asked to accept responsibility for carrying out the wishes of a dying person. The order is reversed but that matters not since they were so close to each other there seemed no time to grieve for one alone.

Then my Gramma decided enough was enough and let her God take her to a better place. She was indeed the matriarch of the family and carried the wisdom of the ages wherever she went. She was indeed a great and honourable lady who was loved by all. No greater human has walked this earth.

Just when tragedy seems to be past us and we settle into expectations of retirement and grandchildren our world was shattered with the very untimely death of my big brother Terry. It happened so suddenly that I am still of the feeling that it has to be a dream. One minute he is the host at the Holtom family reunion and the next minute he is in a terminal coma. We may never know why and that leaves anger. Big brothers are always supposed to be there. Sons are always supposed to be there for their Mom. Two of three Morton boys must carry on with the help of the next generation of boys and girls.

In each of these tragedies I spent considerable time in Harriston preparing the funerals, giving and receiving comfort and just walking the streets. In every instance my admiration for the Town grew. Walking down the street people would stop me and say your Jim’s boy or your Randy’s nephew or Mrs. French’s grandson or how is Isabel. The condolences would flow in a sincere and consoling fashion. I hate to admit it but most of these people I do not recall their names nor their relationship but thank you all for welcoming me and my family home in the most difficult of times. Food arrives without fanfare to feed the family. Offers of assistance are frequently received in person and by telephone. Harriston rallies to console its family.

It is hard to write how one feels but I do feel renewed by Harriston. You always make me feel warm and cozy even when death has stung my brain. My relatives in town, especially Marion, Art, Helen and Betty Jean have always been fantastic. There is of course all the others, related and not, who come to the funeral home to pay their respects, which is of tremendous support to my mother and the rest of us Morton’s. I feel safe in Town. I feel my mother in her apartment is safe and secure with all the needed friends nearby.

I truly thank you Harriston for being there for my family and I as we faced some very sad times. Thank you for buoying my sole as I walk the streets seeking answers to questions that no one can answer. For those of you who reside there do not take Harriston for granted. It is a great place that really cares. It is a great sanctuary amidst the enormity of today’s issues both near and far. For those like myself, who reside in far off places these days, never forget your roots. Take the time to let the soul of Harriston refresh your soul in times of trouble and in times of jubilation. Sincere thanks from a boy who will never forget and tells the world proudly of his roots.

I joined Manulife Reinsurance Division in January 1990 and stayed until May of 1994. The mandate I carried was for traditional retrocession business. Manulife had been number one but was slipping and my team’s job was to regain the number one position in retrocession world in both reputation and production. Again I had the advantage of a world class team of people who went the extra mile to polish the image and be the most efficient and prolific “retro” on the planet. I never did fit the politics of Manulife and even had psychologist who were doing their routine reviews of all senior executives (I was number 26 out of 26 world wide!) tell me I would lose all my strengths and become a typical Manulifer if I stayed. I wanted to remain me and maintain my advantages as I saw them which for the previous twenty years had been so sought after by other companies and people.

The amount the client needs is $5,000,000. The amount you sold is $5,000,000. Why would anyone not want to sell more at these great rates?

As a well-educated and experienced agent, you have worked for months to arrive at the point of final presentation of the product that best suites the applicant’s needs. The numerous details to complete the application form have been garnered through a barrage of questions that make the Home Office underwriter’s job easier. Now comes the moment of editing the sale and making sure that all the t’s have been crossed and I’s dotted. Panic sets in as that tiny asterisk catches your eye and you scan to the long tail (* RATES ARE AVAILABLE FOR AMOUNTS UP TO $2,000,000 ONLY) that attaches to the other asterisks on the back page of the rate card of four screens later on your laptop.

After you have extradited yourself from immediate embarrassment with your prospect, you hear from your co-operative insurer that the retrocessionaires want higher premiums to participate in this plan. Just when you thought you had captured the essence of reinsurance or at least had become accustomed to its presence, along come the terms ‘retrocessionaire’ and ‘retrocession’.

The reinsurers are just great in their support of this innovative and aggressively priced plan, your co-operative insurer explains, but those stingy retrocessionaires will not cooperate and insists on fatter rates. They are the specialists, you are told, that must be approached by the reinsurer for retrocessions (or more coverage) when the sale exceeds $2,000,000 and your reinsurer’s capacity.

Your immediate reaction is probably “does this never end?” or “just where does the buck finally stop?” Having heard and witnessed the frustration of agents with reinsurers, I can finally comprehend how this situation would have the agent perplexed once again.

How does this situation arise? Today’s life insurance market is extremely competitive and a balance of aggressive pricing and innovative plan design often puts the pricing actuary and marketing executive in a position of market leaders. Those two people (sometimes rolled into one) must try and convince one or more reinsurers to support their pricing of the plan. If they are lucky, five reinsurers will provide support in the form of a price that allows the company to reinsure its excess business without losing money or interfering with the agent’s remuneration.

In the free enterprise system of reinsurance, the lowest bidder for the ceding company’s (in this case, the life company’s) excess business wins.

Now what we have is the originating life company designing a competitive product to sell more for less to the public. Keeping it simple, the price is such that most other life insurers are unable to match the price. One reason is that the winning reinsurer who for its retention, offers the lowest price of say five, worldly, knowledgeable, aggressive reinsurers, it is not likely to offer another life insurer the same rates for a copycat plan-not if that reinsurer ever wants to do business with the originating company again. The winning reinsurer’s price has been keenly stripped of every vestige of extra pricing margins, that is: morality, investment, administration and profit. Because the ceding company and reinsurer have combined retention of only $2,000,000, yet a market that often buys more, the search for a retrocessionaire(s) commences.

Starting with the premise that the price is very thin, one can assume the retrocessionaire’s price must be even thinner because the retrocessionaire’s price is stripped of the most of the reinsurer’s margins. There are three general results that can occur.

First, retrocession capacity is significant amounts is found to remove tiny * off the rate card. The price needs no adjustment. Unlimited capacity is a sign that three or more pricing actuaries have agreed on price, commission and product design, which is mean feat!

Second, no facilities are found at the price and the tiny *is necessitated. To boldly accept a $1.00 premium (which is that portion of the life company’s premium to the reinsurer that the reinsurer may be able to subsequently allocated for retrocession’s) and pay out $1.50 for risk coverage (which may be the best price any retrocessionaire is able to offer) does not normally appeal to a reinsurance company.

Third, a cooperative structuring of premiums and commission is discovered that allows all parties to achieve their goals. The reinsures pays the retrocessionaire the thin risk premium and collects same from the insurance company. The reinsurer acts as a conduit for the excess risk but receives no payment for the service, treating it as a fact of keeping the ceding company’s business. The ceding company and agents, in their joint effort, agree and accept a reduced commission respectively.

Within the extremely competitive large case market the balancing of price, commissions and total capacity becomes very important to all parties. If the agent expects the lowest priced product, it may be at the expense of limiting the total capacity in the market. (A more moderately priced product, for example, would have a much higher total capacity with more retrocessionaires able to provide coverage for the higher premiums available.) In the majority of sales the total face amount available for the lowest priced product is often enough but in the odd case the tiny * can ruin your day if it catches your eye at the last moment.

Finally, what do you call a company that accepts excess business from a retrocessionaire? Only printable answers, please.

Two years after the start of the Trudeau years and the whole new appreciation for the red rose, the Canadian life insurance industry was “shopping” substandard or near substandard life insurance applicants to reinsurers for their opinion and price. First in, with lowest price, wins were the predominant rule and today that stays true. Pioneering efforts by Ian Michie and team at M&G Re (a reinsurer once active but now merged into history) in its battle with “sister” company Canadian Re took every opportunity to encourage cedants to send their sub par business to the reinsurer. The reinsurer in turn would surely price the impact of whatever the impairment at a much lower price. Voila, reinsurer happy; cedant happy; agent (surely you jest to speak of brokers in Canada in the 60’s) happy; applicant a policyholder.

The arrival of some rookie European reinsurers heated the battle for not just automatic standard excess insurance but the “sickies” that, as we were to learn, agents had files on in the back room or at least the bottom of the bottom drawer. Late 60’s and early 70’s were full of fascinating stories most of which have to wait the 30 years before publication. But the reinsurance industry had its share of alcoholics (could note understand why anyone would rate someone who drinks a bottle a day), nymphomaniacs (a marketer never to be witnessed again), egotistical doctors (instant “I can take that standard”), actuaries (antiselection, not a pricing consideration) and underwriters (pass one exam that was written in the 1940’s and you too could bind risk for billions), and stupidity. The latter can be said only in hindsight since at the time most of the industry thought the moves to be merely avant-garde or “stepping outside the nine dots”. From the 1998 vantagepoint the nine dots were often nothing more than the 5 stars on a liquor bottle.

Easy, don’t lynch me yet you old folk. The times were great and everybody did drink more and had a different approach to life compared to today’s mineral water craze (will that be sparkling or not, imported or domestic, with sulphur or without). Jeez it was much easier to sit down with the upper echelon of the 70’s and have the kingpin host just say “doubles all ’round”. Within minutes we could be eating. Over the sumptuous red meat meal, talk of starlets, hockey scores, and cars predominated. As if by magic the last five minutes saw a side bar discussion (the 90’s tribute to our vocabulary) on the merits of entering into or expanding the shopping program or perhaps begging for a chance to take some automatic excess.

As usual I digress. The fledgling world of reinsurance was in reality just getting its license to fly so to speak. After decades of only trivial amounts of reinsurance going to “foreign reinsurers” and the predominant amounts going to either the parent company or in trading agreements with other cedants (i.e. Manulife would give some to Sun, Sun would give some to Manulife, Maritime gave to Empire, Empire gave to Dominion, etc). In fact, if my old tattered notes from 1970 are to be believed, less than 4% of all mortality risk was being reinsured outside the aforementioned. The exclusive reinsurers were far from a mainstay in Canada. Compared with today’s approximate 30% plus of all new business mortality risk being reinsured the paltry amounts then seem barely adequate to pay the salaries of all the reinsurance staff. Of the tiny amount of reinsurance perhaps 20 to 25% was facultative shopped business. Today that percentage is about the same.

Even with the full understanding of the volatility of facultative business, the antiselective nature of some participants (honestly, very very very very few) and the poor placement ratio of extra premium decisions, it has blossomed. In 1998 we are witnessing about 4% of all cases being written (not necessarily issued) ending up in the reinsurers offices (yes plural) for individual appraisal. As a bit of background the CLHIA statistics show that during the last decades about 4% of all business is declined and upwards of 4% is issued other than as applied for. Since at this point in time reinsurers have not started bidding the price down on standard business it is safe to assume the ultimate target for the reinsurers is to get to see all 80,000-problem cases per year.

Getting back to the reinsurance underwriter, we see someone who needs to be knowledgeable, innovative, somewhat gregarious, endowed with a strong sense of humour and finally a keen and confident communicator. An underwriter in a ceding company has similar skill sets but each takes on a different weighting. The ability to communicate with the broker trying to get a commission is much more challenging than the reinsurance underwriter calmly chatting about the merits of a particular facultative case with a peer in a ceding company.

The complexity of today’s life insurance world, the extreme pressures of “being profitable”, and the intensity of competition amongst too many reinsurers make the attributes of what I see as the successful reinsurance underwriter very visible yet not always easy to find. Even the constant workload that relentlessly consumes 10 hour work days is beyond the mental stamina of many underwriters. During a typical day the average reinsurance underwriter binds their employer to somewhere between $6 to 12 million of mortality risk (in a year that’s about $1 to 2.5 billion of risk).

The attributes I feel are important may vary from the many scholarly opinions of reinsurance and insurance executives who abound in our industry. To say I have always hired successfully would be wrong. To say I have never hired successfully is only a rumour fueled by jealous competitors. Remember the great words of Harold Ballard “When I want your opinion, I’ll give it to you”.

As succinctly as I can be I will try to describe what I think are the good attributes of the star reinsurance underwriters throughout the almost thirty years I have been witness to the risk selection process in our industry. Reaction will be from the “Who are our underwriters?” by some senior executives to “Never met a good underwriter yet, let alone a star!” by some brokers. There are after all many a consistencies in our business that never diminish in value.

Knowledge plays less of a role than I initially thought given that it is more often the ability to shape knowledge into solutions that measure a human. In fact marine scientist Dr. Joe MacInnis said “The larger the island of knowledge, the longer the shoreline of wonder.” The original underwriter was burdened with only rudimentary information and relied an others to contribute the knowledge — medical advisors, actuaries, lawyers, financial consultants, and marketing directors. As costs and scarcity of advisors took hold the dependence on one underwriter to make a decision based on a spectrum of knowledge beyond any one degree became commonplace. Underwriters attended seminars, tended to come to occupation with a university degree (never seemed to matter in what as even my abstract math degree worked), found a new set of exams under the auspices of the Academy of Life Underwriting, CLU courses, formal mentoring programs and time spent reading claims! But at the end of the day it was the “wonder” about the individual case that made for successful application of knowledge.

Innovation is so easy to talk about but so hard to witness in every day life. When a case arrives at a reinsurer it 99% of the time has a problem attached, be it medical, aviation, occupation, avocation or financial. The underwriter in the cedant has discovered the problem, now the reinsurer’s underwriter must find a solution. One of the most famous underwriters of the last 50 years, Charlie Will, penned or at least immortalized the words “Does it make sense.” Looking hard for all the good things about the case that soften the impact of the impairments to standard issue, the reinsurance underwriter is trying to make a decision that makes sense. There are times that even with extremes of innovation at hand there is still the decline because it does not make sense. The greatest challenge for the underwriter is to not just say no, since that was the initial option at the insurer.

Gregarious characters survive in underwriting because they thrive on all the flocks of brokers, marketers, actuaries, claims personnel and others who flock around to either encourage leniency (almost clemency at times), lunacy, meeting unprecedented mortality assumptions, failure (brings more work to claims area) , and of course lowest cost producer. There is always someone or perhaps a team hovering over the underwriter to see that it is done right, which is a moving target. If you are not gregarious by nature watch out for the stares will wear you down. Of course, since there is always an “of course”, being too gregarious can shorten ones career as entertaining the flock takes precedence over getting the work done.

Laughter is always the best medicine. Read twenty sick cases in a day about every possible impairment and body part and you are ready for release. Release is in good nature humour or running to your doctor with the symptoms of the day. Barely 24 months go by and we see one or more neophytes leave underwriting because they have sympathetic illnesses directly related to the days reading. The underwriters who can poke gut wrenching laughter from their colleagues are super. Those who can find humour in the sickest of cases also break the spell of impaired underwriting. The somber individual does not survive the cut. If you are not clever with the use of humour, you better be a klutz that attracts laughter with every guffaw.

Communication is the key to success in many occupations, perhaps all. The reinsurer has to communicate well within their company to try and enlist all resources in building the solution for the client. Getting the message through the myriad of obstacles to the broker via the cedant is often a hair-pulling extravaganza. You know what you need but can you communicate well enough to the cedant underwriter so they in turn can communicate the message to the broker. Most of the time it works but in about 5% of cases it fails. Reinsurer error. I have yet to discern early in an underwriter’s career who will be the super communicators. The maturity element has a lot to do with it as does the self-confidence that comes often years into the program.

A lot of what makes the reinsurance underwriter successful in a never diminishingly competitive industry can apply to the underwriters in any ceding company. The biggest differential is the nature of the biggest issues I have always heard about. In the insurer it is often the seemingly constant battles with brokers or agents over trivial items or even the repetitive nature of each challenge that provokes departure or worse, disdain for the job. In the reinsurer it is the never ending files of impaired lives that are always wanting standard and the fact underwriting has for decades been the whipping boy (today it should person but I cannot even pen the words whipping girl) for reinsurance decline in new business or loss of a automatic treaty. Never any applause but always lots of cryptic criticism.

With the advent of machines taking over underwriting and margins narrowing underwriting will change again but the root issues will follow once the broker realizes he is talking to a machine. No one will think of the standard lives according to a machine but those spit out, as rejects will now be back to human intervention. Today’s facultative leadership in the likes of RGA is an example of the torch being handed to the new leader in facultative decisions. As much as the company I work for feels confident in its risk selection, it would always relish ways of sharing that creative task with the insurers. We have to get that talent and authority to underwrite back in the ceding companies to partner the reinsurer more on substandard. As that happens it will be even more profound that pusillanimous underwriters need not apply to either of the insurer or reinsurer. Become an actuary or claims executive.

There continues to be times in my life that I snuggle down and feel secure that I have seen it all and nothing startling can happen. But, just like the time I sat down on a red-hot cooking iron hiding on the fringe of a warm campfire, I am jolted to reality and put into hyperactive mode. No my travels have not put me (or rather my dernier) in contact with a hot poker. However, I have just been presented with the results of a small survey of facultative underwriting as practiced today in my favorite market for insurance, Canada.

We are all too aware that everything is measured today; be it your legs for a suit or the number of life insurance applications that fall into measurable categories. For a reinsurer the measurables are time service and decisions — how many standards, how many +50%, how many +100%, etc. through to declines. The latter were always in the minority. There was a time when a reinsurer would concur with the prowess in a direct company and agree that the particular impairment or combination of impairments was such that decline sufficed. Did that happen often? No. The reinsurers declined about 20 to 30% of what was sent facultatively to life reinsurers. There was as always free enterprise at work and great disagreement abounded over which cases were indeed decline, thus keeping the incidence rate for all declining to low 20% level.

With “hot” competition that number was perceived to be lower today; but, given that risk selection still meant discarding the really poor cases, it should not have changed more than 5%. There was something comforting in believing that reinsurers still were predictably declining to accept those applications for insurance where the proposal’s health history, occupation, avocation, aviation or combination of all. After all, the laws of antiselection, deteriorating health and the shear cost of mortality were, I thought naively, still barriers to accepting certain risks.

Did mistakes ever happen? That is like asking if my stomach or more southerly regions of my digestive pit have ever known the ravages of food poisoning or overly spiced dishes in some exotic land (Bombay to Richmond Hill). Blunders happen. In a rush to get a decision out to a customer (the insurer) mistakes happen in transcribing the quote at the reinsurer’s communication centre (fancy monogram for fax or telephone). Wrong message attached to wrong file. Missing page in a reinsurance file having disappeared on the photocopier or fax machine. Young Turk (not sure if this is a politically correct term today?) underwriter who does not hear the medical consultant’s opinion or did not ask the right question has put the reinsurer in jeopardy many a time. Any or all have happened on cases and the reinsurance underwriter goes from Turk to turkey in a matter of minutes.

Now to the true-life adventure or at least a paltry few words of comments on today. A noteworthy Canadian insurance company’s underwriting department, in its zeal (zeal is good) to get the best for its brokers, shops the file. This is when a ceding company, the insurer, decides that it may not want the case or feels the assuming company (reinsurers) might like it better the file to 2 or more reinsurers. The reinsurer first back with the lowest price wins in most cases. There are some companies with complex reinsurance rules as to who wins what, when and how. Knowing the readership, I will stick to the simple explanation that the first low price quote for the case is awarded the honour of providing risk coverage for the ceding company. More succinctly put, the first in with cheapest price wins!

Since reinsurers see so many non-standard cases, their expertise can often save the day and find a price for most cases it sees. Experience has varied from reinsurer to reinsurer. The odd reinsurer (please peers do not take that as a direct criticism) may win cases in greater numbers than its competitors. The other competitors complain, throw mud and stomp their feet. The next month or quarter, the stomper becomes the stompee and the stompee becomes the stomper. In 28 years I have witnessed and sought help every time the tables turn and the oppressed become the oppressors. Stompers can be oppressors as can they be oppressed and stompees can be oppressed or oppressor?

The fine company in question or more correctly its service oriented underwriting management, followed 19 cases that it wanted no part off since by all normal underwriting rules of protocol and risk selection these cases were “really, really bad”. Immediate death claims all. Straight to the mortality heap for these 19 unquotable cases. The brokers who found these lives (just) should be ostracized for at least an hour. The first step in the travels of these 19 cases was to the copier or fax, where, with the push of a couple of buttons, reproductions of the file ended up in five reinsurance abodes.

With a craving like you could never imagine, diligent and well-trained reinsurance underwriters attack the files. Given that cases reinsurers see are all bad or tough the reinsurance underwriter is charged with finding the good and thus putting a price (winning) on the file. With the latest in medical know how beating on the computer screens as the medical networks get searched, the underwriter is frantically trying to find ways to quote as low as possible for that marginal edge over “reinsurer x”. I have never met “reinsurer x” and have often wondered, aloud at times, if I will ever meet anyone who has worked in “reinsurer x”.

Constantly nagging in the left ear is the conscience saying go lower and faster. In the right is the corporate actuary saying, “don’t do anything to risk our financial future”. This statement is being made when they themselves do not have a clue what the financial future will bring. Ha, “the devil made me do it” becomes the plea of the often banished underwriter. Regrettable the role of devil can be played by either the marketing conscience or the corporate actuary.

Sleepless nights abound as the reinsurance underwriter relives over and over again the combinations of CAD, IDDM, MS, CVA, BP, PP, SGOT, SGPT, AP, etc. Or was it just their partners snoring? Every decision that went to the edge of reasonableness will haunt the reinsurance underwriter for days or at least until the next beer. The rookie reinsurance underwriter has far more sleepless nights than the seasoned veteran. Until you realize no one really cares the next day, you worry. Thus experience has its rewards.

Where was I before I diverged somewhat? Right, the 19 cases and earth shattering decisions. I guessed that perhaps a third of the 19 cases would get a quote of some kind from perhaps one reinsurer. To my befuddlement every one of the 19 cases received in bold print a quote! That in and of itself was shock enough but it was not the story.

Every single case of the 19 received a table 2 (+50 mortality points for the ununderwriters)! I still, months later, shake my head or at least it is being shock at the knowledge that being good with the thin pointy pencil on a third of the cases is no longer sufficient. The “bar has been raised”, “benchmark heightened” or the competition’s tougher in plain utilitarian English. Then I grab myself (figuratively not physically) and rationalize that perhaps the younger student of underwriting cannot count beyond 50 (a binary system involving no more than 5 sets of fingers). Has the word decline ceased to be necessary. To most readers of this magazine the answer is yes. To a select few the answer is no. There are indeed cases that should be declined as potentially immediate risks and if over a couple of years you get enough of these you are in big “do do”.

So much for my years of accumulated expertise and funny stories helping me predict the world of facultative underwriting. I am in a world of unpredictable events. The next thing I will hear is that Sun and Manulife have merged and their CEO’s are coexisting in the same seat of power! The next thing I will hear is an actuary building in a percentage for deteriorating mortality. The next thing I will hear is that my pending book is a best seller! The next thing I will hear is that none of the cases I underwrote ever became a claim! So much for the reliability of predictability. Our industry is changing and yet there remains the same competitive beehive of activity it has always been.

I thank the company for giving me a new insight into today’s reality, the lack of predictability and the answer to my question. The question of course was who was the winningest reinsurer on these 19 decline cases. I honestly will be eternally thankful for the news that it was one of the other reinsurers who won 11 of the 19. There are times it feels good to come in 4th! I have always wanted to win the right ones and lose the bad ones to my competitors (bad as likely as not being in the eye of the underwriter). Taking risk with such immediacy attached to their imminent mortality is not what I want to win.

We are very fortunate to be operating in an environment that is very unpredictable and thus challenging. Soon the norm like testing for HIV will reach new thresholds. Soon those that are HIV positive will not be declines as s already the case with at least one US company. Remember that just prior to the HIV testing our industry was very, very comfortable with accepting applicants for insurance amounts up to $1,000,000 with only a nonmedical. May those days return? Given the rush to liberalize our underwriting process it can only be around the corner.

As for the broker or agent of record your every dream is coming true. Well not quite, since having met a lot of you your dreams are sometimes beyond the realm of being fulfilled by any underwriter.

Over the past many months I have spent a considerable amount of my valuable time with systems people. They look the same, except for the pens in their pockets and intense giddiness when hardware and software is mentioned. They, these gurus of tomorrow’s solutions at today’s bargain prices, do speak a different language from us farm boys from rural Ontario. Because of these glaring differences I was astounded to hear reference to “paving the cowpath” by non other than an individual from IBM who spoke with a Texas twang.

The cowpath was fundamentally the route that paper takes from the customer’s desk or kitchen table to the bowls of the large life insurance company. Yes there are bowels deep inside often supplanting the heart but that is another story. The reference was of course to the making the path smoother to travel as step one and perhaps straightening it as step two. Benefits include not stepping in some great fertilizer or trying to poop and scoop with a plastic bag.

Filling in application forms is an integral part of our business and without the abundance of forms of all shapes and sizes we would have less bureaucracy, fewer lawyers and less of an encumbrance at the front end of the life insurance business. Unfortunately the paper is around for a few more years and there is a great struggle to reduce the volume what looms on the horizon may not offer much of an alternative unless everyone pitches in to make the choices viable. The worst possible scenario is for paper to not be reduced but exaggerated to serve no concrete purpose. Using two words to spell cowpath goes against my humble origins.

In late 1994 a rather sharp, as in bright pink paper, piece of mail came to my attention thanks to someone who was in cardiac arrest after having himself received the article in question via the Queen’s postal system. It was not that he wanted moi to follow his heart’s reaction but rather hopefully and erroneously tell him it was a mirage. Behind the vibrant pink cover were six pages that represented the culmination of countless hours of work by industry professionals. There was also the covering note reflecting the praises of the industry “alert getter”. My review of the onerous material was the same as the provider of the sleepless night, “Who is going to use this form?”

Not to hurt anyone’s feelings but “The Uniform Paramedical Part II” designed by The Uniform Part II Development Committee was a shock to the system (human not computer). Six pages of square boxes for nurses or doctors to steadily and exactly within the squares write in all that ails our potential customers. I never learned who was to pay for the filling in of same nor the training on printing and brevity. December 1995 and I am still searching for a company that is using this new and evolutionary form.

The intention was fantastic and well directed at the gathering of information that would free our computer’s desire for encodeable data via optical readers or at least clever data entry clerks (is that still politically correct or is there a more apt description of an age old unction? The race was definitely on to either have all concerned with an application for life insurance enter data directly onto a computer or at least print like you did in grade three. Unfortunately but probably predictable the race became a three-legged race. One leg represented the standardization of all our forms. The second leg represented ANSI standards (a North American wide move to standardize our data by number and specific locations. Lastly we had the laptop race, which became closer to fiction than fact in 1995.

Today we have hard earned real cash being spent on all legs of the race and yet there appears to be little concerted effort to bring all the factions together to build a vehicle that encompasses all that is needed now and sets up the future. I will mention a few initiatives that are going on with a restraint on my usual unbridled critiques of things that go bump in the night or in this case the light of day in our insurance industry. My apologize to any of the hard working committee members that I offend through my candour but I am sure you or they (if they are not readers of MO) will take in stride and put me on another task force.

The ANSI standards group has been looked at from afar by yours truly with admiration for its unfailing enthusiasm for what is a boring and tedious project spread over hundreds of volunteers who see gain from the pain. Their task is to get all our forms and procedures reduced to simple numeric codes that will enable the rapid assimilation by machine of our data and our directions for that data. In the world of the future their diligent and extremely detailed work will pay for itself many times over. For right now, as I learned when working on an insurance industry system, the standards are often ahead of the need or not quite ready where needed. Fact and fiction are merging though so lets not give up. At last count the life application had 400 plus encodeable pieces of data. That of course is the biggest xzy%$#… of an application any one of us will ever see. Again I will be pleased to see the abridged version of only two hundred.

The laptop as means of collecting data be it the application or the medical data via doctor or nurse is on its way and is in real use in some organizations — usually those that have captive field forces and can bear the cost. If we had a world whereby every agent or broker could enter all that personal data of customers and have it feed the illustration systems and on to the application for insurance, paper would disappear and layers of data entry people would be redundant. I was recently told of one large US company that has 11 (lucky eleven) points where critical data like name, SIN, date of birth and address are entered! With electronic applications we can feed the life insurance company with “EDI” that turns the crank of underwriting and administration systems.

I am waiting for this day, which I predicted, would happen in 1990. Maybe 1998 is the transition year between paper as our medium and binary numbers (binary numbers were designed for simple folk) as our salvation.

The generic application is just like generic medicine — it’s not only good for what ails you but also it costs so little. The largest cost is in the ownership ritual people have for what is coveted in their own application both part I and part II. Twenty-five years ago I was trained on the existing generic (it was not called generic since I think the word generic was not invented yet) part II. Individualism was the rage and the uniform part II was devoured by numerous precocious lawyers, underwriting academics (I enjoyed that period) and verbose medical practitioners. Today we look back on valiant yet futile attempts to get a generic application and notice our sister/brother (Steve, which is politically correct) industry in the automobile insurance environment using a simple, cheap and thin generic application.

Most recently a new beginning is sought for a generic application because agent, broker, underwriter, administrator, etc. wants to reduce costs, increase simplicity, carry less paper and move us to an eventual smooth transition to electronic data flow. A small group of forward thinking entrepreneurs unfettered by the past and encouraged by their employers want to have a generic application on the street by the end of the first quarter of 1996. It can be done and it would be a tribute to today’s life industry if we could drop the comical rivalry in building pretty to view but cumbersome to use applications. For the group I sampled a dozen brokers and two career agents (closet brokers who’s secret will follow me to my book) and six underwriters (had to have less than the producers for fear of reprisals). Unanimous in desire to have a generic application. Not quite so one-sided in support. One of the latter said it could not be done and is a waste of effort. The gauntlet is on the turf and I sincerely hope the whole spectrum of industry movers and shakers step up to retrieve it and bring about a miracle.

ANSI, laptops and generics (not to be mistaken with geriatrics) are here and evolving. There are no shortcuts to retooling our industry but a network that binds us all at the most cost effective unit cost an bring about all of the above as it forms a catalyst for evolution. Imaging paper and gradually increasing the EDI segment as it evolves and brokers learn to type faster than me is one way of getting the paper collected in front of the nose of the underwriter immediately. This will give immediate results to the broker while setting up the electronic infrastructure to handle more and more of those elusive binary numbers. The latter being a home run for the head office staff.

Telemarketing is a proven phenomenon that has been used to sell everything from chimney cleaning to insurance. Success varies by product but it generally has a large following of believers who hope it grows in life insurance. The latest upstart of similar genetic structure is the teleunderwriter. The agent does his or her think in finding the customer, assessing the need and closing the sale. The basic data about the human being are given to the teleunderwriting team who has an underwriter call the customer at a predetermined time. The success of the underwriter customer interaction has been very high. Less attending physician statements is a real big plus as they account for the single largest reason for delays in underwriting (although lost files really ran a close second right up at the echelon of significant issues).

Brokers sell. Underwriters underwrite. Medical evidence providers provide data. Laboratories get the spit, peepee (another one of those descriptive words that only a mother could invent) and blood. Administrators administrate. Network managers manage it all. What a great world we are heading into as an industry. Now if we could only get all brokers to be data entry persons!

Many a flight in 2006 went well and actually took off and landed on time. I take no credit for such good fortune but rather applaud the rarity of such events when they do happen. I think airlines in general are just penurious with their “on time” delivery. Switching carriers rarely does any good as each airline has their “bad days” or better yet their “good days” do occur amongst the “bad days”. What prompts this musing is the seemingly elongated stretch of misfortune of not having any flight leave, arrive or behave as advertised. From May to early September 2006 my destiny was to suffer the most irritating of delays and generally terrible ground and flight crews that did nothing to make the misadventures more palatable.

To recount all the flights from hell would bore even an airline critic or the travel ombudsman. Thus my tale uses the most taxing trip and the capstone of five months of travel. It started as what should have been an easy flight from Toronto to Heathrow, change planes and head to Budapest. “Should have been” ended up as “not a hope in Hell.”

True to my habits of on time delivery of my body and luggage to airports well in advance of takeoff, I arrived at Terminal 1 of Toronto’s Pearson Airport some two hours and thirty-two minutes ahead of flight time. Usually for frequent flyers, with enough miles in the air (or on the ground waiting for a gate), there is a privilege line to fast track me through the check in process. It was indeed a short line. I must be truly blessed this day.

The short line was short but also, much to my chagrin, not even moving. Why I did not move from my stationary position as next in line began to wear on me? What could be taking the person ahead of me so long to check baggage, get boarding pass and disappear through the security check? It sounded and appeared that he was rerouting himself through a dozen countries, trying to use the complex upgrade certificates on each segment and insisting on seat “3A” as he had a phobia about every other seat. His patience was being tested as was the ground staffs. My patience was being toyed with but I had time to spare so another 5, 10 or 15 minutes did not matter. But it was 16 minutes and 33 seconds before I advanced to check in. Meanwhile all the other check in staff serviced regular passengers who lacked the “privilege” status. Who said “loyalty” has its privileges? Certainly it was not the airline, but perhaps “loyalty” is an overused word in even our business these days. “Loyalty” is but another seven letter word to be used in a willy nilly fashion by employers, staff and suppliers.

As I moved to step two, which was to make it through security, I heard the check in staff say there has been an “equipment change” but it did not affect my assigned seating. Other than the knowing that an equipment change announced two plus hours in advance of departure time is no deterrent to “have a good flight”, I became apprehensive for some unknown reason.

The mandatory security screening was just as it had been for the last several years but exaggerated in intensity since “liquids” were added to the list of prohibited items like knives, AK 47s, gel explosives and nail files. Why is it that I get in the line behind someone who has not flown in 20 years, carries enough cosmetics to be considered a travelling Avon Lady and has enough trinkets adorning her body to indicate she watches too much of the “Shoppers’ Channel”. Four attempts latter she finally strips herself of all the banned substances and metal but with the anger and blasphemy directed at the security team which would make a sailor blush or at least take notes. Thankfully we were spared the sight of her body search as that would have taken an hour! The imagination runs amok at what one might find in the numerous body folds of the dear lady. The husband on the other hand having slid through with no encumbering paraphernalia kept yelling at her “I told you it was forbidden to travel with so much illegal contraband like body spray, anti aging creams and steel toed shoes.”

My experience comes in useful as I clear the dreaded portal and not even my watch sets off the alarms (leather strap being the preferred binding over steel). Too bad, because on this occasion, it is a rather attractive security guard who would have done the body search. Note to self, wear a bigger belt buckle next time with iron crucifix buried under shirt.

Step three varies dependent on how one likes to spend time waiting at airports. I like to sit in the “privilege” lounge and use their internet and phones. The afternoon cookies are also an attraction! It is a crowded lounge and makes one wonder if the environment on a crowded day is better here or in the spacious common areas of Terminal 1. Even with the crowd of people and buzz of 200 cell phone conversations, I could hear the voice or twang of my traveling business connection who shall be labelled “N” to protect Neil’s identity. We make the perfunctory “How Are You’s” and then get caught up on company and local office gossip and politics. That killed the hour rather quickly and we never did finish the list of office political misadventures. If enough people gossip one can piece together what is actually happening in an office where leadership lacks communication skills. If the office does have good communication skills they write a book about it. When was the last time you read a good book of an actual real life company’s successful office communications? Off to the plane.

Not only had there been a change of aircraft but someone forgot to use the new seating configuration so the gate was a clutter with people scrambling to get new seat assignments, business class people fuming that they now had to ride with the masses and children who should have been asleep. We are definitely going to be late leaving Toronto and true to form the Spartan team of Air Canada staff were in a foul mood, seemed disorganized and at times abandoned the process for a latte. Take off came over one hour later than scheduled and the air travellers all knew arrival at Heathrow would be late. For those with connecting flights like “N” and I the 80 minute period to make the connection is now down to 20 minutes. Only an Olympic sprinter on drugs could even attempt that challenge at Heathrow.

We hit the ground determined to sprint to our next terminal and pray all the while that the plane to Budapest was somehow delayed enough for two middle aged men to manoeuvre Heathrow’s myriad of travelers obstacles. Carrying too much hand luggage can slow one down in a sprint. Against all odds “N” and I made it through using the “privileged lanes” that the Brits still know are important to those who can pay or can prove royal lineage or at least one’s mother slept with royal lineage. That plus some intimidating looks got us to the Hungarian Airlines desk a mere 10 minutes after scheduled departure of the plane. The smiling check in man said calmly that the gate is closed so too bad. He said go sit over there and cool your heals (it was the heart rate I was more worried about) while he checks flights. Then as if only seconds later (heart rate must have brought on delirium) the smiling check in man waved at us to come on over. He announced that if we hurry there might be a chance to get on the flight. Great news.

Once again the heart rate was maximized, sweat was more evident and 24 hour deodorant was tested to its full commercial advertised limit. Turning the corner we hit, in a figurative sense, a closed boarding gate door. Only a couple of people were in the departure hall at our gate so our assumption was we ran for nothing. It was only now we decided a bio break was the smart thing to do. As we turned to hunt down the “Male” sign a security guard asked why we looked so forlorn. Our answer was the missed flight. His bright faced smile said we had plenty of time to catch the flight as it had not even arrived at the gate and thus the gate doors were still closed! As our minds reflected on the sadistic check in man, the need of the bio break was a top priority especially for “N”. Too much water is sometimes a curse and even a great reinsurer like “N” could not calm the 4 litres of liquid inside his bladder. (Note: reinsurers are noted for large bladders which enable them to never leave the negotiating table or cocktail party before there guests. There is one exception to this and I have pictures to someday show the world of her in her favourite position.)

Feeling under less of a biological strain as well as a travel strain we now appreciated that with almost two hours to cool our heels and underarms our luggage would surely make the flight to Budapest. “Don’t worry Be happy” came to mind as we sat very still hoping for a pulse rate below 100 per minute to arrive before we had to lug carry on stuff onto the plane. Life does not get much better than sitting knowing where you are going (few executives today know or at least their staff believe they have no idea), your baggage is going to arrive with you and the thought of another new city finally took hold.

My luggage came through the luggage belt unscathed in Budapest and near the end of all arriving luggage which is usual when they put a “priority” tag on it. “N’s” luggage decided Heathrow was a nice place so it stayed behind. We did not realize that until all luggages were off the conveyor belt and no one was left in the area except the baggage handlers. “N” took his foul mood to the lost luggage window where the usual smiling clerk asks you to fill in forms and asks that infamous question “When did you last see your luggage?” Is the answer “When I checked it in, in Toronto?” or is it “When I went into the cargo hold mid flight to see how it was faring as we crossed the Atlantic?” We are now about 4 hours behind schedule and poor “A” has been waiting at the airport to meet us for the last 6 hours. Instructions on how to get a modest amount of “we are sorry” cash from the airline consumed more time and mental acuity in finding where and how. Hungarian was neither our second, third or fourth language.

Okay the worst has to be over and we can now control our own destiny as we take to a rental car and drive a modest distance to 14 Bajcsy-Zsilinszky Street in Balatonalmadi, Hungary. What can happen in 110 kilometres of expressway?

Each of us (“A”, “N” and I) had copies of the “Yahoo” driving instructions plus a route map from here to there and back. Three turns onto an expressway, change expressways once and three turns off the expressway and we would be safely in bed at the Ramada Hotel and Conference Centre (not exactly the Grand Hyatt Resort and Spa but that was reserved for leadership travel only). Written word and pictures of the route were not adequate for “A” who paid the extra currency for a talking GPS machine to be fitted in our rental car. Now we had three sets of instructions, three route maps and a GPS navigator. A stranger could see in a flash that we were in the risk management side of insurance! The salesman would have hired a taxi and the leader would have employed a limousine and consort to while away the travel time.

“A” was insistent we listen to the machine as it calmly told us where to go! The frustration was almost immediate as the machine made the three turns shown on paper instructions become six turns. Not only that but every time we got on an expressway we were calmly told to exit freeway and take a secondary road. Strange how different “Yahoo’s” instructions were from the friendly and monotone GPS voice. Get on the expressway. Get off the expressway. “A” had to find a service centre since “N” needed badly a bio break (again consuming so much water, although great for the complexion and bodily functions does have its down side) and we needed to buy an expressway pass. With pass in hand and water level down to tolerable level we traveled on. Why did the GPS seemingly keep us going in circles? We all knew we had passed the same homes and the same scenery many times and thus concluded we were traveling in circles. As darkness descended only the lights and intersections were recognized over and over again. “A” though secretly had unbending faith in the technology and perhaps thought the GPS was saving us from a revolution (actually started two days later) or a washed out freeway. “N” sat stoically in the back seat fretting over his upcoming appearance in front of important customers dressed in tacky shirt and jeans (without a crease). More accurately as much as we did not want to admit it, we were traveling the same circle route over and over again. What did the GPS have against the freeway? How long before “N” wanted to stop at he same expressway gas station for a bio break. Maybe then he would be convinced he had seen that urinal before.

Okay we would over-ride the GPS, take the freeway and head for our destination. Finally three hours plus late we were driving down “Bajcsy-Zsilinszky Street”. Problem was there was no hotel at #14. The family home looked far too cozy to host hundreds at an insurer’s conference! Okay, collectively we knew there was a problem, so we agreed after much debate to ask a pedestrian if he could tell us where to go. Three men succumbing to asking for instructions was thought to be a world record and fit for the Guinness Book. “N” sure would like a Guinness about now. In English we hoped the pedestrian had some understanding of our hand gestures, points at map and slow English. His English was very rudimentary but he was clear when he said we were on the right street but we were in the wrong town or more rightly wrong village. I could never have helped someone in Richmond Hill who needed my rudimentary Hungarian. He very carefully told the three of us how to get out of town and in the right town and on the right street.

In a moment of reflection I wondered if the competition had sabotaged our GPS! It would clearly be they that benefited from a tired band of three arriving at the meeting haggard looking and without the right attire. Sorry only “N” would be shabbily dressed. We did try and console “N” with the comment that a new sport coat, pants and shirt would be less than people we know who squander more on golf and wine. At least this was in the name of marketing and image building; when golf with staff helped who, one could ask.

Finally we arrived at the address in the right town and were whisked through reception in a most efficient manner. One could think the super service was due to any combination of a) it was midnight in a small town, b) three big men looking ready to kill their GPS, c) “N” badly in need of a bio break and d) the 24 hour period on their deodorant had expired.

The rest was boring. The talks went well although the message was tampered with at the last moment or after. The audience through the translators’ version seemed happy with only a few sleeping or left wondering what they missed in the translation. “N” made a public apology for his lack of proper attire. “A” still fretted over the belligerent GPS and the numerous emails changing all the plans at the last moment for the next event in Warsaw. Why is it those who delegate responsibilities because they do not want the responsibility make sure those that take responsibility are driven to drink with micro management? You will have to wait for the book and the insight it will bring to management or what passes for management.

“N” and “A” went on to Warsaw to another story I can only one day write about in my management script. “N” happy as bio breaks were less frequently needed (learned that 3 litres will suffice) and he had clean underwear (simper ubi sub ubi) and a tooth brush. “A” would take weeks to come down from his “high” of two public spectacles (the good kind that warm the heart) in the same week.

For me the flight home was just perfect. A rare great airline crew on all flights. A quiet lounge offered mid trip solace. On the way to Vancouver passing near the Pole I wondered if the isolation of the Arctic is where we should send all incomplete management to see that they cannot control the environment even though they think they can. Enough of that political thought as Vancouver grew closer and I still had two more stops to make this week. If its Wednesday the speech is on…