posted
So some of you know that I work in the Corporate America / Executive Suite / Wall Street type industry known as reinsurance. Usually nobody knows what that is besides lawyers and very few insurance professionals. I won’t bore you with the details. Reinsurance is closely related to insurance though its not the same thing. I’m tapped into the insurance industry but only tangentially. Anything I do at work wouldn’t have anything to do with the insurance you see every day unless you own a small business in a few specific segments or are a shareholder of a large corporation.
My job, as you probably imagine, is dull to people who are not in the industry. Basically, I’m a broker—I put together deals. If I can do 6 deals in one year, it’s a VERY good year. Sometimes, for whatever reason, I actually get to hear some pretty juicy and hilariously fascinating stories. Some so good that I have to share. For instance, the recent experience with the Russian Mob.
To try to sum it up quickly without boring you: when a business owner buys insurance, it generally works like this. The policy holder (business owner) goes to an insurance agent / broker (retailer), who then goes to a wholesaler, who then goes to an insurance company. Sometimes, the wholesaler gets a certain amount of authority from the insurance company so they can act on their behalf, binding policies. These guys are called MGA’s. Sometimes in my job, I link up MGA’s with insurance companies. Usually, the insurance provides specific guidelines the MGA must use to act on their behalf and bind policies, and they then audit them every year to make sure they follow these guidelines.
So, there is an MGA in Chicago that specializes in providing insurance for nightclubs and bars. Upon closer inspection, we learned it was actually almost entirely gentleman’s clubs that this MGA specialized in. Luckily for me, when I went out and visited these guys, they told me they were all set and didn’t need my services at the moment. This MGA had a binding authority for a large insurance company with offices all over the world, about $5 billion in surplus and is publicly traded on the NYSE. And in the last few weeks, the whole thing has blown up, which is fascinating to watch.
Turns out the MGA is owned by a Russian mobster; he has two aliases and five social security numbers. The MGA was binding policies for strip clubs all over the nation that were also owned by the Russian mob for the cheapest price imaginable, without any inspections and almost always outside the guidelines established by the insurance company. The insurance company began to realize something was wrong, and wanted to do an audit—except they could not get in touch with the MGA, and then the MGA claimed the files were all off sight. The company brought in the FBI, sensing something had gone wrong. They did their audit, and found out that 83% of insurance policies underwritten by the MGA fell outside the established guidelines.
This was classic insurance fraud. The Russian mob was getting their wholly owned strip clubs insurance on the cheap by defrauding the insurance company. They did not intend to bury the company with claims—not yet, at least, because that would burn the MGA, who is also likely a mobster (or at least tied in). But that was probably always an option. The company just sued the MGA for $17.5 million.
Right after they were sued, the MGA called me asking if I could help find them a new insurance company. At this time, I didn’t know what had happened, but luckily am working on a similar deal and couldn’t represent two MGA’s doing the same thing, so I declined. They didn’t need me, I guess, because they got their deal done almost immediately after with an even better known insurance company (who just about everyone has heard of). And then the press releases started coming out about the law suit…so I expect their current insurance company will cut them off it they’re smart.
I should totally turn this into a noir screen play for a movie! Too bad there wasn’t any Barbara Stanwyck femme fatale involved.
From: If you don't want my peaches, honey... | Registered: Sep 2003
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posted
Lacking a sexy heroine or villain in real life never stopped Hollywood before . . .
Good story, Cobie. Thanks for sharing.
-------------------- The Semi-Great Gildersleeve - writing, super-heroes, and this 'n' that
From: The Stasis Zone | Registered: Jul 2003
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When I was doing discovery documents for a bunch of reinsurance arbitrations, there was one memo in which some reinsurance brokers in the UK were described as being "willing to sell their own mothers for an extra buck."
-------------------- Five billion years from now the Sun will go nova and obliterate the Earth. Don't sweat the small stuff!
From: Boston | Registered: Aug 2003
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London reinsurance brokers, especially ones whose careers boomed in the 80's / 90's, are notorious in the industry.
From: If you don't want my peaches, honey... | Registered: Sep 2003
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posted
"Cobalt Kid: The Re-Insuranceanator!" "In a world of uninsured mobsters, and who wants that? comes...The Cobalt Kid. Packin' heat and SA120v forms, Cobalt Kid... He'll insure your ass. Oh yeah, he'll do it!"
-------------------- Damn you, you kids! Get off my lawn or I'm callin' tha cops!
posted
Oh man, my wife loves Johnny Dollar! She's a claims adjuster so maybe that's the appeal. If there was an OTR show about a temporary-Order-Management-Specialist I guess I'd listen to that.
From: Douglasville, GA | Registered: Jul 2003
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posted
I wish some of the conventions I attended had a Johnny Dollar panel and a Double Indemnity panel.
From: If you don't want my peaches, honey... | Registered: Sep 2003
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When I was doing discovery documents for a bunch of reinsurance arbitrations, there was one memo in which some reinsurance brokers in the UK were described as being "willing to sell their own mothers for an extra buck."
quote:Originally posted by Cobalt Kid: I think I've worked with those guys.
London reinsurance brokers, especially ones whose careers boomed in the 80's / 90's, are notorious in the industry.
posted
It's been the first topic everyone I've talked to all day has brought up. Good for him.
I'd be worried if anyone was surprised by this. It's hard to find anyone defending Goldman anymore...even Goldman employees, apparently.
From: If you don't want my peaches, honey... | Registered: Sep 2003
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Hyperpath: Email this page to someone!
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