may 2011 - agenda magazine

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May 2011 issue of Agenda Magazine

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3AGENDA / May 2011

Are you a Member yet?1. Market Information.2. Networking3. Education & Seminars.4. Quality Presentations5. Representation6. Tradeshow7. Monthly Meetings8. Industry Recognition9. Qualified Vendors.20. Strong Leadership.11. Meaningful Discounts.12. Preferred Positioning.

LA

AA

Mem

bers

hip

Benefi

ts:

LAAA

Mee

ting

Cale

ndar

L.A.A.A.P.O.Box 4564

Valley Village, CA 91617(818) 635-4848

[email protected]

www.latinagents.com

For up to date meeting info in your area, go to www.latinagents.com/calendar

05.19.2011 - MeetingL.A. Monthly MeetingStevens Steak HouseCommerce, CA

05.25.2011 - TrainingLas Vegas Commercial 101 TrainingNational Golf CourseLas Vegas, NV

12.01.2011 - 12.04.2011 - ConventionConvention and Christmas GalaLong Beach Reinassance HotelLong Beach, CA

4 AGENDA / May 2011

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16075 Tapco Ad - LAAA Agenda April 2011.pdf 3/9/11 9:11:34 AM

Within the last six months, we at Andree

& Associates had been working with

many different companies in building

better websites and driving significant

WHO IS REGULATING THE LARGEST GLOBAL INSURANCE COMPANIES AND BANKS? Do These Financial Intermediaries Need Special Regulation and Oversight? Who will do it?

traffic to their websites. With each

website we initially started with the

goal of building better search engine

rankings, by doing some website re-

By Stephen Santoro

design, search engine optimization and

other. Along the way we found many

different ways of driving traffic to their

websites as described below.

Hope they work for you, the way they

have work for my company and different

clients.

1.- Event Coverage: this is simple try

attending events that are related to

your customer niche. Basically narrow

your audience, target groups of people

that have interests in certain things

for example, Off-roading, insurance,

lawyers, computer consultants, car

racing, chamber of commerce meetings,

or just business oriented groups. You

can also narrow by county, city, state or

country depending on your advertising

budged.

So for example if you are targeting

people in the car racing area you would

need to participate in a car show, be a

racing team sponsor, or just attend a

local car racing event. Take pictures and

notes and publish them on your website

so people can browse the pictures and

comment on them.

It’s very important to let people in the

event know that you will be posting a

The superfund neither resolves the core issue or mitigates the fundamental problems of the financial markets.

review and pictures on your website.

Also print some flyers and hand them

over to help people remember your

website address, if available create a

special offer, something like “Browse

the event pictures on our website after

X or Y date and get 15% discount on any

product” will do the trick.

The sub-prime and Alt-A mortgage

bubble have caused HUGE havoc in

financial markets. The economy has

shown other weak sectors in the credit

markets as a result. A recession can

be avoided, yet when compared with

the robust economic expansion of the

past years the correction that followed

in 11.2007 seems like a recession

nonetheless. I must ask: Who is

charge? Who is watching? What kind

of role should insurance and banking

regulators play to ensure this fiasco

never occurs again? And can they or

will they safeguard us against current

and future turmoil? Should one federal

regulator manage global insurers in

the USA instead of 51 individual state

regulators and the District of Columbia?

The US Treasury Secretary Henry

Paulson, in concert with CITIGROUP,

Bank of America, NT/SA and JP Morgan

Chase, NT/SA proposed the creation of a

“superfund” called the “Master Liquidity

Enhancement Conduit”. This fund

is designed to buy mortgage backed

securities (MBS’s), collateralized debt

obligations (CDO’s) and collateralized

loan obligations (CLO’s) from structured

7AGENDA / May 2011

investments vehicles (SIV’s), most

owned by CITIGROUP, BOA and JPM,

who had invested in prime, sub-prime

and Alt-A mortgages. I don’t see the

need for this “superfund”. The banks,

insurance and reinsurance companies

involved who bought these securities

(many allegedly rated by S&P, WEISS and

Moody’s as AAA) still hold the capacity

to meet their lending commitments

and risk-based capital requirements.

Further, this superfund would acquire

only better quality mortgages of these

SIV’s. I doubt this would entice or

encourage commercial-paper holders

of these SIV’s to continue to “roll over

their paper” or continue lending to these

SIV’s. It appears the basic purpose

of this superfund is to only delay the

recognition of these losses, the accurate

and proper pricing and the resultant

write-offs and write-downs. The

superfund neither resolves the core issue

or mitigates the fundamental problems

of the financial markets. Another

measure is for the Federal Reserve

Board of Governors aggressive easing

of US monetary policy, by lowering the

federal funds rate (the rate banks charge

each other) or the discount rate (the

rate the Fed charges banks who borrow

directly from it). The Fed has lowered

the federal funds rate and the discount

rate, while injecting large amounts of

cash reserves into the world banking

systems. The Fed, in concert with other

countries central banks went further

by informing member banks that credit

would be readily available, signaling

their help for allowing banks to make and

meet the banks commitments-including

SIV demands on the banks credit lines.

Major European central banks served

up HUGE cash reserves, frequently to

mitigate stresses. The Bank of Japan,

which spoke of raising rates, abstained

(temporarily) from raising rates. In

spite of these efforts by monetary and

insurance regulators, world markets

remain stresses, shaking and very

tense. Sub-prime and Alt-A mortgage

transaction volumes are virtually non-

existent. Stock prices of most world

and global financial institutions (banks,

savings & loans, insurance companies

and reinsurance companies) fell sharply,

many by 50%. Volatility was high. Key

commodity prices rose sharply. The US

dollar continues to fall sharply. Some

large countries are “de-linking” their

currencies to the US dollar, something 1

year ago that was unheard of.

The US Treasury, the Federal Reserve

Board of Governors, the National

Association of Insurance Commissioners

and all State Insurance Regulators did not

come forward with solutions that limit

future fiascos such as these bubbles

we just witnessed. These folks have

not upgraded their protocols to regulate

the fundamental structural changes that

have transformed markets in the recent

decade. In an age of transparency, these

global enterprises are really opaque.

8 AGENDA / May 2011

This issue has created fears, doubts and

mistrust about the underlying strength

of the markets and these institutions. A

decade ago financial markets were not

this complex. Today the are magnitudes

larger, and filled with complex, new and

arcane instruments. Risk taking-driven

by quantitative (quant) models has

become much more aggressive with

greater scale. These structural changes,

many if not most initiated in the USA, are

gaining acceptance in ALL major world

financial centers. We have created a

highly securitized financial world that

works well only if securities are priced

CORRECTLY and not “marked to myth”.

Weaknesses and failures in securities

pricing, as we have seen, wreaked havoc

in all markets. Investors, including me,

have learned the “hard way” that not all

assets are the same as to pricing, even if

rated investment grade AAA. There is a

HUGE difference to “marking to market”

value US government securities and

agencies or large high-quality private-

How can these folks encourage economic growth, while at the same time restraining financial markets within proper limits?

sector issues vs. lower quality issues

for which pricing is done off models

or some computer generate “matrix”.

Fed Chairman Bernanke was asked

once what information he would like

that is not currently available to him.

His answer, “I would like to know what

these MBS’s, CDO’s and CLO’s are really

worth. This episode (with sub-prime

and Alt-A mortgages) has revealed a

HUGE weakness in structured credit

products.”

Giant financial intermediaries (banks,

s&l’s, insurance and reinsurance

companies) have all contributed this

opaque environment in financial markets.

Their activities span many sectors

from consumers to business, trading

to investing, securities underwriting

to lending, proprietary (program)

trading, insurance and reinsurance

underwriting, real-estate brokerage,

from managing billions of consumer or

institutional dollars to consulting and

advising. These firms global presence

grows briskly every day, with many now

garnering most of their profits from

markets outside of the USA. Their sheer

size, scope, scale and reach in financial

markets worldwide is impossible to

decipher from their published financial

statements. Their reach is so vast and

deep these behemoths are “deemed to

large to fail”.

Who or what can provide financial

oversight, supervision and regulation

THAT IS CURRENT, UP TO DATE AND

9AGENDA / May 2011

AS SOPHISTICATED AS THEY ARE?

Today’s regulatory environment is a

historical artifact from an era when

financial markets and companies were

much more fragmented and insulated

from each other. US state and federal

regulators for various markets continue

to oversee specific activities in financial

markets. The elimination of “Chinese

walls” that once separate securities

brokerage, commercial banking,

personal banking, investment banking,

mutual funds, hedge funds, insurance,

reinsurance and other businesses has

made fragmented state and federal

regulation obsolete. The Federal Reserve

System and the National Association

of Insurance Commissioners (NAIC)

comes close to performing the role of

“global financial guardian”. Their central

missions are to implement policy (keep in

mind the NAIC is a “quasi-governmental

entity, whose strength comes from the

50 states and the District of Columbia’s

Insurance Commissioners) that will

encourage and sustain economic

growth. But these tactics do not

always work in concert with each. In

fact they often work against each other.

Officials acknowledge what to do when

a financial bubbles burst, yet they lack

the analytical capacity to identify a credit

bubble in the making. How can these

folks encourage economic growth, while

at the same time restraining financial

markets within proper limits?

What is urgently needed is a new kind

of regulator. This body will oversee the

largest US-based financial institutions,

banks, s&l’s, insurance companies and

reinsurance companies, who engage in

a broad on and off balance sheet activity

I noted previously in this article. This

authority would monitor and supervise

these behemoths, assessing capital

adequacy, loss reserves, soundness

of their trading, underwriting and

investment practices, their vulnerability

to conflicts of interest, measure their

stability and soundness, and make

certain of their competitiveness. I

am not advocating comprehensive

supervision of most or all financial

institutions. I do propose this oversight

for the 20 largest and some who wish to

be regulated as such, through this highly

sophisticated regulator that would

fill the much-needed regulatory void,

given the vast reach of these dominant

players. The 15 largest institutions

in the USA have combined assets of

$13 trillion. They dominate all areas

of underwriting, trading, investment

management, claims adjudication and

financial management. These firms

command an overwhelming position in

derivatives and in many of the esoteric

financial derivatives that have grown

so rapidly in the past 5-10 years. For

many smaller institutions the current

regulatory and supervisory authorities

should remain the same.

10 AGENDA / May 2011

I suggest this new entity be under the

joint supervision of the Federal Reserve

Board or Governors and the NAIC, due

to their collective insights into market

development and innovation. This new

authority should report to Congress

annually. In light of current and future

globalization, other leading economies

of the world should consider a similar

or joint approach. Here too, few

institutions would come under their

supervision, jurisdiction and regulation

in Europe, Canada, Asia and Australia.

For the past 5 years many have asked

for an alternative to state insurance

regulation. A federal charter was

discussed, with the insurance company

or reinsurance company having the

option of how it is regulated. I favored

this option and champion it today. I

now believe the same is necessary

for all financial intermediaries as I

describe above. Oversight by regulators

must align with the rapidly unfolding

developments in domestic and global

financial markets. If we do not do this,

the sub-prime and Alt-A mortgage crisis

will be nothing compared to what can

happen to our credit, banking, insurance

and reinsurance markets.

11AGENDA / May 2011

12 AGENDA / May 2011

13AGENDA / May 2011

14 AGENDA / May 2011

Together, we’ll make a difference.As we join you in celebrating Cinco de Mayo, we’d like to express our continued commitment to bilingual services and culturally responsible care. We look forward to working together to improve health care in the community. For more information, visit kp.org/espanol, or contact Carmen Salcido at [email protected] or 562-833-0197.

kp.org

16 AGENDA / May 2011

Our approach here at RMIS has always been and will continue to be, “Everyone deserves a chance.” A chance to estab-lish A relationship with a leading MGA in California. A chance to write business and earn a living. A chance to diversify and write lines of business you’re not fa-miliar with such as commercial auto, GL, package, professional E&O or work comp. A chance to grow and make the most of what you already are...a complete Califor-nia Insurance Broker in every which way. So you only sell personal lines and aren’t comfortable with commercial? Don’t be scared, let us teach you. Let us help you take out the guess work of where to place business and never turn it away. Give us a call to be surprised at how much we actu-ally can offer you. By the way, watch for our new personal auto market in FSC on 6/1 - it will be huge for your agencyso make sure it’s selected.You will notice RMIS offering a number of new products over the next 12 months that include 2 new standard/preferred ho-meowner markets and a new A rated per-sonal auto market that has never before been introduced to California (no joke, this is the first time anyone in California has ever seen this). A few that we’ve already added are Professional Liability, E&O, Non

Profit, General Liability for Artisans/Con-tractors, Commercial Packages that in-clude Habitational/Apartments, BOP’s and Worker’s Compensation. Have you noticed all of our InstaQuote Online Raters at RM-ISmga.com?Bob Moreno established RMIS in 1978 af-ter spending 14 years on the carrier side. His previous position was that of a Regri-onal Vice President of a very large, spe-cialty lines carrier. RMIS has long been an industry leading Managing General Agent and Specialty Lines Wholesale Broker in California. With over three decades of ex-perience, RMIS has grown tobecome one of the most respected companies in the insurance market today. We are dedicated to providing a level of professional service, growth and profit, seldom achieved in out sector of the insurance business. We strive to be the best at what we do, offering a wide range of competitively priced products for our insurance brokers from a line of excellent carriers. Born on April 10, 1978, RMIS has continued to be a family business valuing loyalty and respect through all the years.

www.RMISmga.com714.738.1383Where SERVICE And STABILITY Are Family

EVERYONE DESERVES A CHANCE TO ESTABLISH A RELATIONSHIPBy RMIS Insurance

20 AGENDA / May 2011

22 AGENDA / May 2011RELAX & THINK

24 AGENDA / May 2011