may 2011 - agenda magazine
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May 2011 issue of Agenda MagazineTRANSCRIPT
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.
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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.
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