Dear friend,

Right on cue, here comes the new consensus.

Bumper profits are fuelling excess capital, which is accelerating the overall softening tendency that has been underlying the market for the past two years, despite mega-catastrophes.

That softening is pretty much across the board now that Florida has put the Cat amongst the pigeons and other Southern US governors are pricking up their ears.

Now that Florida is off limits, there aren’t any good no-brainer reinsurance bets left, so it looks like its time to take a bit of cash off the table.

Munich Re and Swiss Re are going to pursue hefty buybacks, and Arch has authorised a repurchase scheme that could take a quarter of its capital out of the game.
I’m looking forward to the first announcements from prominent class of 2005 players for the icing on the cake.

In fact it’s all very much like the first half of 2005, isn’t it, dear long-suffering friend?

Back then huge wedges off cash came off the class of 2001, like fleeces off sheep when spring has sprung. I remember all Bermuda being agog at the paydays for players like Tony Taylor of Montpelier as whopping special dividends swelled investors’ current accounts.

But remember what came next? It wasn’t long before that same Montpelier was posting one of the largest hits to capital of any reinsurer (sorry can’t remember the exact numbers off the top of my head) and was out on the fund-raising stump once again.

It’s, this capital management business. Too much and you’re wasting precious capital, too little and you risk death.

And on that cheery note, let’s move on.