Why isn’t it like 2005 any more?

I suppose the obvious answer to that question is that it is 2007!

But back in the pre-Katrina 2005 everyone was discarding excess capital like togas at one of Emperor Nero’s wilder parties.

This time not so much capital seems to be finding its way into shareholders current accounts, despite the fact that the last bits of balance sheet repair are now finished.

Except for a rapidly cooling property Cat market, rates are much worse than they were then. But in 2007, instead of not knowing what to do with their spare cash everyone seems to have a strategic diversification plan that needs executing.

Such is demand for diversity that one hears of US conglomerates hastily rooting around in their basements to see if there are any excess and surplus shell companies they have forgotten about and can dust down and flog off to eager buyers.

It’s like a dazed global reinsurance hokey cokey. Lloyd’s comes to Bermuda, Bermuda comes to Lloyd’s, Lloyd’s goes to mainland US, as does Bermuda. Old Europe is already everywhere — only more so now. Bermuda goes to Switzerland. Everyone goes to Dubai, Dublin and Singapore.

When everyone is doing everything the same how can everyone be doing the right thing? Everyone must be ever so slightly wrong.

And I think here and now is where it all starts going wrong ever so slowly. Absent any big Cats these are my gut feelings for 2008:

At least one mega-merger in the broking sphere — the weak dollar is a killer — and if any Asian currencies start seriously revaluing it is going to turn into a rout.

At least two hasty mega mergers between top-25 reinsurers as business dries up. The key difference here will be that the merger details don’t mention ‘perfect strategic fits’ any more — just obvious synergies and cost cutting.

The unseemly dash for US specialty business reveals its first victim. Not blood on the floor yet, just a few cuts and bruises that take the edge off otherwise still very good results.

People stop worrying about silly systemic D&O exposure to subprime and start remembering the more mundane but much more terrifying exposure they have to books of private mortgage insurance, consumer credit and credit guarantee business. Some start looking at case studies of the UK market in the early nineties and start worrying a lot more.

I could go on, but my keyboard has run out of ink!