Overview
The RBS Project Finance Group prides itself in providing our clients professional services of exceptional quality and of unique standing in the Emerging Market Project Finance field. The complexity surrounding the capital markets and Emerging Market Project Finance can solely be managed by firms with a comprehensive understanding of the needs of all of the relevant parties to a transaction. To ensure that a level of satisfaction is obtained between the institutional investors, lenders, private equity funds, and Project Sponsors we work with, RBS monitors the performance of our projects in order to ensure that prosperous long-term business relationships are fostered.
Our objective, amongst other things, is to provide prudent financial advice on a timely manner and satisfy the specific needs of each of our clients. RBS maintains an ample network of senior-level corporate relationships at an international level and acts at the highest level of professionalism with a work ethic inline with the interests of our clients, by never taking on the fundraising of a project in which the firm would not agree to be invested in. Project Finance transactions are off-balance sheet investments that typically take the form of a Special Purpose Vehicle (SPV) and are in excess of $100M.
Institutional Investors
RBS understands that institutional investors and private equity funds operate on stringent guidelines which limit their time horizons and risk exposure levels, particularly when investing in Emerging Market opportunities that bring appeal with their high-yielding metrics. In order to contain risk and limit the exposure of any given investor into a project RBS offers Investor Representation and Intelligence Services.
RBS Investor Representation:
RBS can represent and advise investors in various areas for the creation of corporate and project value, while streamlining the investment process with RBS attending to matters of:
• Proxy voting;
• Risk mitigation strategies;
• Strategic partner identification;
• Accountant advice;
• PR and broker consultants advice;
• Tax consequences, and;
• Legal representation (through an assign).
Intelligence Services:
Through our Intelligence@RBS services we provide qualitative and quantitative asset management reports for parties which invest in our projects through the implementation of a JD EDWARDS project management and reporting system. These JD EDWARDS reports can also be accompanied by status updates that highlight project progress and performance. Investors can also request ad-hoc queries or tailored reports surrounding a particular industry and geographic location they might be interested in (i.e. Polish Steel). These ad-hoc reports include information from the world's finest informational databases such as Thompson DataStar, Goliath, Hoover's, LexisNexis, Economist Intelligence Unit, our in-country foreign representatives, and other avenues.
Corporate Advisory
RBS works with top tier Emerging Market firms that hold strong value characteristics, including sound financial health, responsible management, transparent corporate governance, and have attractive business propositions. These firms are usually below the radar of the major international investment bodies, yet are significantly well established enough for RBS to identify them, or them to identify RBS. RBS can provide financial advice to our Project Sponsors and assist them with the development of complete a Project Plan. The Project Plan includes extensive due diligence concerning operational reviews, financial reviews, legal reviews, market research, customer references, technological assessments, auditing, translation, socio-environmental analysis and management competency analysis. Project Sponsors can also obtain our council regarding corporate actions surrounding deal valuation, transaction structure, consideration types (i.e. cash or stock), tactics, timing, strategic investors and the development of partnerships with international market leaders in a particular industry
Project Finance Consideration
The following considerations are common in most of our Project Finance transactions:
Project Repayment Cycle:
In order to ensure repayment of loans and investments the following steps are taken in order to redirect revenues typically from an offshore SPV account:
Step 1 - Pay off operating costs Step 2 - Pay off taxes Step 3 - Pay off loan interest Step 4 - Pay off loan principal Step 5 - Pay off maintenance costs Step 6 - Pay off dividends to shareholders
Financial covenants in Syndicated Credit Facility:
Covenants ensure that the Borrower agrees to refrain from certain actions in order to protect the Lender or investors interests. There are many types of covenants amongst which the most common cover matters such as working capital, debt-to-equity ratios and dividend payments. Financial covenants of most RBS Project Finance transactions will include:
I. An agreement for the Borrower to not undertake further new debt upon loan approval
II. There should be no change in ownership during project loan repayment term
III. Debt Service Coverage Ratio (DSCR) typically of at least 1.5 (varies by sector)
Security Package
The security package is used to entice an Investor and Lender's appetite for a given investment by attempting to mitigate risk through preemptive planning. Security packages are easiest to use in the process of asset-backed securitization, where the assets are used as collateral in the risk mitigation process. The securitization of trade receivables is also a common form of structured trade finance, where the quality of the receivables is measured by the credit rating quality of the Buyers. A typical Security Package will include the following:
• The pledge of Special Purpose Vehicle or Entity (SPV or SPE) shares throughout loan repayment
• A partial mortgage of land, equipment and/or Inventory
• Supply and off-take agreements assigned to Lender in case of default
• Assignment of insurance proceeds to Lender
Project Acceptance Criteria
Corporate Characteristics:
1. Minimum 5-year in-sector in-country existence and experience
2. Minimum annual sales of USD $ 20 Million
3. Minimum annual average profit of USD $1.5 Million for past 3 years
4. Corporate governance transparency and accountability
5. Company is willing to be audited by an internationally recognized entity
Project Characteristics:
7. Project is within one of the Industries of Operation
6. Project is located in one of the Emerging Markets of Operation
8. Project does not fit within the Non-Eligible Projects
Financial Characteristics
9. Preference is given to hard currency Projects (USD, EURO, POUND)
10. Maximum repayment term of 10 years for investment (debt or equity)
11. Minimum investment required of USD $15 million (debt or equity)
12. Minimum IRR of 25% per annum
Sunday, January 25, 2009
Saturday, January 24, 2009
Who's got the biggest stock exchange?
MSNBC.com answers your questions on business, personal finance
Terry from down under is trying to figure out whose stock market on his side of the globe is bigger: Australia or New Zealand? (Sounds like he may be trying to settle a bar bet.) When it comes to investing in global stock markets, size does matter. But it isn't always the most important consideration.
How much is the New Zealand stock market worth compared to the Australian market? Which stock market in Asia is worth the most (market capitalization in US$ terms)?Terry V. -- Melbourne, Victoria, Australia
No worries, Terry. You Ozzies have the Kiwis beat hands down. According to the latest figures from the World Federation of Exchanges, the Australian Stock Exchange had a total market capitalization of $777.7 billion as of October, 2005 – up 15 percent from a year ago. Over in Wellington, the New Zealand Exchange reported a total market cap of $41.7 billion – up 9 percent. (On the other hand, if the Kiwis traded livestock along with their corporate stock, their exchange would be huge.)
Japan’s two stock exchanges still dominate the Asia-Pacific region in terms of the total value of all the domestic stocks traded on those markets. The top spot goes to the Tokyo Stock Exchange, which has a combined market cap of just over $4 trillion, followed by the Osaka Stock Exchange, with a combined stock value of $2.6 trillion.
By comparison, the granddaddy of all stock markets, the New York Stock Exchange, had a total market cap of nearly $13 trillion as of October – up 10 percent. The Nasdaq – with $3.5 trillion in market cap – was up just 7 percent.
Bigger markets do have some advantages: the most important is what's called "liquidity." The bigger the market, the easier it will be find a buyer for your stock when you're ready to sell. Most investors also want to know how fast a country’s stock market is growing. On your side of the globe, Japan's market have also been among the fastest growers: the Tokyo exchange was up 26 percent for the 12 months ending in October; Osaka was up 27 percent.
But chasing growth overseas can be risky. Your investment will be converted into the exchange's local currency, which may or may not hold up well against your local currency when you decide bring your money back home. You’ll usually have a much harder time getting information about stocks listed on an overseas exchange. And not all exchanges operate under the kind of strict regulations to protect investors that you may have come to expect. That’s why individual investors are much better off buying into funds managed by stock-pickers who are experienced with the quirks and pitfalls of buying foreign stocks.
Smaller international exchanges can be much more volatile than older, better-established markets. The fastest growing Asian stock market for the 12 months ended in October, for example, was the tiny Colombo Stock Exchange in Sri Lanka (market cap $7.5 billion) which grew by 105 percent. That kind of rally is pretty tough to sustain: past results, as they say, are no guarantee of future performance.
And the economic growth of a given country may or may not translate into stock market gains. Despite mainland China’s economic boom, stock investors in stocks listed there have gotten burned. The total value of all the stocks on the Shanghai Exchange - at $274 billion – is down 16 percent for the year ending in October. The once-hot Shenzhen Stock Exchange – worth $114 billion – is down nearly 20 percent. On the other hand, investors in the older, better-established companies listed on the Hong Kong Exchange have fared better: that exchange's market cap is up 28 percent to $982.
Terry from down under is trying to figure out whose stock market on his side of the globe is bigger: Australia or New Zealand? (Sounds like he may be trying to settle a bar bet.) When it comes to investing in global stock markets, size does matter. But it isn't always the most important consideration.
How much is the New Zealand stock market worth compared to the Australian market? Which stock market in Asia is worth the most (market capitalization in US$ terms)?Terry V. -- Melbourne, Victoria, Australia
No worries, Terry. You Ozzies have the Kiwis beat hands down. According to the latest figures from the World Federation of Exchanges, the Australian Stock Exchange had a total market capitalization of $777.7 billion as of October, 2005 – up 15 percent from a year ago. Over in Wellington, the New Zealand Exchange reported a total market cap of $41.7 billion – up 9 percent. (On the other hand, if the Kiwis traded livestock along with their corporate stock, their exchange would be huge.)
Japan’s two stock exchanges still dominate the Asia-Pacific region in terms of the total value of all the domestic stocks traded on those markets. The top spot goes to the Tokyo Stock Exchange, which has a combined market cap of just over $4 trillion, followed by the Osaka Stock Exchange, with a combined stock value of $2.6 trillion.
By comparison, the granddaddy of all stock markets, the New York Stock Exchange, had a total market cap of nearly $13 trillion as of October – up 10 percent. The Nasdaq – with $3.5 trillion in market cap – was up just 7 percent.
Bigger markets do have some advantages: the most important is what's called "liquidity." The bigger the market, the easier it will be find a buyer for your stock when you're ready to sell. Most investors also want to know how fast a country’s stock market is growing. On your side of the globe, Japan's market have also been among the fastest growers: the Tokyo exchange was up 26 percent for the 12 months ending in October; Osaka was up 27 percent.
But chasing growth overseas can be risky. Your investment will be converted into the exchange's local currency, which may or may not hold up well against your local currency when you decide bring your money back home. You’ll usually have a much harder time getting information about stocks listed on an overseas exchange. And not all exchanges operate under the kind of strict regulations to protect investors that you may have come to expect. That’s why individual investors are much better off buying into funds managed by stock-pickers who are experienced with the quirks and pitfalls of buying foreign stocks.
Smaller international exchanges can be much more volatile than older, better-established markets. The fastest growing Asian stock market for the 12 months ended in October, for example, was the tiny Colombo Stock Exchange in Sri Lanka (market cap $7.5 billion) which grew by 105 percent. That kind of rally is pretty tough to sustain: past results, as they say, are no guarantee of future performance.
And the economic growth of a given country may or may not translate into stock market gains. Despite mainland China’s economic boom, stock investors in stocks listed there have gotten burned. The total value of all the stocks on the Shanghai Exchange - at $274 billion – is down 16 percent for the year ending in October. The once-hot Shenzhen Stock Exchange – worth $114 billion – is down nearly 20 percent. On the other hand, investors in the older, better-established companies listed on the Hong Kong Exchange have fared better: that exchange's market cap is up 28 percent to $982.
Sunday, January 18, 2009
Bank Of America Bussines Capital
Bank of America Business Capital provides asset-based loans of $5 million or more for working capital, acquisitions, expansions, turnarounds and debt restructurings.
For nearly a century, companies from virtually every industry have turned to Bank of America Business Capital for sound financial solutions. As one of the largest asset-based lenders in the world — serving the United States, Canada and Europe — we're dedicated to helping middle-market and large corporate borrowers achieve their goals. Our proven track record and commitment to excellence have resulted in lasting relationships and satisfied clients.
About Us
Bank of America Business Capital has been a leader in asset-based finance for more than 80 years because we deliver, consistently, through many economic cycles.
We're an enduring asset-based lender with a history of fast decisions and creative loan structures offering flexibility and liquidity. Whether the loan is $5 million or $2 billion, our deals get done. What's more, our clients benefit from the broad product offering and loan syndication capabilities of Bank of America — a capability that is unmatched in the asset-based lending industry.
Our approach to lending is simple:
For nearly a century, companies from virtually every industry have turned to Bank of America Business Capital for sound financial solutions. As one of the largest asset-based lenders in the world — serving the United States, Canada and Europe — we're dedicated to helping middle-market and large corporate borrowers achieve their goals. Our proven track record and commitment to excellence have resulted in lasting relationships and satisfied clients.
About Us
Bank of America Business Capital has been a leader in asset-based finance for more than 80 years because we deliver, consistently, through many economic cycles.
We're an enduring asset-based lender with a history of fast decisions and creative loan structures offering flexibility and liquidity. Whether the loan is $5 million or $2 billion, our deals get done. What's more, our clients benefit from the broad product offering and loan syndication capabilities of Bank of America — a capability that is unmatched in the asset-based lending industry.
Our approach to lending is simple:
- Stick with what you know. For us that means middle-market and large companies, referral sources and equity sponsors in hundreds of industries.
- Anticipate needs. We can because we live and work where our clients operate. Our business development, loan administration, underwriting and in-house appraisal professionals are located across the United States.
- Offer solutions that help clients grow and succeed. Whether it's financing an acquisition, restructuring the balance sheet, leveraging a trade name, or providing foreign exchange and cash management services, Bank of America Business Capital offers total financial solutions.
As our borrowers and intermediaries will attest, we're committed to our clients' success — every day. For financing of $5 million or more, contact us online. To view our lending profile click here.
Executive Management
Bank of America Business Capital is led by a seasoned executive management team. We invite you to view their biographies by clicking on the photos or names below.
Daniel C. deBrauwere West U.S.Division Executive
John MostofiCentral U.S.Division Executive
Bob ArthEast U.S.Division Executive
Bruce Denby Business FinanceDivision Executive
Executive Management
Bank of America Business Capital is led by a seasoned executive management team. We invite you to view their biographies by clicking on the photos or names below.
Daniel C. deBrauwere West U.S.Division Executive
John MostofiCentral U.S.Division Executive
Bob ArthEast U.S.Division Executive
Bruce Denby Business FinanceDivision Executive
Covenant Transportation Group, Inc.
Based in Chattanooga, TN, Covenant Transportation Group, Inc. is one of the largest truckload carriers in the United States. The company is the holding company for several transportation providers including Covenant Transport and Covenant Transport Solutions of Chattanooga, Tennessee, Southern Refrigerated Transport of Texarkana, Arkansas and Star Transportation of Nashville, Tennessee. The consolidated group operates more than 3,450 tractors and 8,200 trailers. The company’s key customers belong to the manufacturing, retail, freight forwarder, less-than-truckload and 3PL segments.
Covenant was looking for a lender with experience in financing companies in the trucking industry to provide liquidity for the company to maintain its market share during uncertain economic times. Bank of America Business Capital delivered a creative deal structure that allowed Covenant to replace its prior loan with a more flexible, longer term arrangement.
The $85 million senior secured credit facility is being used to refinance existing debt and provide for working capital needs. It includes an accordion feature which allows Covenant to request an increase in the facility of up to $50 million. Bank of America is also providing letters of credit as well as treasury management services.
Wednesday, January 14, 2009
Banking, Insurance and Financial Sector: A vision of the Future*
Introduction
Financial markets are a part of the changing business paradigms, across the globe. In fact,the financial markets are the first to unleash the creativity and imagination and lead therevolution. Today, globalization of competencies, thinking and perspectives has been thepart of Strategic Action Plan of all the major players in the financial markets, globally.
The cut throat competition across the market operators and the pressure to perform by thestakeholders has resulted in competition being fiercer than ever before. I think, both the business landscape and chemistry of the competition has changed significantly over the period of time. All around, there is a fresh thinking on the financial products, structure of market players and possibilities for value creation. I would say financial markets are being redefined, reinvented and reconfigured on a persistent basis. Changing paradigms of the financial services
Today, financial markets are turbulent, globally. Traditional business models, when
businesses were clearly differentiated (Banks conducted banking, insurance companies
offered risk covers and securities companies offered investment opportunities), have become the footnotes of the finance literature. Today, insurance companies are exploring values in the banking and investment products and vice versa. It is no more a bank competing with another bank and insurance company competing with another insurance company, but aninsurance company competing with bank s and what not.
Hence, to my mind, the most precious word today is the “convergence” of the opportunity zones in financial markets from concept to culmination. * Speech by Shri G. N. Bajpai, Chairman, Securities and Exchange Board of India at 15th All India Conference of Chartered Accountants held at New Delhi on January 4, 2003.
It may be observed that the competitive dynamics of market has changed phenomenally.
Today, players in the market compete in one segment and co-operate in other segment.
Strategic alliances of the competing banks on the ATM infrastructure is a live example of this. Today, Mutual Funds compete with the Banks on deposits, as they too provide the cheque facility with certain limitations. Revolutionary waves have gone to the extent of providing the ATM facility to the Mutual Funds investors. It is very interesting to observe the competition mounting across the opportunity zones because that encourages people to improve and deliver better values to the market leading to growth of overall productivity of the nation.
Another example here is that of the insurance products. You would observe that the buyerof the insurance products also looks at them as the investment products. This is an issue of conditioning over the period of time and therefore, the customers of the insurance products are both the customers of the risk protection and the investment products. That leads to the insurance sector competing with the other avenues of the investment including banks, financial institutions and investment companies.
The structure of the players in different opportunity zones is also changing on continuous basis. Corporate marriages, exchange’s mergers, clearing corporations alliances, regulator’s integration, globally, bear testimony to it. Convergence of the financial products is also apparent, everywhere.
As an example, let us look at the securities brokers. They are no more securities brokers; they are the brokers exploring opportunities across different dimensions of the economy. Similarly, enterprises in the finance are talking about one stop shop offering all the products ranging from commodities to securities to currencies under one roof. This change in business models is necessitated by the values buried in the interlinkages of the opportunity zones, emerging from economies of scale and economies of scope.
On exchanges side, more and more products are migrating to the exchanges for trading.
Globally, availability of all sorts of financial products (both money market and capital market) on the exchanges is driven by the benefits like transparency, better price discovery, wider dissemination of information and large investing community. Mergers of the exchanges is adding to all these dimensions, globally. Creation of the Euronext (merger of Amsterdam Stock Exchange, Paris Stock Exchange and Brussels Stock Exchange), Singapore Exchange Ltd. (merger of Stock Exchange Singapore and Singapore Mercantile Exchange (SIMEX)) and OneChicago (alliance of Chicago Mercantile Exchange (CME), Chicago Board of trade (CBOT) and Chicago Board Options Exchange (CBOE)) are the live examples.
Similar trend may be observed on the clearing and settlement side. Merger of the two major clearing corporations at the global level, Cedel International and Deutsche bourse clearing corporations to form Clearstream, is an example of that. Concept of single clearing corporation supporting large number of trading platform with clearing and settlement facility is being acknowledged at the global level, purely based on its value creating capabilities.
Ratings of the Clearing corporations has also added a fuel to the business dimension and players in the market are exploring the opportunities to become strong through strategic alliance.
On regulators side, deeper co-ordination has become a respectable word. Creation of the Financial Services Authority by merger of all the regulators in the economy in U.K. has set a precedent in itself. Now, a number of countries, across the globe, are thinking on these lines. Recently, Germany has joined the U.K. through creation of the Financial Services Supervisor, a combined regulatory authority for the banking, securities and insurance. Logic is simple – integration of the opportunities zone demands a flexible, efficient and effective supervisory regime. This can be accomplished either through the effective co-ordination among the regulators or the creation of single regulatory body. Some economies are choosing the first and some second.
Further, financial innovation is becoming ubiquitous. Availability of the financial products, linked to the temperature, earthquake, snow fall, rain fall, hailstorm and what not communicates that there is a huge room for creativity in this area. Today, anything and everything is being traded in the market. Emergence of the areas like credit derivatives, real options, securitizations is paving an entirely fresh set of opportunities for the market. There is a huge room for the structured and synthetic products in the Indian market. To me, it appears, market is in for an exciting phase in terms of the financial innovations.
Today, investors are perceived as not just as the investors but buyers of the financial solutions. Therefore, the philosophy of customer being king is driving the financial markets as well. Accordingly, it is no more customers chasing the products; it is the appropriateness of options chasing the customers. Today, financial institutions are co-designing the products/services with their customers and striving to provide them with global solutions.
Simplification of the customers’ life is being priced by the market. Look at what Virgin Bank is doing. It provides all the services to its customers including checking account to savings account to housing loan to car loan to credit card etc…with a single bank account. I think, it is pretty interesting.
Technology is also helping market players redefine the way they have been operating in the market. See, today, banks are taking ATM machines to the customers, indeed a noble concept. Availability of the concepts like phone banking, anytime banking etc. has become possible because of the technological developments only.
Adding to all I said earlier, strategic alliances between the market participants across the segments is quite apparent in the market. You may see a real estate products provider having alliance with both banks for the financing and insurance companies for the risk management products, for his customers. The goods dealers are providing both the finances and insurance to their customers. The case in example is airline’s tickets having insurance embedded in it. Latest and very interesting phenomenon is that Holiday Inn is building a hotel in Texas, wherein entry to the room will be through the credit card. The idea is that when the credit card can get the customers cash, why not let them have entry to the hotel through credit card, absolutely hassle free check in and check out. Are not markets undergoing profound fundamental changes? Imperatives for success In this era of fierce competition, it has become extremely imperative for all of us to weave clear cut strategy to deal with these changing dimensions of the business landscape in financial services. We need to strengthen each link in the value chain and move with a clear cut vision to deliver values in the market. Therefore, I would feel we need to be competitive
at all the levels - individual, corporate, economy and regulatory.
Competitiveness at the individual level: It may be apparent that nothing but the change is stable in the world. It offers both the opportunities and the challenges to the individuals. It is for the individuals to choose what do they look at. According to me, change is nothing but an exciting opportunity to reposition oneself. Understand that the driving force behind any repositioning is change. This repositioning may be because of the survival crisis created by the unanticipated change or the excitement offered by the change in terms of the unlimited
opportunities not visible with the naked eyes.
We all need to appreciate that future is never the extrapolation of the past. It is absolutely unpredictable, discontinuous and non-linear. That is where the excitement lies to the leading professionals in the market. They understand that the future is what they shape up now.
That is why they don’t talk about predicting future, they talk about imagining future and having imagined, creating it. They create future in the literal sense. Leaders also appreciate that there is nothing called sustainable leadership in this ever changing world and they have got to be extraordinarily competitive to sustain and lead the revolution on the persistent basis.
In this increasingly competitive and complicated business environment, it is imperative for individuals to primarily focus on value creation through the continuous improvement in their own competence levels. They also need to cultivate and nurture leadership and ethical practices. Only an appropriate mix of the competence, leadership and ethical practices would ensure the long term growth of individuals, add value to their contribution, keep them relevant to emerging ethos and save them from getting buried in the debris of obsolescence.
Competitiveness at the corporate level: I would convey to the corporates to do fewer things but do them better than the best, globally. Corporates need to appreciate that no one can internalise the versatility of competencies. Hence, it would be imperative for them to leverage, outsource, network and create strategic alliances with others. Further, they need to think without precedents as precedents create risk of traditional thinking and withhold the imagination from running radical and development of fundamentally great and different products and services. They need to be different faster than being better and be better faster than being smaller. They need to go beyond known paradigms to be the path-breakers and secure a place at the international platform.
Today, businesses are no more businesses, these are battles of competencies. Indeed, there is a competition for the competence in the market. Fortunately or unfortunately, success or failure of a market player in this battle for competence determines his potential for growth and the competitive differentiation. Hence, companies need to strategize and re-strategize almost on the continuous basis. They need to persistently strengthen their existing knowledge and acquire/create new knowledge, compatible with the existing one, as quickly and as inexpensively as possible, to continue leading in the opportunity zones. Tomorrow, their competitive position in market place would depend on the speed with which they run on the learning curve, discover the new frontiers of the knowledge in all dimensions of their operations and then think creatively and imaginatively on the strategic ways to transform this accumulated knowledge into the value delivering proposition. It should be understood that the existence of knowledge does not ensure success; corporations must also possess the capabilities to leverage on that knowledge to create values.
Competitiveness at the regulators level: In this changed business ethos, regulations too demand a in-jaundiced perspective. Regulators can not deal with the complexities of the 21st century business environment with the 20th century rules, regulations and the rudimentary perspective. We can not shoot a moving target with a static gun position. Therefore, in this era of revolution across the globe, regulations should be enterprising, forward looking and evolutionary in nature.
I believe regulators’ must cast off the myopic view. Regulators’ focus should shift from the regulations to the development of the markets. In my view, regulations just happen to be incidental to the development. This change in the regulators’ focus would bring in the paradigm shift in their approach, which would facilitate their transition from being enforcement oriented, reactive, adversarial, incident driven and hard to compliance, partnership oriented, preventive, problem solving and soft.
What I am suggesting is that the regulations should define the broad framework/ parameters for the game and within that framework, market participants should be allowed to operate without any intervention. This approach is all about having the confidence in the market and systems. Now, the challenge is to ensure that the people don’t play foul with the game.
Protection of the system’s integrity through architecting proper risk management system is another challenge before the regulators. This demands regulators to make tactical choices with regard to the tools, best time intervention and regulatory style to fit the audience.
Further, the convergences of the financial activities and the emergence of new age one stop financial institutions have resulted in a titanic challenge to the regulators, internationally. They need to co-operate at a level more than ever before. They need to strike an intelligent balance between the safety of the markets under their regulatory jurisdiction and the creative initiatives of the market participants. No matter what, market should be given a fair opportunity to explore the avenues for the expansion and growth because that would result in the competition in various opportunity domains and thus emergence of better values to
the ultimate customers. The capabilities of the regulatory infrastructure and petencies of the human resources have necessarily to keep pace with the regulatees.
Competitiveness at the economy level: We all need to strategize to position “India Incorporation” at the Global level. According to me, we need to come out of the thinking of being a developing country because ‘developing’ is a mindset. There are areas where India is globally competitive. Our biggest strength is the educated, trained and skilled manpower, the scientific minds. We have proved that by exhibition of resilience of Indian economy even in the midst of global meltdown stemming out of collapse of far eastern economies and troubled Latin American economies. We need to focus on our strengths and identify the weak links in the economy chain and dent them with determination. We have entrepreneurial acumen to make India a giant figure at the global canvas. I strongly believe, we have
potential to do so. A perception is steadily growing about India being a dynamic market among the emerging economies.
Conclusion
To conclude, I would say that the opportunity zones in financial markets are contracting somewhere and at the same time expanding elsewhere. Both change and the pace of change in the financial markets would be different tomorrow. Continuous exploration of scopes and exploitation of values would demand a brilliant focus on emerging opportunities, competence building, strategies for the leadership position in the opportunity zones and principles centered business practices. Therefore, we need to create a culture, which embraces change and moves ahead with an objective to lead.
Financial markets are a part of the changing business paradigms, across the globe. In fact,the financial markets are the first to unleash the creativity and imagination and lead therevolution. Today, globalization of competencies, thinking and perspectives has been thepart of Strategic Action Plan of all the major players in the financial markets, globally.
The cut throat competition across the market operators and the pressure to perform by thestakeholders has resulted in competition being fiercer than ever before. I think, both the business landscape and chemistry of the competition has changed significantly over the period of time. All around, there is a fresh thinking on the financial products, structure of market players and possibilities for value creation. I would say financial markets are being redefined, reinvented and reconfigured on a persistent basis. Changing paradigms of the financial services
Today, financial markets are turbulent, globally. Traditional business models, when
businesses were clearly differentiated (Banks conducted banking, insurance companies
offered risk covers and securities companies offered investment opportunities), have become the footnotes of the finance literature. Today, insurance companies are exploring values in the banking and investment products and vice versa. It is no more a bank competing with another bank and insurance company competing with another insurance company, but aninsurance company competing with bank s and what not.
Hence, to my mind, the most precious word today is the “convergence” of the opportunity zones in financial markets from concept to culmination. * Speech by Shri G. N. Bajpai, Chairman, Securities and Exchange Board of India at 15th All India Conference of Chartered Accountants held at New Delhi on January 4, 2003.
It may be observed that the competitive dynamics of market has changed phenomenally.
Today, players in the market compete in one segment and co-operate in other segment.
Strategic alliances of the competing banks on the ATM infrastructure is a live example of this. Today, Mutual Funds compete with the Banks on deposits, as they too provide the cheque facility with certain limitations. Revolutionary waves have gone to the extent of providing the ATM facility to the Mutual Funds investors. It is very interesting to observe the competition mounting across the opportunity zones because that encourages people to improve and deliver better values to the market leading to growth of overall productivity of the nation.
Another example here is that of the insurance products. You would observe that the buyerof the insurance products also looks at them as the investment products. This is an issue of conditioning over the period of time and therefore, the customers of the insurance products are both the customers of the risk protection and the investment products. That leads to the insurance sector competing with the other avenues of the investment including banks, financial institutions and investment companies.
The structure of the players in different opportunity zones is also changing on continuous basis. Corporate marriages, exchange’s mergers, clearing corporations alliances, regulator’s integration, globally, bear testimony to it. Convergence of the financial products is also apparent, everywhere.
As an example, let us look at the securities brokers. They are no more securities brokers; they are the brokers exploring opportunities across different dimensions of the economy. Similarly, enterprises in the finance are talking about one stop shop offering all the products ranging from commodities to securities to currencies under one roof. This change in business models is necessitated by the values buried in the interlinkages of the opportunity zones, emerging from economies of scale and economies of scope.
On exchanges side, more and more products are migrating to the exchanges for trading.
Globally, availability of all sorts of financial products (both money market and capital market) on the exchanges is driven by the benefits like transparency, better price discovery, wider dissemination of information and large investing community. Mergers of the exchanges is adding to all these dimensions, globally. Creation of the Euronext (merger of Amsterdam Stock Exchange, Paris Stock Exchange and Brussels Stock Exchange), Singapore Exchange Ltd. (merger of Stock Exchange Singapore and Singapore Mercantile Exchange (SIMEX)) and OneChicago (alliance of Chicago Mercantile Exchange (CME), Chicago Board of trade (CBOT) and Chicago Board Options Exchange (CBOE)) are the live examples.
Similar trend may be observed on the clearing and settlement side. Merger of the two major clearing corporations at the global level, Cedel International and Deutsche bourse clearing corporations to form Clearstream, is an example of that. Concept of single clearing corporation supporting large number of trading platform with clearing and settlement facility is being acknowledged at the global level, purely based on its value creating capabilities.
Ratings of the Clearing corporations has also added a fuel to the business dimension and players in the market are exploring the opportunities to become strong through strategic alliance.
On regulators side, deeper co-ordination has become a respectable word. Creation of the Financial Services Authority by merger of all the regulators in the economy in U.K. has set a precedent in itself. Now, a number of countries, across the globe, are thinking on these lines. Recently, Germany has joined the U.K. through creation of the Financial Services Supervisor, a combined regulatory authority for the banking, securities and insurance. Logic is simple – integration of the opportunities zone demands a flexible, efficient and effective supervisory regime. This can be accomplished either through the effective co-ordination among the regulators or the creation of single regulatory body. Some economies are choosing the first and some second.
Further, financial innovation is becoming ubiquitous. Availability of the financial products, linked to the temperature, earthquake, snow fall, rain fall, hailstorm and what not communicates that there is a huge room for creativity in this area. Today, anything and everything is being traded in the market. Emergence of the areas like credit derivatives, real options, securitizations is paving an entirely fresh set of opportunities for the market. There is a huge room for the structured and synthetic products in the Indian market. To me, it appears, market is in for an exciting phase in terms of the financial innovations.
Today, investors are perceived as not just as the investors but buyers of the financial solutions. Therefore, the philosophy of customer being king is driving the financial markets as well. Accordingly, it is no more customers chasing the products; it is the appropriateness of options chasing the customers. Today, financial institutions are co-designing the products/services with their customers and striving to provide them with global solutions.
Simplification of the customers’ life is being priced by the market. Look at what Virgin Bank is doing. It provides all the services to its customers including checking account to savings account to housing loan to car loan to credit card etc…with a single bank account. I think, it is pretty interesting.
Technology is also helping market players redefine the way they have been operating in the market. See, today, banks are taking ATM machines to the customers, indeed a noble concept. Availability of the concepts like phone banking, anytime banking etc. has become possible because of the technological developments only.
Adding to all I said earlier, strategic alliances between the market participants across the segments is quite apparent in the market. You may see a real estate products provider having alliance with both banks for the financing and insurance companies for the risk management products, for his customers. The goods dealers are providing both the finances and insurance to their customers. The case in example is airline’s tickets having insurance embedded in it. Latest and very interesting phenomenon is that Holiday Inn is building a hotel in Texas, wherein entry to the room will be through the credit card. The idea is that when the credit card can get the customers cash, why not let them have entry to the hotel through credit card, absolutely hassle free check in and check out. Are not markets undergoing profound fundamental changes? Imperatives for success In this era of fierce competition, it has become extremely imperative for all of us to weave clear cut strategy to deal with these changing dimensions of the business landscape in financial services. We need to strengthen each link in the value chain and move with a clear cut vision to deliver values in the market. Therefore, I would feel we need to be competitive
at all the levels - individual, corporate, economy and regulatory.
Competitiveness at the individual level: It may be apparent that nothing but the change is stable in the world. It offers both the opportunities and the challenges to the individuals. It is for the individuals to choose what do they look at. According to me, change is nothing but an exciting opportunity to reposition oneself. Understand that the driving force behind any repositioning is change. This repositioning may be because of the survival crisis created by the unanticipated change or the excitement offered by the change in terms of the unlimited
opportunities not visible with the naked eyes.
We all need to appreciate that future is never the extrapolation of the past. It is absolutely unpredictable, discontinuous and non-linear. That is where the excitement lies to the leading professionals in the market. They understand that the future is what they shape up now.
That is why they don’t talk about predicting future, they talk about imagining future and having imagined, creating it. They create future in the literal sense. Leaders also appreciate that there is nothing called sustainable leadership in this ever changing world and they have got to be extraordinarily competitive to sustain and lead the revolution on the persistent basis.
In this increasingly competitive and complicated business environment, it is imperative for individuals to primarily focus on value creation through the continuous improvement in their own competence levels. They also need to cultivate and nurture leadership and ethical practices. Only an appropriate mix of the competence, leadership and ethical practices would ensure the long term growth of individuals, add value to their contribution, keep them relevant to emerging ethos and save them from getting buried in the debris of obsolescence.
Competitiveness at the corporate level: I would convey to the corporates to do fewer things but do them better than the best, globally. Corporates need to appreciate that no one can internalise the versatility of competencies. Hence, it would be imperative for them to leverage, outsource, network and create strategic alliances with others. Further, they need to think without precedents as precedents create risk of traditional thinking and withhold the imagination from running radical and development of fundamentally great and different products and services. They need to be different faster than being better and be better faster than being smaller. They need to go beyond known paradigms to be the path-breakers and secure a place at the international platform.
Today, businesses are no more businesses, these are battles of competencies. Indeed, there is a competition for the competence in the market. Fortunately or unfortunately, success or failure of a market player in this battle for competence determines his potential for growth and the competitive differentiation. Hence, companies need to strategize and re-strategize almost on the continuous basis. They need to persistently strengthen their existing knowledge and acquire/create new knowledge, compatible with the existing one, as quickly and as inexpensively as possible, to continue leading in the opportunity zones. Tomorrow, their competitive position in market place would depend on the speed with which they run on the learning curve, discover the new frontiers of the knowledge in all dimensions of their operations and then think creatively and imaginatively on the strategic ways to transform this accumulated knowledge into the value delivering proposition. It should be understood that the existence of knowledge does not ensure success; corporations must also possess the capabilities to leverage on that knowledge to create values.
Competitiveness at the regulators level: In this changed business ethos, regulations too demand a in-jaundiced perspective. Regulators can not deal with the complexities of the 21st century business environment with the 20th century rules, regulations and the rudimentary perspective. We can not shoot a moving target with a static gun position. Therefore, in this era of revolution across the globe, regulations should be enterprising, forward looking and evolutionary in nature.
I believe regulators’ must cast off the myopic view. Regulators’ focus should shift from the regulations to the development of the markets. In my view, regulations just happen to be incidental to the development. This change in the regulators’ focus would bring in the paradigm shift in their approach, which would facilitate their transition from being enforcement oriented, reactive, adversarial, incident driven and hard to compliance, partnership oriented, preventive, problem solving and soft.
What I am suggesting is that the regulations should define the broad framework/ parameters for the game and within that framework, market participants should be allowed to operate without any intervention. This approach is all about having the confidence in the market and systems. Now, the challenge is to ensure that the people don’t play foul with the game.
Protection of the system’s integrity through architecting proper risk management system is another challenge before the regulators. This demands regulators to make tactical choices with regard to the tools, best time intervention and regulatory style to fit the audience.
Further, the convergences of the financial activities and the emergence of new age one stop financial institutions have resulted in a titanic challenge to the regulators, internationally. They need to co-operate at a level more than ever before. They need to strike an intelligent balance between the safety of the markets under their regulatory jurisdiction and the creative initiatives of the market participants. No matter what, market should be given a fair opportunity to explore the avenues for the expansion and growth because that would result in the competition in various opportunity domains and thus emergence of better values to
the ultimate customers. The capabilities of the regulatory infrastructure and petencies of the human resources have necessarily to keep pace with the regulatees.
Competitiveness at the economy level: We all need to strategize to position “India Incorporation” at the Global level. According to me, we need to come out of the thinking of being a developing country because ‘developing’ is a mindset. There are areas where India is globally competitive. Our biggest strength is the educated, trained and skilled manpower, the scientific minds. We have proved that by exhibition of resilience of Indian economy even in the midst of global meltdown stemming out of collapse of far eastern economies and troubled Latin American economies. We need to focus on our strengths and identify the weak links in the economy chain and dent them with determination. We have entrepreneurial acumen to make India a giant figure at the global canvas. I strongly believe, we have
potential to do so. A perception is steadily growing about India being a dynamic market among the emerging economies.
Conclusion
To conclude, I would say that the opportunity zones in financial markets are contracting somewhere and at the same time expanding elsewhere. Both change and the pace of change in the financial markets would be different tomorrow. Continuous exploration of scopes and exploitation of values would demand a brilliant focus on emerging opportunities, competence building, strategies for the leadership position in the opportunity zones and principles centered business practices. Therefore, we need to create a culture, which embraces change and moves ahead with an objective to lead.
Saturday, January 10, 2009
INDUSTRIAL ALLIANCE
INSURANCE AND FINANCIAL SERVICES
Proposed N131-103 Registration Requirements
We are writing to provide the comments of Industrial Alliance Insurance and Financial Services Inc. (Industrial Alliance) on the Notice and Request for Comment dated February 27,2007 ("the Notice"), on Proposed National Instrument 31-103 Registration Requirements, Proposed Companion Policy 31-103CP and Proposed Amendments to Multilateral Instrument 33-109 Registration Information published for public comment by the Canadian Securities Administrators ("CSA") (respectively, the
"Proposed Instrument" and the Proposed Companion Policy" and collectively, the "Proposal").
Industrial Alliance has a national footprint in the distribution of financial services in Canada. Through our three broker-dealers: IA Securities Inc., a nationally registered securities dealer and IDA member, as well as FundEX Investments Inc. and Investia Financial Services Inc., both of which are nationally registered mutual fund dealers and members of the MFDA, we currently represent over 2000 licensed advisors. We will limit our comments to those that we feel will specifically affect the way in which our advisors and our firm will be able to service our more than 300,000 clients. At a high level, Industrial Alliance is in complete support of regulatory proposals that provide consistent treatment of the consumer experience, greater clarity and consistency of rules, and efficiencies in process.
Industrial Alliance fully endorses the CSA's stated aim of the Proposal - "to create a flexible and administratively efficient [registration] regime with reduced regulatory burden". We also commend the CSA for its efforts in achieving the level of uniformity and harmonisation of the current myriad of registration-related rules. Given the historical differing positions taken by the various CSA members on registrant regulation, the Proposals are indeed a welcome achievement on the part of the CSA.
We support the objective of the Proposed Instrument to harmonise, streamline and modernise the registration regime for dealers and dvisors across the CSA jurisdictions. In addition, we would note the importance of achieving greater harmony in the rules, and application of rules, of the Self Regulatory Organizations ("SROs"), whose role will be critical to the shaping of a consistent investor experience.
There are elements of the Proposal, however, that are of concern to us. The three broad areas of concern that we touch on from this perspective include: dealer-advisor registration; compliance and suitability; and the Client Relationship Model. On the proposals relating to dealer registration, we support the retention of the Mutual Fund Dealer category. We further support the proposals to ensure adequate transition periods and the
permission of grandfathering of proficiency requirements where appropriate.
The Proposed Instrument appears to confine the business of a Mutual Fund Dealer, a position that does not properly reflect the realities of the distribution business, which has broadened significantly in scope in recent years. We are concerned by the language in the Proposal restricting mutual fund dealers and their advisors "solely" to the distribution of mutual funds. Professional financial advisors are engaged in the analysis of the financial situations of their clients, and in recommending solutions
for their investment needs from a wide array of products including GICs, Principal-Protected Notes, Mutual Funds, and Segregated Funds. The Proposal's language should be modified to reflect these realities.
The Proposal introduces a new category of registration: the Exempt Market Dealer. We require more discussion about the regulatory oversight structure that would be faced by mutual fund dealers that also distribute exempt market products. It is our view that the registration regime should recognise the higher level of oversight that membership in an SRO brings, and accordingly MFDA Members should be permitted to sell exempt market products without the additional requirement to
register as Exempt Market Dealers. As a first step, however, we urge the CSA to commit to providing a nationally harmonised definition of "Exempt Market Product".
It is imperative that the playing field, in terms of advisors being able to recommend various products and services to their clientele, be level. We would strongly urge that it be mandated
by the eSA that this new category of registration should have a mandatory requirement to become a member of a Self Regulatory Organisation (SRO). The MFDA is already well
positioned to act as the SRO for this new registration category as a large number of its membership (FundEX included) already distribute exempt products to their respective client
bases.
These issues are compounded when other regulatory restrictions on Mutual Fund Dealers are also taken into consideration. The current Proposal does not address a situation that currently exists whereby some registrants that distribute Mutual Funds operate with a competitive advantage over other registrants. MFDA members are prohibited from benefiting
from the use of Net-Free client balances as well as being able to earn interest in their respective trust accounts. IDA members are not subject to these restrictions. Although a sincere effort has been made to create a harmonised regulatory environment, we are disappointed that an issue as large as this has been omitted from the Proposal.
We also require clarification of the term "Branch" as this registration category has been removed from the Proposed Instrument and replaced by the term "Regional Supervisor". We believe that taking a principles-based approach will better accommodate the different distribution models and their associated risks. We also desire more discussion with you on the potential limitations to the scope of the activities that will require registration under the business trigger, as well as how this business trigger will be defined; and more importantly, how it will be interpreted by the enforcement arms of the MFDA, IDA and provincial securities regulators.
We strongly urge the eSA to use this initiative to attempt to bring in "Financial Planning"
under the scope of regulatory oversight. Situations currently exist whereby a Fee-for-Service
advisor that meets with a client, provides financial planning advice, recommends a particular
asset mix and receives remuneration for this advice/recommendation. Surely this type of
activity should be captured under the proposed "business trigger".
With respect to the Client Relationship Model, it is important that we do a better job as an industry in creating an environment of greater clarity and transparency in the client-advisor relationship. The industry has evolved to the point where many financial advisors have voluntarily incorporated into their financial planning practice the concepts of investment policy statements, client service commitment guarantees, written financial plans, and separate point of sale disclosure documents on how they are compensated. The Proposal introduces a new concept called the Relationship Disclosure Document (RDD) which will make these practices the norm.
While we support the additional clarity and transparency that the RDD would bring to the account opening process, we note that it is being introduced at the same time as a parallel initiative to revamp Point of Sale disclosure is being introduced by the Joint Forum. Clearly there is overlap between the principles of the RDD and the POS initiative. As such, we are requesting that these two initiatives be integrated and that they be conducted with a full review of all disclosure presently required and provided over the course of the client-advisor relationship, with the aim of
understanding where the gaps are and where duplication can be liminated.
Although we fully support the direction that this new RDD takes us, it should not be implemented until such time as a thorough Cost Benefit Analysis has been completed, bearing a clear articulation of regulatory objectives, along with consultations with dealers and advisors about the range of business models, supported by relationships and disclosures that exist. Furthermore, what needs to be defined are the areas that should be probed in a client survey, in-field testing with clear objectives and language that will elicit responses that can inform regulatory decisions.
Regarding complaint handling, it is important that the Proposed Companion Policy be directional, less prescriptive, and concordant with the requirements of existing complaint handling systems to avoid client confusion. We wish to have further discussions with you regarding the structure of an appropriate complaint resolution process.
Finally, although the Proposal does not provide specific rules with respect to incorporated salespersons, we strongly urge the CSA to provide regulatory support for the MFDA's proposal to continue to permit the principal-agent model with directed commissions, that maintains the benefits of incorporation to salespersons without compromising investor protection. In this regard, we would like more discussions on the possible interpretations of this relationship by other stakeholders.
We thank you for providing us with the opportunity to comment on the Proposal. Don't hesitate to call us directly should you have any questions or wish to discuss these comments.
Yours truly,
By: Michael S. Greer
President
FundEX Investments Inc.
Christopher J. Enright
Executive Vice President
FundEX Investments Inc.
cc. Normand Pepin
Executive Vice President
Industrial Alliance Insurance and Financial Services Inc.
Insuring the Industrial Revolution
Insuring the Industrial Revolution: Fire Insurance in Great Britain, 1700–1850. By Robin Pearson. Aldershot, U.K.: Ashgate, 2004. xiii + 434 pp. Tables, maps, figures, appendix, bibliography, notes, index. Cloth, $89.95. ISBN: 0-754-63363-2.
Reviewed by Timothy Alborn
Although business history as a discipline has for several generations been evolving beyond the model of single-company case studies, it remains true that an archive-based, industrywide survey is a welcome, and somewhat newsworthy, event. Robin Pearson’s Insuring the Industrial Revolution fits this bill for British fire insurance, stretching from its roots in the early eighteenth century up to 1850, when it was on the verge of market saturation at home and (if only briefly) world domination abroad. Before this book, the history of British fire insurance mainly rested on three company histories, each longer and more magisterial than its predecessor: Clive Trebilcock’s history of Phoenix Assurance (appearing in two volumes in 1985 and 1999), Barry Supple’s history of the Royal Exchange (1970), and Peter Dickson’s history of the Sun (1960). Pearson integrates these books’ findings with a substantial amount of new archival evidence from other London companies, like the Hand-in-Hand, County, Guardian, Alliance, and Imperial; and from provincial fire offices in cities like Manchester, Newcastle, Bristol, and Leeds. This wider array of sources allows Pearson to bring to the history of fire insurance the same appreciation for regional diversity that has long marked our understanding of such British industries as textiles and coal, and, more generally, to take what he calls a “market-oriented rather than corporate-oriented approach” (p. 9).
Pearson opens with a quantitative chapter tracking premium rates, sums insured, and proportion of insured British property from 1760 through 1850. The latter category, for instance, rose to just over 34 percent from 1770 through 1790, fell during the Napoleonic Wars to under a third, then rose steadily from 1820 until it reached 56 percent in 1850. Since this growth pattern was out of sync with the pace of industrialization (which grew fastest in many sectors between 1780 and 1820), he accounts for it by referring to “supply side” explanations, including profitability
(owing to luck or skill in assessing risk), better marketing, and more efficient management, and to unquantifiable “demand side” explanations, such as increased levels of risk aversion. His numbers, in other words, lead him to focus mainly on qualitative factors, which he spends the rest of the book untangling: first in a series of chronological chapters, and then in a set of thematic chapters covering company formation, marketing, underwriting, and investment.
The take-home message in both sections is that social and economic geography, more than any other single factor, determined the pace and structure of the industry up to 1850. The eighteenth-century London offices that grew were those (starting with the Sun) that were willing and able to appoint provincial agents. The provincial companies that prospered were those in market towns (like Norwich, Exeter, and Bath), where low proportions of industrial risks allowed start-ups to underprice their big London competitors. As a result, industrial centers (like Liverpool and Manchester) were underserved for much of this period, since the only companies big enough to survive the occasional disastrous fire that occurred in those markets spent relatively little time either pursuing business or learning how to improve their underwriting there. Regional variables also figure strongly in Pearson’s discussions of company formation and marketing, which he links to regional networks of directors, shareholders, and merchants. The only thematic chapter where they do not play a role is the final one on investment, which mainly summarizes and reinforces conclusions from the Phoenix and Royal Exchange company histories.
Although Pearson is not unwilling to consider cultural explanations when his evidence pulls him in that direction, he is at heart an economic historian of rather conventional tastes. His discussion of fire underwriting primarily mounts an offensive against previous studies that have used the Sun’s policy registers as a proxy for British property values; only in passing does he treat underwriting per se as an interesting historical problem. Similarly, he pitches his discussion of company formation in terms of debates over the principal-agent problem, and he spends no time engaging (for instance) the parallel legal narrative provided in Ron Harris’s Industrializing English Law (2000). Although some of Pearson’s
published articles do supplement this economic focus with wider-ranging questions (for instance, his 2002 article on moral hazard published in this journal), such avenues of inquiry typically play a subordinate role in this book.
Though Insuring the Industrial Revolution is impressive in scope, there are inevitably gaps—some acknowledged, others more puzzling. As Pearson acknowledges in the introduction, Irish and Scottish fire offices appear only at the margins in his story, and do not benefit from the archival scrutiny that marks his discussion of their English counterparts; he similarly brackets the emerging foreign and colonial business of fire offices that appeared after 1800. There is virtually no mention of the data-processing side of the business, at the level of the work and lives of the clerks who kept fire offices’ books, and little discussion of the impact of life insurance (which many insurance companies offered along with fire coverage) on marketing, investment, or capital formation. None of this, however, should detract from what this book does accomplish: an able and comprehensive cliometric analysis of an important economic sector, which benefits from exemplary archival research.
Timothy Alborn is associate professor of history at Lehman College and the City University of New York. He is the author of Conceiving Companies: Joint-Stock Politics in Victorian England (1998) and numerous articles on the social and cultural history of British business. At present, he is completing a history of British life insurance in the nineteenth century.
Reviewed by Timothy Alborn
Although business history as a discipline has for several generations been evolving beyond the model of single-company case studies, it remains true that an archive-based, industrywide survey is a welcome, and somewhat newsworthy, event. Robin Pearson’s Insuring the Industrial Revolution fits this bill for British fire insurance, stretching from its roots in the early eighteenth century up to 1850, when it was on the verge of market saturation at home and (if only briefly) world domination abroad. Before this book, the history of British fire insurance mainly rested on three company histories, each longer and more magisterial than its predecessor: Clive Trebilcock’s history of Phoenix Assurance (appearing in two volumes in 1985 and 1999), Barry Supple’s history of the Royal Exchange (1970), and Peter Dickson’s history of the Sun (1960). Pearson integrates these books’ findings with a substantial amount of new archival evidence from other London companies, like the Hand-in-Hand, County, Guardian, Alliance, and Imperial; and from provincial fire offices in cities like Manchester, Newcastle, Bristol, and Leeds. This wider array of sources allows Pearson to bring to the history of fire insurance the same appreciation for regional diversity that has long marked our understanding of such British industries as textiles and coal, and, more generally, to take what he calls a “market-oriented rather than corporate-oriented approach” (p. 9).
Pearson opens with a quantitative chapter tracking premium rates, sums insured, and proportion of insured British property from 1760 through 1850. The latter category, for instance, rose to just over 34 percent from 1770 through 1790, fell during the Napoleonic Wars to under a third, then rose steadily from 1820 until it reached 56 percent in 1850. Since this growth pattern was out of sync with the pace of industrialization (which grew fastest in many sectors between 1780 and 1820), he accounts for it by referring to “supply side” explanations, including profitability
(owing to luck or skill in assessing risk), better marketing, and more efficient management, and to unquantifiable “demand side” explanations, such as increased levels of risk aversion. His numbers, in other words, lead him to focus mainly on qualitative factors, which he spends the rest of the book untangling: first in a series of chronological chapters, and then in a set of thematic chapters covering company formation, marketing, underwriting, and investment.
The take-home message in both sections is that social and economic geography, more than any other single factor, determined the pace and structure of the industry up to 1850. The eighteenth-century London offices that grew were those (starting with the Sun) that were willing and able to appoint provincial agents. The provincial companies that prospered were those in market towns (like Norwich, Exeter, and Bath), where low proportions of industrial risks allowed start-ups to underprice their big London competitors. As a result, industrial centers (like Liverpool and Manchester) were underserved for much of this period, since the only companies big enough to survive the occasional disastrous fire that occurred in those markets spent relatively little time either pursuing business or learning how to improve their underwriting there. Regional variables also figure strongly in Pearson’s discussions of company formation and marketing, which he links to regional networks of directors, shareholders, and merchants. The only thematic chapter where they do not play a role is the final one on investment, which mainly summarizes and reinforces conclusions from the Phoenix and Royal Exchange company histories.
Although Pearson is not unwilling to consider cultural explanations when his evidence pulls him in that direction, he is at heart an economic historian of rather conventional tastes. His discussion of fire underwriting primarily mounts an offensive against previous studies that have used the Sun’s policy registers as a proxy for British property values; only in passing does he treat underwriting per se as an interesting historical problem. Similarly, he pitches his discussion of company formation in terms of debates over the principal-agent problem, and he spends no time engaging (for instance) the parallel legal narrative provided in Ron Harris’s Industrializing English Law (2000). Although some of Pearson’s
published articles do supplement this economic focus with wider-ranging questions (for instance, his 2002 article on moral hazard published in this journal), such avenues of inquiry typically play a subordinate role in this book.
Though Insuring the Industrial Revolution is impressive in scope, there are inevitably gaps—some acknowledged, others more puzzling. As Pearson acknowledges in the introduction, Irish and Scottish fire offices appear only at the margins in his story, and do not benefit from the archival scrutiny that marks his discussion of their English counterparts; he similarly brackets the emerging foreign and colonial business of fire offices that appeared after 1800. There is virtually no mention of the data-processing side of the business, at the level of the work and lives of the clerks who kept fire offices’ books, and little discussion of the impact of life insurance (which many insurance companies offered along with fire coverage) on marketing, investment, or capital formation. None of this, however, should detract from what this book does accomplish: an able and comprehensive cliometric analysis of an important economic sector, which benefits from exemplary archival research.
Timothy Alborn is associate professor of history at Lehman College and the City University of New York. He is the author of Conceiving Companies: Joint-Stock Politics in Victorian England (1998) and numerous articles on the social and cultural history of British business. At present, he is completing a history of British life insurance in the nineteenth century.
AUD Health Insurance Plan for Student
AUD Mandatory Health Insurance
Effective Fall 2008, Private Health Insurance covering care in the UAE is mandatory to all AUD students. In order to meet this requirement by enrolling in the AUD-sponsored health insurance plan, students are charged a non-refundable AED 1,000 fee on their Fall semester bill covering the period September 1 through August 31. Students with valid current health insurance covering all of UAE may waive this fee (please see below).
Policies and Procedures
Effective September 20th 2008, students must collect their Insurance Cards from the AUD Health Center.
From September 1st until September 20th 2008, medical visits and procedures will be reimbursed through claim forms students can download from AUD website.
Students permanently dismissed or graduating from AUD, before Spring semester, have the choice to apply for a refund after returning the card to the Health Center.
Students joining within the academic year will be charged on pro-rata basis. The amount will be determined by the Insurance Company.
Fee for Blood Test for visa is not covered by the insurance. Students sponsored by AUD have to follow the pre-existing policy.
Fees and Charges for AUD Students Health Insurance Plan
Student joining beginning of
Charges
Fall Semester (covering September 1st, 2008 – August 31st, 2009)
AED 1,000
Spring Semester (covering January 12th, 2009 – August 31st, 2009)
AED 650
Summer I Semester (covering May 10th, 2009 – August 31st, 2009)
AED 350
Summer II Semester (covering July 5th, 2009 – August 31st, 2009)
AED 175
Effective Fall 2008, Private Health Insurance covering care in the UAE is mandatory to all AUD students. In order to meet this requirement by enrolling in the AUD-sponsored health insurance plan, students are charged a non-refundable AED 1,000 fee on their Fall semester bill covering the period September 1 through August 31. Students with valid current health insurance covering all of UAE may waive this fee (please see below).
Policies and Procedures
Effective September 20th 2008, students must collect their Insurance Cards from the AUD Health Center.
From September 1st until September 20th 2008, medical visits and procedures will be reimbursed through claim forms students can download from AUD website.
Students permanently dismissed or graduating from AUD, before Spring semester, have the choice to apply for a refund after returning the card to the Health Center.
Students joining within the academic year will be charged on pro-rata basis. The amount will be determined by the Insurance Company.
Fee for Blood Test for visa is not covered by the insurance. Students sponsored by AUD have to follow the pre-existing policy.
Fees and Charges for AUD Students Health Insurance Plan
Student joining beginning of
Charges
Fall Semester (covering September 1st, 2008 – August 31st, 2009)
AED 1,000
Spring Semester (covering January 12th, 2009 – August 31st, 2009)
AED 650
Summer I Semester (covering May 10th, 2009 – August 31st, 2009)
AED 350
Summer II Semester (covering July 5th, 2009 – August 31st, 2009)
AED 175
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