Securities Markets - Insurance companies venturing into previously uncharted territory

With the spotlight currently focused on the subprime mortgage crisis and with many prior examples of securities debacles, think Enron, it's interesting to note that insurance entities are starting to explore opportunities into this historically untouched area of investment for them. According to their website, Lloyds, www.lloyds.com, one of the largest world players in the insurance and reinsurance market, "Convergence between the capital and insurance markets is gaining pace and Lloyd's insurers are at the forefront of developments". They have formed an investment management company that will specialize in traded insurance risk. With the global industry as a whole having an extremely profitable run the past couple years due to the low incidence of insurance related catastrophes, combined with a successful run of investment profit in the stock markets, they are now exploring new ways to broaden their earnings capacity. While at face value this looks much like many other new investment ventures, the fact that the insurance industry is heading in this direction can cause consternation among insurance company investors. While the insurance industry is inherently based on risk, it seems to be taking that risk factor into a whole new direction with this move. Our industry, and it's profits, are subject to the unpredictable whims of nature, and it seems they are now heading into the unpredictable whims of the securities markets as well. Just some food for thought going forward. It might be interesting to keep an eye on this development and see if it turns into a trend. Either way it should make be an interesting ride for investors.

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