frankly for the reinsurers. They are going to be holding some cards. I do think that they will be able to push through some rate increases at January 1. Frankly to the extent that we are buying from them, some of that has got to be passed on. They have had more rate integrity than the direct market has had over the last two or three years. They have held the line. If they push through increases something has got to give because we’re getting squeezed from two different directions here.
RYAN: Just to expand on that, with respect to reinsurance companies as ceding companies like RSUI and Markel are sizing up their programs, as has been pointed out already, there certainly is going to be a flight to quality. I think what folks need to keep in mind is not only that these insurers could be impaired simply because of the fact that they might be more willing to accept some risk on the investment side. But the point of the matter is if there are some impairments there which they have to further write down and then you have a catastrophe event and then what happens is many reinsurers, they’ve been very successful in going down to the capital markets to replenish these balance sheets, at this point in time if something were to occur the ability to go back and replenish what was lost is going to be very difficult.
So from that perspective as you’re dealing with reinsurers one has to go back in history and look at which companies had bigger appetites and which companies go back to the market, capital markets to replenish. Those might be the companies that are disfavored in the market as tight as this in terms of the credit markets.
The Impact of AIG
McDONALD: Chris, you kind of foreshadowed our next topic, which is to talk about AIG. Dan mentioned some of the rating perspective there and we’ll come back to that in a few minutes. What we’re really concerned about here is just the impact. The headlines, the news obviously, the situation, what’s that done in the specialty market?

TREANOR: It’s created a tremendous amount of activity. Right after the event as E.G. articulated, we saw a ton of instant shopping. We saw a ton of folks out there looking to look at midterm movement of the business. At the end of the day hardly any of that business moved. But you had a lot of nervous customers. You had a lot of nervous brokers. People were taking a look at what else is available in the marketplace and trying to make quick decisions.
That’s dissipated, that slowed down. Certainly at renewal AIG is under a lot of pressure. It’s where you’d expect it to be. I think their D&O book is probably under the most pressure. That’s a very visible line of coverage and a line where they have a dominant market share, particularly in Fortune 500, commercial more than in financial institutions, but commercial D&O. that’s where they’re seeing a lot of the pressure and that’s creating a lot of movement, a lot of opportunity. They haven’t certainly lost a ton of that book but they’ve lost a bit of that book.
The other area which really plays to us in terms of opportunity is, as I said before, there are a lot of areas where AIG wrote a ton of capacity. If you’ve got $150 million of capacity on your umbrella program there’s no way you’re keeping that at renewal, unless you’re just buying the entire marketplace. There are probably half a dozen customers who buy the entire commercial marketplace, get over a billion dollars. But short of that, if you’ve got $150 million of AIG capacity and a $300 million tower, you’re not going to keep it there.
So that creates certainly umbrella opportunities and excess liability opportunities which typically fall to the E&S marketplace, into the specialty marketplace. So there’s a lot of activity going on there.
On the property side, Lex is a dominate player in our space. Certainly a lot of activity in that space as the result of people’s concerns about Lex. The Berkshire program, the credit enhancement program that Berkshire Hathaway provided them has stabilized that book. But they’re under pressure and they’re getting tested all the time.
So some movement of business certainly, some movement of business in key areas and a ton of activity. I would say we’re all seeing a substantial increase in submission activity as the result of, as good prudent customers people are testing what they’ve got.