Insurance Magnate Pays Big to Divorce Wife

Wondering why you are paying a lot for insurance? Perhaps some of your premiums are going to help pay the divorce settlement of insurance bigwig, John Charman. According to an article on Business Week, Britain's court of appeals has upheld a previous lower court decision to give Charman's ex-wife a settlement that equals almost 37 percent of his total assets. The final pay-out will be well over $50 million US.

Charman claims the settlement is grossly unfair.  

Both Charman and his wife came into the game without a penny. From humble beginnings, Charman then built an insurance empire. He is currently president and chief executive of Bermuda-based Axis Capital Holdings Ltd. (Previously, Charman was the senior deputy chairman of the Lloyd's insurance market.) Axis Capital is listed on both European and North American stock exchanges. When Charman set up Axis Capital Holdings, he was aiming to cash in on the US surge in insurance premiums after the 9/11 terrorist attacks.

Why would Charman want into the US market? Well, after 9/11, property insurance in the US became much more expensive, as insurers whined about risk and claims. While insurance on office towers may have gone up, home and other property insurance was also suddenly more expensive. This happened across the market, even when the self-same insurers weren't directly part of the group that was being sued in the wake of the loss of the twin towers. This overall increase in premium made the US market much more appealing, and that's what likely drew Charman.

Charman will not be left a pauper by his divorce by any means. In the 2005 financial year alone, Charman was paid $7,741,762, and had stock options of $42,027,204 in Axis. With this kind of compensation, it is understandable that much of his estate is based on insurance stocks.

Why would this affect your insurance premiums? Well, insurers are increasingly influenced by the shareholders in their companies. These shareholders are looking for bigger and bigger profits, and higher and higher share prices. In this case, if Mr. Charman is going to pay off Mrs. Charman with cash as opposed to assets, he's going to be needing a lot of healthy profit from his stocks to do that. I have to wonder if anyone will be tracking to see if Axis itself or insurers who are downstream of Charman's Axis Capital Holdings - using Axis for reinsurance for instance - will be jacking up premiums to help cover the president's divorce costs.

Monique L. Attinger 

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