Tuesday Report - November 16, 1999

Versatile Business Tool Enables Major
Industries To Function More Efficiently By Sharing Risks

Taking a page from movie superstar George Lucas' book, the insurance industry provides itself with yet another venue...and they do it by bartering catastrophe risks among themselves.

Lucas, the genius behind Star Wars, bartered to reduce his risks by trading a percentage share of his profits. He bartered 1% of the profits in Star Wars for 1% in John Milius' surfing film Big Wednesday. Although Big Wednesday proved to be a big bust, Milius' share of Star Wars netted him more than $500,000. Lucas, of course, made less money on the deal...but it could have gone the other way.

Insurance companies are confronted with a different type of risk than a movie producer, one that can be prohibitively expensive. Namely management of catastrophe risks...ranging from hurricanes and earthquakes to riots and other events.

By forming the Catastrophe Risk Exchange (CATEX), insurance brokerages and self-insured entities are able to barter units of their disaster risk by region and peril.

In effect, because insurers are increasingly being barred by regulators from dropping lines of coverage, or from leaving unprofitable states, the industry has embraced barter. This way they are now able to dilute risk-concentration in one geographic area, by trading a portion of it for risks insured against a different peril in another part of the globe.

Industry Happenings...News About IRTA And NATE

International Reciprocal Trade Association (IRTA)

Electronic Data Systems and MCI WorldCom concluded a giant trade agreement recently. The huge deal included trading employees, assets, and outsourcing services valued at between $15 billion and $17 billion.

EDS will run MCI's computer operations and manage its software development. In return MCI will pick up EDS's global network.

Business-To-Business Auctioneer
Eyes Significant Market Share
Of $300 Billion Yearly Marketplace

DoveBid, formerly Dove Brothers, is one of the world's leading business-to-business auctioneers and capital asset sale advisors. Now they're the industry's first company to offer integrated online and on-site services.

As of November, DoveBid customers around the world will be able to acquire, or sell, literally thousands of capital assets by participating in DoveBid's on-site auctions, or by handling the desired transaction over the web.

"We expect DoveBid.com's virtual exchange to facilitate the transfer of tens of millions of dollars' worth of capital assets in 1999 alone," stated CEO Ross Dove. "These are assets that were previously destined to sit in storage, because the after market distribution mechanism was so inefficient."

There's four ways to handle change. You can cope with...adapt to...or exploit change. Or you can actually create change on purpose. People who actively embrace barter are on level four. Being proactive, not reactive. They trade because it provides their company with a competitive advantage in the changing marketplace.