Authority, company executives' elation was "tempered with terror'', says E.W.

Blanch executive vice president Jack Graham.

That's because it was by far the largest US catastrophe reinsurance programme ever placed.

Bermuda's property catastrophe reinsurers played a leadership role by providing the traditional reinsurance capacity layer for the CEA, a state agency which operates as primary insurer selling earthquake coverage for residential property risks.

The total amount of CEA capacity that emanated from the Bermuda marketplace was $317.8 million, E.W. Blanch Co. said. Financier Warren Buffett, through his Nebraska-based Berkshire Hathaway Inc., provided $1.5 billion in reinsurance.

Capacity figures are based on the original authorisations as well as a 71.7 percent industry participation in the CEA.

Prior to the CEA, the largest catastrophe reinsurance placement was in the $500 million to $600 million range.

The CEA was designed to solve California's homeowners insurance crisis after the 1994 Northridge earthquake. In August of last year, E.W. Blanch Co. was invited to compete for the CEA's $2 billion in traditional reinsurance. On October 25, 1996, the company became broker of record.

The company had competed with an "all-industry solution'' which would draw on resources of competitors to market the placement with E.W. Blanch Co. as "quarterback''.

E.W. Blanch Holdings chairman and CEO E.W. (Ted) Blanch Jr. called the move to assemble a team of US brokers a "rather unusual'' approach.

Associate intermediaries were assembled in November and had the group gone to the market looking for lines in the $5 million to $10 million range, reinsurance of $500 million would not have been reached, Mr. Graham said.

Brokers knew they had to ask every reinsurer for between $150 million and $200 million -- an unprecedented amount.

By mid-November, the broker company had landed market capacity of $3.6 billion.

The final step was to get 70 percent of the California Homeowners market to join the CEA.

On the day of the deadline, at 10 p.m., some companies backed out, dropping membership to 69.4 percent.

"A solution was crafted by the CEA requiring specific modifications to the reinsurance placement, and we needed agreement from the ten lead reinsurers by 10 a.m. on November 26 before the final governing board meeting. We had it in 12 hours,'' said Mr. Graham.

"The requested changes were material and we knew there would be lots of emotion around the request.'' Phone contact was made with all European markets before 3 a.m. Bermuda companies had been reached by 7 a.m. and before 10 a.m., agreement was unanimous. At 2.30 in the afternoon, the governing board meeting ended -- the deal was a success. The CEA had met all legislative requirements and could begin operation.

Long before E.W. Blanch Co. was quarterbacking the largest catastrophe reinsurance placement, its founder, E.W. Blanch Sr. was assembling clients from his fledgling company set up in his home in Edina, Minnesota.

Among his first telephone calls, after quitting his job at a private Minneapolis reinsurance broker in 1957, were to his clients. He also called the bank for a $7,000 second mortgage on his house. The money would be used to capitalise E.W. Blanch Co.

Ted Blanch Sr. had been working for a privately owned reinsurance broker, which focused on property business in Minneapolis/St.Paul, but left after his attempt to gain a stake in the company was turned down. His work there had included developing the company's casualty book and also made use of his expertise in rating and writing reinsurance contracts.

He resigned from the private firm, taking eleven of his clients and his secretary with him, to form E.W. Blanch Co. He first operated the business with a rented typewriter, a Xerox machine and a phone. His wife, Jean, was the company's first bookkeeper.

A year later, he hired his son Ted Jr., who would go on to become the company's chairman and CEO.

Ted Blanch Jr., whose entire career has been with the firm his father started, enjoys telling others that he is the only senior executive at the company who has not been offered a job somewhere else.

By 1995, the company's brokerage income was $87.2 million with staffing reaching 600 at year end.

In the 90s, the company has gone from strength to strength until most recently, when annual results for the year ending December 31, 1996, showed profits were down, a shift attributed to a $22.7 million restructuring charge.

Over 1996, the company made $6.3 million as compared with $18.2 million during the prior year.

"The 1996 financial results demonstrate significant positive performance,'' Ted Blanch Jr. said.

"We have seen success in every part of the company and are very well positioned as we enter 1997. Prior to the restructuring charges, the company's earnings grew by 14.2 percent despite difficult market conditions.'' Floated at $18.50 a share in May 1993, the company's stock has gained over 20 percent over the past two months. Early last week, shares were trading at $23.

E.W. Blanch Holdings, Inc. is a leading provider of integrated risk management and distribution services, including reinsurance intermediary services, risk management consulting and administration services and wholesale insurance services.

Headquartered in Minneapolis, it has branch offices throughout the US. Swire Blanch Holdings, Ltd., the company's international joint venture, has offices in Copenhagen, Hong Kong, London, Mexico City, Paris, Rome, Singapore and Sydney.

In the January issue of the E.W. Blanch Holdings newsletter, the company said cornerstones of its success have been promoting reinsurance relationships where the buyer and seller are in a mutually beneficial deal, promoting a team approach and professionalism at every level, and generally doing everything possible to retain clients.

"Dad's entire career was marked by a passion for professionalism, quality and accuracy.

"He set the standard for our technical expertise, commitment to integrity, sense of fair dealing and compulsion to be the best at what we do,'' Ted Blanch Jr. said. "Any success the company and its employees have can be directly traced to his example. As a business person he could and often did, exhibit single-minded drive, warmth and compassion at the same time.'' Ted Blanch Jr. has 38 years of experience with the company his father founded.

The six most senior people at the company have 171 years of combined service.

Ted Blanch Jr. will participate in a Wednesday morning session, "The Bermuda Connection-Financing and Transfer of Risk'' at the Insurance Symposium.

Company founder Ted Blanch Sr. and his wife, Jean Ted Blanch Jr.