Saturday, October 01, 2011

Bankruptcy IV

From the 2nd of September:

"If one is to be bankrupted, it is always imagined there will be a tangible reason, & a person to blame.

E.g You have made a rash decision, & can blame only yourself. Or you have a lowdown mongrel of a bank manager, & thus have someone you can seethe over & plan to shoot, or something.

Either way, you could expect to have lots of warning, i.e. to be trading poorly for a while beforehand, or be having difficulties meeting bank commitments etc.

It never entered my head that it could pop out of nowhere, that you could be trading profitably, looking to expand, everything going fine. The *pop* along comes an event that you never imagined would happen to anybody. There is no person to blame, no rash decision been made."
The spectre of bankruptcy is no longer looming, I can sleep again. And I made this offer:

"Anybody who can guess what it is that has caused such trouble will be allowed open slather in my wine cellar."

Nobody came close. Some great stories, but nobody guessed anywhere near to it.

The bank was very good about it. Much much better than expected.

The problem? I couldn't get insurance. No Australian underwriter would offer me insurance. The reason: I am located north of 23 degrees latitude, & insurance companies will not offer commercial property insurance to anybody north of 23 degrees.

I had expected there would be a last minute quote, but instead for several weeks I was totally & completely uninsured. (Public liability insurance was no problem, otherwise I'd have been in even worse trouble.)

My preferred insurance brokers, a huge worldwide firm, was finally able to find insurance for me on the international market. This was no joke, putting a country pub into a market that is designed for the insuring of entire fleets of oil tankers or something.

The insurance was finally cobbled together via 8 different underwriters. Quite an effort.

The cost as 1/5th of profitability.... When I entered the pub trade property insurance was about 1/70th of profitability. Increase in risk is negligible. Increase in real terms, in cost of replacement has been negligible.

Very few people believed me. The insurance industry became heated when I sooled the politicians onto them. My industry association was ambivalent, but after phoning a few insurance companies themself, oh boy did they ever believe me. The Liberal & National party responses varied between laughing ("You're in a pickle mate!" - from one very well known LNP politician, who actually laughed as if it was the funniest thing heard all week. This was not helpful)

My local member at least pretended to give a toss. Every ALP politician I contacted was extremely helpful, & escalated the predicament (it'll affect the bulk of businesses north of 23) at either state or federal level.

My ALP federal politician, within 30 minutes of being phoned by me, traipsed straight accross Canberra to thump the desk on my behalf with certain powers. For their trouble they received this response: "Your consitituent is making this up."

That was action within 30 minutes. The first LNP politician to call me back took half a week to do so. All they had to say was how lucky it was I had phoned them, as the ALP "won't even bother to help you mate."

Why is lack of insurance critical? It is a condition of bank finance. Without insurance the bank has cause to instantly withdraw their finance, force a sale. In such circumstances the sale would be for a fraction of what would be termed a "fire sale price", being as the incoming buyer would be buying something they cannot insure.

This is a possible explanation for the (to me) strange behaviour of the past few months from a couple of other pubs in town.


richard mcenroe said...

What the hell do you have north or 23 dregrees down there? Fire-spitting kookaburras? Exploding koalas? Democrats?

missred said...


Mine Host said...

Richard: That is a question only insurance companies can answer.

Every story they've told to me is not the real one, as I can easily demolish it.

They get their money too easy. If they wish to remain an unregulated industry, I suggest they don't make a habit of drawing a line accross the continent, cutting it in half, & refusing to even offer a quote for insurance to anybody north of the line.

RebeccaH said...

In the States, they call that "redlining". They only used it to cut out inner city (read, minority) communities, and it's illegal now. But never have I heard of insurance companies arbitrarily redlining part of a country for no apparent reason.

What's happening to the other pubs in your vicinity?

kae said...


Sheesh, that's really rough, as is the percentage of cost.


JeffS said...

Huh. Yeah, I wouldn't have figured that one out. Period.

In large part because it's arbitrary, and developed through some bizarre reasoning. When people decide to do something stupid, they go all out.