The eel mystery

I’m pretty sure that if I told you that the insurance abbreviation eel (each and every loss) actually comes from the eel, the snake-like fish which can be found all over the world, you wouldn’t believe me? Well, allow me to elaborate.?

So, why eels? What’s the story with eels? Let’s travel back in time a bit.

Some 10 or 15 years ago, I used to go fishing with a couple of friends. The usual setup was 3 crew members and a lot of fun. We used to sail out, more precisely paddle out at night and the whole thing was more of a hangout event than actual fishing. Considering the peculiarity of the place we used to go to (a small estuary – where a river enters the sea), there were only 2 fish available to catch – mullets and eels. Mullets were kind of boring – they were easy to catch and kind of common in the whole story. On the other hand, eels, wow, the eels were something special. Though to spot, extremely fast and almost impossible to catch – only after some experience you could hope to catch one. At the time I didn't give it much thought but this unusual snake-like fish always felt strange to me. Years passed and I, only recently, discovered that eels were strange, really really strange.

The eel mystery. Eels have fascinated many great minds throughout history. Why? Well, nobody knows how eels reproduce. To this day there's no actual proof on how they come to this world, only speculation – perhaps researched and almost factual speculation but still only guesses.

Ancient Egyptians believed that eels were produced by the sun warming the Nile. Aristotle thought that they grew from the mud and potentially from worms. Pliny the Elder said: ?Eels rub against rocks and the scrapings come to life; this is their only way of breeding." Sigmund Freud had a strange obsession with this animal – spending some time studying hundreds of eels.

It was later discovered that American and European eels come from the same place – the Sargasso sea which is located in the Bermuda triangle thus adding further to the twist. They have 4 stages of life. They begin as larvae in the Bermuda triangle and then embark on their journey to the coasts of the continents while starting with the 2nd stage – they grow to become glass eels working their way to their (temporary) home – rivers, estuaries and shallow waters of the sea. This is where they enter into the 3rd stage of the eel life cycle and are called yellow eels.?

Yellow eels spend their lifetime in this hard environment working their way to find food, often in quite harsh conditions. They're capable of hibernating for a long time and can be quite patient creatures. After a certain period of living like this (again, no one knows how long, it can be 10, 20 or even 50 years) they reach their 4th and final stage transforming into a silver eel. This is when they throw everything aside (quite literally as their stomach is dissolved) and all available energy is concentrated on the final return, the return to their birthplace – the Sargasso sea.?

Arriving home, eels reproduce and die after ?fulfilling this last mission“ so to speak. There are many theories as to how this actually happens, how eels reproduce, but the fact is that there's no real proof yet.

The eel life cycle is indeed quite fascinating, heart warming even, a real adventure story.

What does all this have to do with insurance? Read on.

As the eel mystery kept fascinating many smart people throughout history, the bright brains of the insurance industry were no exception. One of the young underwriters from the booming insurance industry of the mid 20th century whose father was a marine biologist was obsessed with eels.?

As he pondered the four stage life cycle of this amazing marine creature, while bored at his office desk, a sudden epiphany possessed his mind. The premium or the money paid to underwriters is the eel. It has the same lifecycle as the eel!

Ok, someone owns a company. He wants to protect his assets. He has a certain amount of money. He wants to use a certain amount of that certain amount to bind an insurance policy which will protect him from certain risks. Monetary speaking, this is the first stage. The amount he'll pay to the insurance company is the insurance premium. Now, most people, even the ones working in the insurance industry don't really know (except actuaries) how the premium is calculated. There are some vague thoughts but no ?real proof“ for normal people (not insinuating that actuaries are not normal people ?). So the premium is born after assessing a risk. Let's say it's the reinsurance premium – the first one in the chain of re/insurance. This is the larvae stage. The eel/premium is born in the Sargasso sea in the Bermuda triangle/reinsurance company office (often in Bermuda as well).

The next phase is the actual payment itself or the glass eel stage. The money ?travels“ from the policyholder to the final destination, be it the local insurance company or in the case of a larger business,? the international reinsurance markets. The money/glass eel has reached its destination.

The money paid then is on the reinsurers books. It ?drowns“ in the enormity of the premium income and ?lives“ there for some time in ?harsh“ conditions of the insurance industry. This is the yellow eel phase.

Finally, a loss occurs. The money needs to find its way ?home“ i.e. to the policyholder. The company owner needs this money to help him overcome the suffered claim. This is the silver eel stage. There’s a lot of concentrated energy on resolving the issue at hand. The money reaches its destination and the loss is settled. The silver eel has returned home.

The silver eel subsequently reproduces and dies. But for the monetary analogy explained above we can say the same thing, right? The money the owner has received will definitely help him ?reproduce“ or better said earn more money in the future considering he has not been impacted by the harmful event with insurance cover as it would have happened without one. Also the monetary amount received does die in a sense as it is used to repair or rectify the damaged item or so on.

Proud of his discovery, this young man concluded:

?First the premium is born mysteriously. Then it is paid or transferred to the carrier. After that it remains still on the books. Finally, when a loss occurs it is transformed, it reproduces and dies. Wow, with each and every loss an eel is born. Each and every loss? Eel = eel.“

And so the eel abbreviation came to be.

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Truth be told, insurance and eels don't have anything in common. Two completely different worlds. And the second part of the story above is completely made up, an insurance fairytale. But, you know, without the eel part, you probably wouldn't be reading this.

The eel story is quite interesting and I hope it served its purpose – to ?lure“ you into reading this article. Because why would you read another insurance article trying to convince you insurance is interesting?

The fact is that insurance is boring to most people. But connecting the two topics above you realize that everything can be linked in some sort of way. This is the true beauty of the world, of life, of thoughts, of humanity. Mystery, story telling, fairy tales, insurance ramblings, everything matters. And everything is connected.??

One thing that insurance and eels have in common is the mystery element. Stop to think about it, insurance protects you from certain risks. And these risks are mysterious – risk is a chance something harmful or unexpected could happen.?

And people in general don't like the mysterious, they fear the unknown. This is exactly where insurance steps in. It helps you overcome the uncertainty of the future, of the mysterious.

So next time you hear a mysterious story, enjoy it and stop to think – does it somehow connect to me, or to my business, career, life? The answer is that it most probably does.

And if the mysterious, the unknown, the uncertain makes you nervous and gives you panic attacks, well, at least you’ve got insurance.

“We all have fear of the unknown what one does with that fear will make all the difference in the world.”

– Lillian Russel