- US Property/Casualty Insurers Facing Increasingly Complex Operating Environment: Guy Carpenter Report
- Guy Carpenter Reports on Kumamoto Earthquake, Seismic Risk and Earthquake Cover in Japan
- Guy Carpenter Cites El Niño and North Atlantic Oscillation as Key Climate Drivers in 2015
In the Northwest Pacific Basin, Typhoon Sarika and Super Typhoon Haima have recently affected areas of the Philippines, Vietnam and Mainland China. Both typhoons made landfall in the northern Philippines within a week, as a Category 4 on the Saffir-Simpson scale. Reported impacts in the northern Philippines have been especially severe, with reports of moderate to complete damage over areas of northern Luzon. Damage from wind, flooding and mudslides have been reported, together with reports of downed trees and powerlines.
Insurers have long embraced the concept of risk tolerances. In some cases, the risk tolerances were expressly stated in a company’s enterprise risk management (ERM) policy document or in other cases exhibited in the course of normal operations.
Nick Frankland, CEO EMEA, Guy Carpenter
The gap between insured losses and total economic losses remains stubbornly large - Swiss Re estimates that only 30 percent of global catastrophe losses in the ten years prior to 2015 were covered by insurance. Consequently, the remainder of the loss, USD 1.3 trillion, was borne by individuals, firms and governments, and this burden is increasing. Swiss Re estimates uninsured losses more than doubled from 0.08 percent of global gross domestic product (GDP) for the ten years from 1976 through 1985 to 0.17 percent for the years 2006 through 2015.
The changes in today’s property and casualty (P&C) insurance marketplace present insurers with many challenges to capital management and risk transfer techniques. Insurers are compelled to leverage their capital positions to increase and diversify their market shares to an unprecedented degree. Preserving the status quo is not an option for long-term viability. Profitable growth is a key priority for companies seeking additional return. Companies need to enter new lines of business or geographies strategically with proper analysis. Guy Carpenter offers proprietary analytical tools, intellectual capital and expertise to help companies determine and evaluate their growth plans while maintaining an acceptable level of risk and profitability.
US Property/Casualty Insurers Facing Increasingly Complex Operating Environment: Guy Carpenter Report
A.M. Best’s More Transparent Ratings Criteria Provide Benefits to Insurers That Proactively “Own Their Ratings”
Eric Simpson, Managing Director
Maintaining or improving ratings is a priority for most insurers. This can be challenging amid increasing demands for companies to “own their risk” (Own Risk and Solvency Assessment “ORSA”) in an environment of evolving rating agency requirements, including A.M. Best’s (Best) proposed ratings methodology and Stochastic-based Best’s Capital Adequacy Ratio (BCAR) criteria.
Victoria Carter, Vice Chairman, International Operations
Fundamental disruptive forces are driving monumental changes in the global economy at an unprecedented rate. These forces compel the (re)insurance industry to adjust to the new reality and capitalize on the opportunities created.
Reserving and Capital Setting: Background and Challenges: Loss reserves are arguably one of the most difficult risks to estimate and monitor. In fact, inadequate pricing and deficient loss reserves have been the leading cause of property/casualty company impairments. According to A.M. Best, from 1969 to 2009 they triggered approximately 40 percent of all impairments - four times more than those emanating from natural catastrophes. There are many uncertainties in managing long-tailed, heavily legislated lines of business that can be triggered from emerging risks. Unforeseen inflation and anticipated legislative changes over a 10 to 30 year period present many demands.
Hurricane Matthew: Hurricane Matthew became a rare Category 5 hurricane on the Saffir-Simpson scale, with maximum sustained winds of 160 mph. The hurricane followed the western edge of a subtropical ridge to inflict catastrophic damage to Haiti as a Category 4 hurricane before crossing eastern Cuba, and turning to the northwest through the Bahamas towards Florida.
Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of enterprise risk management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.
China Risk Oriented Solvency System (C-ROSS): The China Insurance Regulatory Commission (CIRC) is instituting sweeping changes through its three-tiered China Risk Oriented Solvency System (C-ROSS) framework that will dramatically impact how (re)insurers conduct business. It will strengthen capital requirements, risk management and transparency disclosures - bringing China in line with, and in some cases overtaking, global standards. The C-ROSS framework is similar to Solvency II: three tiers focusing on quantitative, qualitative and disclosure requirements.
Chart: Regional Property Catastrophe ROL Index, 1990 to 2016: The chart shows the indexes for United States, United Kingdom, Asia Pacific and Europe.
And, You May Have Missed…
Managing Volatility Key To Solvency II Transition: The impact of the Solvency II capital ratio on composite life and property/casualty balance sheets is proving more substantial than some companies initially expected, according to Eric Paire, Head of Global Partners & Strategic Advisory, EMEA at Guy Carpenter. This development is due to the double impact of market volatility and volatility within the solvency ratio itself.