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Property-catastrophe reinsurance rate increases were steady at the July 1, 2009 renewal. In the United States and Latin America, capacity was sufficient to meet demand. U.S. property-catastrophe reinsurance rates increased 15 percent year-over-year, in line with the trend from January to June. In Latin America, preliminary data varied by country, but upward pressure on pricing was offset by supply and local market competition to keep reinsurance rate increases contained. For the marine sector, rates were up 5 percent to 10 percent, based mostly on loss history and catastrophe exposure. With four major renewal periods covered this year, a sense of calm has emerged. The general reinsurance market is tepid, with a few hotspots based on region- or program-specific factors.

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All Finnish insurance companies, except Pohjola and If, participate in the Finnish Terrorism Pool. The pool is intended as a last resort in the event of a major terrorism loss in Finland, and recovery will be made under the pool only after all traditional reinsurance programs have been exhausted. For personal lines, there are no terrorism exclusions. On industrial and commercial lines, exclusions are imposed, but with a EUR3 million per policy write-back. Reinsurance generally follows the original conditions, but excludes NBC terrorism. 

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Upward pressures on U.S. property-catastrophe reinsurance rates were steady at the July 1, 2009 renewal, as capacity in the market was sufficient without being abundant. This continues a trend seen in the United States from January through June. Consistent with the year’s prior renewals, U.S. national program rates were up 15 percent year-over-year, with pricing in the Northeast up 8 percent. This represents a slight up-tick from April 1, 2009’s average rate increase of 14 percent, part of which is driven by a smaller sample size (which gives some loss-affected programs greater influence over the results). Northeast program rates are unchanged from

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For programs in the Northeast, FOTs for both higher and lower layers were up between 5 percent and 10 percent year-over-year. FOTs were equal to the minimum quote, 92 percent of average and only 79 percent of the highest quote, as some reinsurers attempted to price business more aggressively than cedents would support.

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Mexico, the region’s largest market, sustained price increases (based on our analysis to date) of 2.5 percent to 10 percent, on average, for earthquake and windstorm catastrophe excess of loss (XOL) programs, with some prices at the high end influenced by the capacity available. Central American earthquake and windstorm pricing was in roughly the same range - flat to 12 percent. Reinsurance renewal terms in the Caribbean (and some multi-territory programs) did stretch higher. Price increases for risk XOL programs were more modest. Early indicators put programs in Mexico and Central America up 2.5 percent to 5 percent, on average.

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Currently, there is no terror pool or government involvement in terror coverage. In regards to commercial policies, physical damage to buildings is always fully covered, though there are limitations/exclusions on contents and business interruption. There are no exclusions for Nuclear, Biological, and Chemical (NBC) terrorism in the original conditions of workers compensation. Reinsurance generally follows the original conditions but excludes NBC terrorism. However, terrorism is not excluded from personal lines. 

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1. Rates up on Tightening Capacity at U.S. 4/1 Prop-Cat Renewal: Reinsurance rates continued to increase for the U.S. property-catastrophe reinsurance market at the April 1, 2009 renewal, extending the trend that began at the beginning of the year. National programs were up 10 percent to 14 percent on a risk-adjusted basis, with those in the Northeast seeing 6 percent to 8 percent increases. This compares to a reinsurance rate increase of 11 percent on average at the January 1, 2009 renewal.

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2. Cat Bond Update: First Quarter 2009*: A strong first quarter has demonstrated that catastrophe bonds are still important tools for risk managers, treasurers, and CFOs. After five months of silence since the last issuance in mid-August 2008, three bonds closed in the first quarter of 2009 bringing USD575 million in fresh capital and confirmation that these instruments are still attractive investments, despite the ongoing the global financial catastrophe. Investor marketing for a fourth catastrophe bond issuance began in the first quarter but is expected close in the early part of the second quarter. Issuance levels are consistent with the first quarter of 2008, a year that seemed likely to be the second-busiest in the history of the catastrophe bond market until the financial crisis accelerated in the fourth quarter of last year.

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3. Where Are We on Solvency II?: Solvency II will require insurers and reinsurers domiciled in the European Economic Area (EEA) to assess their regulatory capital requirements within a forward-looking risk sensitive framework. Solvency II has reached a decisive point in its development, as the focus moves to how the directive will be implemented in practice and how it will shape the competitive landscape of the insurance industry. From a quantitative perspective, the results of the Quantitative Impact Study 4 (QIS 4) were published by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) in November 2008. From a political perspective, the group support concept was abandoned to avoid further jeopardizing the targeted implementation by 2012.

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An Italian freight train carrying liquefied petroleum gas derailed just before midnight local time (23:00 BST), causing an explosion that engulfed several houses in the Tuscan coastal city of Viareggio, located to the northwest of Pisa in northern Italy. The freight train was en route from the port of La Spezia to its final destination in Pisa.

According to sources, 15 people have so far been killed by the explosion, with a further 50 injured. Italian officials said that 35 of those injured have been hospitalized with severe burns.

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A Yemenia plane carrying 153 passengers and crew on an international flight crashed into the Indian Ocean as it approached its destination of the Comoros Islands in bad weather, according to airline officials. Reports said the aircraft was carrying 142 passengers and eleven crew members. The Airbus 310-300, operated by Yemenia, was flying the final leg of a flight taking passengers from Paris and Marseille to Comoros via Sanaa in Yemen. The plane was flying to Moroni, capital of Grande Comore, the main island of the archipelago, and reports said the jet went down around 10 kilometers (6 miles) off Comoros. The Paris airports authority said 66 French nationals were on board the plane. Most of the passengers aboard the Airbus A310 were believed to be Comoros residents returning from Paris, reports said.

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Belgium’s Terrorism Reinsurance & Insurance Pool (TRIP) was created on February 1, 2008. TRIP, a non-profit organization, distributes the loss costs of terrorism cover among all participants according to their market share, and it acts also as a reinsurance buyer.

TRIP guarantees the cover of terrorism claims during a calendar year up to a global annual limit of EUR1 billion USD1.4 billion. This amount will be adjusted every January based on the Consumer Price Index (relative to December 2005). The Belgian government can change the amount based on several factors, including economic developments, the financial capitalization of the (re)insurers, and the development of terror risk. Carriers are not required to participate in the pool, but participant liability is capped at EUR1 billion, while non-participant liability is not capped at all. Membership in TRIP represents more than 90 percent of the market.

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