The Floriday Hurricane Catastrophe Fund (FHCF) continues to play an important role in most companies’ overall reinsurance programs, and price decreases have been more dramatic for higher layers attaching above the FHCF. This results largely from reinsurers’ preference for more remote exposures. Firm order terms (FOTs) for lower layers (sitting below the FHCF) dropped 7 percent to 10 percent relative to June 1, 2007 renewals. Middle layers, usually placed alongside the FHCF, saw decreases of 12 percent to 15 percent, while FOTs for higher layers declined by 18 percent to 25 percent relative to last year.

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Kevin Stokes, Managing Director
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Florida property-catastrophe risk-adjusted pricing is expected to decline by about 15 percent on average at June 1, 2008 renewals. A competitive reinsurance market and the absence of major insured losses are driving this trend. While disasters are not in short supply, none has had a market-changing impact.

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The Solvency II standard model is nearing completion. Quantitative Impact Study Draft 4 (QIS 4) was released on April 1, 2008 and will run through July 2008. In QIS 4, the non-life catastrophe risk capital component of the solvency capital requirement (SCR) calculation has been modified substantially from QIS 3 and has become more complex. In particular, QIS 4 includes a personalized catastrophe scenario capital calculation option, improving the risk sensitivity of the standard model relative to a specific carrier. This approach can provide a competitive advantage through the use of model results for internal management purposes and the compliance process.

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Emil Metropoulos, Senior Vice President
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The continued rise of the convention industry has created a unique clash exposure for workers compensation (re)insurers. Carriers are increasingly familiarizing themselves with “known” accumulations, the risks associated with the day-to-day workplace, since the terror attacks of September 11, 2001. “Unknown” accumulations, on the other hand, have been more difficult to grasp. When employees across an insurance portfolio gather for conventions, additional catastrophic risk exposures begin to emerge.

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