Archive for December, 2008



December 31st, 2008

Accounting and Accountability: Fair Value and Convergence

Posted at 1:00 AM ET

Fair value accounting - also known as “mark-to-market” - has appeared in the headlines quite frequently, largely because of the ongoing financial catastrophe. Recent statements by the Securities and Exchange Commission (SEC), Financial Accounting Standards Board (FASB), and International Accounting Standards Board (IASB) have fueled the debate, and the U.S. government’s USD700 billion bailout package requires that the SEC perform a study on the impact of fair value accounting on financial institutions … and suspend the practice, if necessary.

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December 31st, 2008

GC Capital Tip: Register for 1/1 Renewal Updates

Posted at 12:55 AM ET

The January 1, 2009 renewal is approaching rapidly. Register now for e-mail updates from GC Capital Ideas to have the latest intelligence delivered directly to your inbox. Review the headlines in your e-mail update to decide which stories interest you most, and click through to the full article.

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December 30th, 2008

2008 Catastrophe Update

Posted at 1:00 AM ET

Julian Alovisi, Assistant Vice President, Instrat®
Contact

A record-setting Atlantic hurricane season and above-average manmade catastrophe losses put 2008 among the costliest years on record. While the economic downturn dominated the headlines throughout the year, lurking in the shadows was one of the most active hurricane seasons on record. Hurricanes Ike and Gustav, combined with other weather-related events and several large manmade catastrophe losses, triggered insured losses of USD50 billion in 2008.[1] Although weather-related events remained the largest source of losses (USD43 billion in total), several manmade catastrophic events triggered insured losses of USD7 billion, significantly higher than the annual average of USD4.8 billion.

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December 29th, 2008

Book Value Update, Dec 29, 2008

Posted at 1:11 PM ET

Book values are unchanged from last week. The S&P 500 Banks Index implied book value continues to show a 32 percent aggregate decline from December 31, 2007. The Guy Carpenter Global Composite’s implied book value remains down 15 percent. As the composite is an index of 141 carriers from around the world, the 15 percent decrease indicates that global insurance industry capital could be down by a similar amount relative to year-end 2007.(Chart after the jump)

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December 29th, 2008

Switzerland: Catastrophe Reinsurance Market 2008

Posted at 12:44 AM ET

Hanspeter Hilfiker, Senior Vice President
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2008 Reinsurance Market Position

Earthquake is covered through an Interkantonaler Rückversicherungs-Verband (IRV) fund in 18 of the 19 monopoly cantons. It has a total capacity of CHF2 billion (USD 1.8 billion). The earthquake coverage provided by the monopoly insurers is voluntary and does not require any additional premium. One monopoly insurer, Zurich Cantonal Institute, covers earthquake for buildings in the remaining canton; it has capacity of around CHF 1billion (USD 0.9 billion). In addition to earthquake, the IRV covers its elemental perils exposure with stop-loss cover with capacity of up to CHF550 million (USD 500 million).

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December 28th, 2008

Taiwan: Catastrophe Reinsurance Market 2008

Posted at 12:55 AM ET

Danny Yeung
Contact

2008 Reinsurance Market Position

Proportional

Natural perils continue to be excluded from most proportional treaties and are reinsured under catastrophe excess of loss programs. For those proportional treaties covering natural perils, event limits are still imposed. With excellent results in 2007, some cedents were able to increase their proportional treaty capacity and event limits for 2008.

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December 28th, 2008

Nordic Region: Catastrophe Reinsurance Market 2008

Posted at 12:50 AM ET

Stefan Schneider, Assistant Vice President
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2008 Reinsurance Market Position

All major catastrophe model vendors are active in the Nordic region and have models for windstorm. In 2008 RMS and EQECAT released new model versions. A significant change is that forestry exposure now is included in the models, which in the light of the Erwin loss in 2005 is considered to contribute to the PML for forestry exposed portfolios. Furthermore, EQECAT released a model for windstorm exposure in Finland which is the first available model for this country. Due to the coming Solvency II requirements the Nordic cedents tend to buy coverage up to a 200 years return period.

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December 26th, 2008

Week’s Top Stories: Dec 20 - 26, 2008

Posted at 3:11 PM ET

Reinsurance Pricing and the Changing Cost of Capital: Despite the ambiguity pervading financial and reinsurance markets, it is clear that systemic risk has increased. Unprecedented chaos in financial markets left investors more risk-averse than they were at the end of the summer.

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Price Bottoms Out for Aviation: The aviation renewal came without surprises and generally without change. After years of cedent-advantaged market conditions, pricing stabilized. Terms and conditions showed little (if any) change, and quoting was timely and disciplined.

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Financial Catastrophe Hits Japan, Net Income Off 67 Percent: A sagging economy has pushed non-life insurer earnings lower in Japan. After-tax net income for the seven largest companies dropped 67.1 percent for the first half of fiscal year 2008 (April 1, 2008 to September 30, 2008) relative to the same period in 2007-after adjustments for contingency reserve movements.

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The Adverse Development Super-Catastrophe: Property catastrophes make the news. Tangible and visual, the carnage can be conveyed with ease, and all can grasp the direct implications immediately.

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Book Value Update, Dec 22, 2008: Book values remained stable last week. The S&P 500 Banks Index implied book value has increased by three percentage points since the end of November, reflecting a 32 percent aggregate decline from December 31, 2007. The Guy Carpenter Global Composite regained some momentum, edging slightly higher from the previous week.

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Most Popular Keyword: World ROL Index

And, you may have missed …

Climate Change: A Debate Reshapes (Re)Insurance: The climate change debate is likely to continue unabated well into the future. Even if it is not settled anytime soon, the debate itself has already begun to affect the (re)insurance industry. Risk-bearers deal in probability routinely, making climate change another likelihood to consider.

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December 26th, 2008

Germany: Catastrophe Reinsurance Market 2008

Posted at 12:50 AM ET

Stephanie Vogg, Vice President
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2008 Reinsurance Market Position

For several years, catastrophe modeling has provided the basis for decisions on levels of reinsurance retentions and limits. All well-known modeling firms have products for modeling German storms. Some reinsurers also have developed in-house tools to estimate catastrophe exposure. The availability of new flood models and the density of extended elemental perils coverage in the primary insurance market have increased. Consequently, cedents have had a closer look at their catastrophe exposure. This, in turn, has lead to the purchase of some additional capacity.

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December 25th, 2008

Southeast Asia: Catastrophe Reinsurance Market 2008

Posted at 12:50 AM ET

Chris Hu
Contact

2008 Reinsurance Market Position

Reinsurance rates have declined for Southeast Asia since 2003. Low levels of insured losses are driving this trend. Average rates on line (ROLs) for property excess of loss cover vary by country, as do year-over-year changes.

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