Cat Bonds Persevere in Tumultuous Market*: A slow issuance year in 2008 masks a story of resilience and risk management flexibility. After a record-setting year in 2007, catastrophe bond issuances fell 62 percent by issuance volume and 52 percent by transaction count last year.
A Tight Retro Market at 1/1: A late treaty retrocession renewal was characterized by reduced capacity and higher prices. Buyers grappled with uncertainty concerning their risk mitigation requirements, based on inward writings and an extremely limited market — especially for standard Ultimate Net Loss (UNL) retrocession protection.
Cats and Credit Push Prices Up: Reinsurance rate increases were moderate on average at the January 1, 2009 renewal. The Guy Carpenter World Rate on Line (ROL) Index rose 8 percent, in response to the dual pressures of a financial catastrophe and the second most expensive property catastrophe year on record.
Ike Update: Revised Shareholders’ Funds Impact: Another four companies increased their Hurricane Ike estimates this week: Arch Capital Group Ltd, Chaucer Holdings plc, Transatlantic Holdings Inc., and Argo Group International Holdings Ltd. This continues a trend that began two weeks ago.
Book Value Update: Renewals Impact: The impairment of insurance investment assets, as a result of the financial catastrophe, has pushed capital lower. As of year-end 2008, the GC Global Composite of 141 carriers had lost an estimated 15 percent of implied book value.
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Capacity Woes Pressure D&O: The January 1, 2009 directors and officers (D&O) reinsurance renewal was challenging for cedents. The ongoing financial catastrophe complicated the effort, which was exacerbated by revelations of the alleged Madoff investments Ponzi scheme in mid-December — just as renewals were completing.
* Securities or investments, as applicable, are offered in the United States through GC Securities, which is a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Advice on securities or investments, as applicable, are offered in the European Union is provided through GC Securities, a division of MMC Securities (Europe) Ltd., authorized and regulated in the UK by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., GC Securities, MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.