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.
Workers Comp Stays Steady: Workers compensation reinsurance pricing remained fairly flat at the January 1, 2009 renewal. Rates on line (ROL) declined slightly for multi-claimant catastrophe programs, and rate reductions for single-claimant exposed programs were slight (if not flat).
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.
Modest ROL Increases at 1/1 for Europe: European rates rose on average from 0 percent to 10 percent on a risk-adjusted basis. Though it produced some headlines, Windstorm Emma did not yield substantial insured losses and had only a limited effect on pricing.
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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E&O’s Dual Pressures: A feeding frenzy in the primary market pushed the cost of errors and omissions (E&O) insurance lower in 2008, with the exception of Financial Institutions (FI) coverage. This led to downward pressure on reinsurance rates, as well, which markets sought to resist at the January 1, 2009 renewal.
* 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.