1. 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.

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2. 2008 Catastrophe Update: 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.

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3. 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.*

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4. Reinsurer Financial and Cat Losses High, Bermuda Hit Most: A tough year for reinsurers is coming to a close. The worldwide financial catastrophe has impaired investment assets and put downward pressure on profits. At the same time, combined ratios were sent higher by an above-average year for catastrophe losses, especially as a result of Hurricane Ike.

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Christopher Klein, Managing Director and Head of Global Business Intelligence
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Net income dropped USD22.4 billion year-over-year to a loss of USD7.5 billion for the Guy Carpenter European Reinsurance Composite for full-year 2008. In 2007, the composite posted aggregate net income of USD14.9 billion. Total return on equity (ROE) fell to -9 percent.

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 Christopher Klein, Managing Director and Head of Global Business Intelligence
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The Guy Carpenter Bermuda Reinsurance Composite posted an aggregate net loss of USD6.6 billion for full-year 2008. This represents a precipitous drop from 2007’s net gain of USD8.6 billion. Again, unrealized losses were the primary source of the problem. Eight of the 18 companies in the composite would have reported net profits if not for them. The composite’s aggregate return on equity (ROE) fell to -7.9 percent.

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Shareholders’ Funds Down 15% for Bermuda Reinsurance Composite >>
(Monday, March 23, 2009)

Shareholders’ Funds Down 21% for European Reinsurance Composite >>
(Tuesday, March 24, 2009)

Lloyd’s Shareholders’ Funds Relatively Stable >>
(Wedensday, March 25, 2009)

Shareholders’ Funds Down 18% for Global Reinsurance Composite >>
(Thursday, March 26, 2009)

Shareholders’ Funds Down 18% for Global Reinsurance Composite: Shareholders’ funds for 16 of the 20 companies in the Guy Carpenter Global Reinsurance Composite are down 18 percent from year-end 2007 to year-end 2008.

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Catastrophe Bonds – Safe from the Storm: Last year, a financial catastrophe shook major market centers around the world. Several prominent, global banks have all but disappeared. Yet, insurers and reinsurers, in general, have persevered.*

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2008 Natural Catastrophe Summary: Natural catastrophe losses of more than USD200 billion made 2008 the third most expensive year for catastrophe losses — surpassed only by 2005 (Hurricanes Katrina, Rita, and Wilma) and 1995 (Kobe earthquake). Last year was also one of the deadliest, with more than 220,000 estimated fatalities from natural catastrophe events.

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SEC Settlements in Ponzi Scheme Cases: Putting Madoff and Stanford in Context, a new working paper by NERA Economic Consulting, examines the sizes of Securities and Exchange Commission (SEC) settlements in Ponzi scheme cases. None of the cases, which involve more than 300 defendants in total, was as large as those involving allegations of fraud against Bernard L. Madoff or Sir Allen Stanford. The study reaches back six and a half years and provides summaries of the 12 cases during this period in which investor funds of at least USD50 million were involved.

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2008 Natural Catastrophe Summary: Natural catastrophe losses of more than USD200 billion made 2008 the third most expensive year for catastrophe losses — surpassed only by 2005 (Hurricanes Katrina, Rita, and Wilma) and 1995 (Kobe earthquake). Last year was also one of the deadliest, with more than 220,000 estimated fatalities from natural catastrophe events.

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Your vote counts. We encourage you to participate in this year’s 2009 Reactions Brokers survey.

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Christopher Klein, Managing Director and Head of Global Business Intelligence
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Shareholders’ funds for 16 of the 20 companies in the Guy Carpenter Global Reinsurance Composite are down 18 percent from year-end 2007 to year-end 2008. The change, which reflects an aggregate drop of USD19.7 billion — from USD108.4 billion in 2007 to USD88.7 billion in 2008 — is consistent with Guy Carpenter expectations since the beginning of the fourth quarter of 2008 (when we estimated a 15 percent to 17 percent decline in shareholders’ funds).

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Caroline Gray, Instrat®
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Event summaries are listed in chronological order.

Floods in the United States

Heavy rain triggered severe floods across the U.S. Midwest from late May to early June, inundating up to 40,000 homes and businesses. Reports said the flooding was the worst to hit the Midwest for 15 years and caused billions of dollars of damage to crops. Bridges and highways were swamped, factories were forced to shut down and water and power utilities damaged.

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