Cat Bond Update: First Quarter 2009: A strong first quarter has demonstrated that catastrophe bonds are still important tools for risk managers, treasurers, and CFOs. After five months of silence since the last issuance in mid-August 2008, three bonds closed in the first quarter of 2009 bringing USD575 million in fresh capital and confirmation that these instruments are still attractive investments, despite the ongoing the global financial catastrophe.*
Rates up on Tightening Capacity at U.S. 4/1 Prop-Cat Renewal: Reinsurance rates continued to increase for the U.S. property-catastrophe reinsurance market at the April 1, 2009 renewal, extending the trend that began at the beginning of the year. National programs were up 10 percent to 14 percent on a risk-adjusted basis, with those in the Northeast seeing 6 percent to 8 percent increases.
April Renewals Follow January Precedent, Despite Industry Capital Conditions: Life and personal accident (PA) reinsurance renewals sustained significant rate reductions at the April 1, 2009 renewal — in some cases as low as 10 percent. Average rate on line (ROL) was down 3.8 percent, excluding programs with large rate changes for reasons not directly related to market conditions.
Bermuda Capital Constrained but Sufficient: Like the rest of the world, the Guy Carpenter Bermuda Composite has suffered a drastic financial change from the share buybacks and dividend payments that were common a year ago. Excess capital has become merely sufficient, and the goal of a 15 percent return on equity (ROE) seems ever more distant, as the five-year rolling average for the composite fell to 8.7 percent.
Where Are We on Solvency II?: Solvency II will require insurers and reinsurers domiciled in the European Economic Area (EEA) to assess their regulatory capital requirements within a forward-looking risk sensitive framework.
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Dynamic, Holistic Market Security: It’s hardly surprising that market security has become a greater priority for cedents around the world. Both natural perils and financial catastrophes have resulted in a substantial reduction in the aggregate amount of capital available in the insurance industry.
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* Securities or investments, as applicable, are offered in the United States through GC Securities, 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. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., 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.