Archive for May, 2009



May 31st, 2009

Top 10 Stories: May 2009

Posted at 1:00 AM ET

1. Lloyd’s 2008 Results — Resilience in a Tough Market: Lloyd’s of London (”Lloyd’s”) competitive position strengthened in 2008, largely because of effective risk management oversight and relatively conservative investment allocation. The capital structure has proved resilient in the face of the worldwide financial catastrophe and financial strength ratings remain strong and stable. As a result, Lloyd’s is well-positioned to benefit from current market dislocation.

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2. Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of Enterprise Risk Management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

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3. Casualty Cat Series: Casualty catastrophes have become increasingly frequent and severe over the past decade, exposing (re)insurers to much more risk than they may realize. One root cause can trigger a chain reaction that can bleed balance sheets and even imperil solvency. Until recently, casualty carriers had little choice but to accept this risk. The maturation of Enterprise Risk Management (ERM) practice and the development of new casualty-specific catastrophe models, though, signal a change.

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May 30th, 2009

Climate Change: Article Index

Posted at 1:00 AM ET

Part I: A Contested Point You Need to Understand >>
(Monday, May 25, 2009)

Part II: What a Warmer World Could Mean >>
(Tuesday, May 26, 2009)

Part III: Liabilties Heating Up >>
(Wednesday, May 27, 2009)

Part IV: (Re)insurance Industry Response >>
(Thursday, May 28, 2009)

Part V: Reinsurers Remain Vigilant >>
(Friday, May 29, 2009)

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May 29th, 2009

Week’s Top Stories: May 23 - 29, 2009

Posted at 11:59 AM ET

Climate Change, Part I: A Contested Point You Need to Understand: Climate change is happening. Or is it? It is caused by human action. Or is it? The arguments are bantered back and forth in a crossfire of disagreement over an issue that holds political, social, and emotional significance around the world. For every position there are sympathetic experts willing to present supporting evidence, which, in turn, is inevitably skewered by those holding a contrary view.

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Shareholders’ Funds Gain Masks Market Conditions: Reinsurers have attained aggregate shareholders’ funds of USD92.8 billion, as measured by the Guy Carpenter Global Reinsurance Composite. This represents an increase of 4.6 percent from the fourth quarter of 2008. Excluding the effects of securities reclassifications and revaluations — and reserve releases — actual growth is a much lower 1.4 percent for the first quarter of 2009.

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Lloyd’s 2008 Results — Resilience in a Tough Market: Lloyd’s of London (”Lloyd’s”) competitive position strengthened in 2008, largely because of effective risk management oversight and relatively conservative investment allocation. The capital structure has proved resilient in the face of the worldwide financial catastrophe and financial strength ratings remain strong and stable. As a result, Lloyd’s is well-positioned to benefit from current market dislocation.

Read the article >>

Continue reading…

May 29th, 2009

Climate Change, Part V: (Re)insurers Remain Vigilant

Posted at 1:00 AM ET

klein_chris_bioChristopher Klein, Head of Global Business Intelligence
Contact

Whether or not you have taken a stance on climate change, the fact remains that this issue will persist in public forum debate and continue to present various risks for the (re)insurance industry. But in addition to factoring potential storm increases into modeling and understanding the possible liabilities that may arise, carriers need to keep abreast of how the debate — and the data — develop.

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May 28th, 2009

Florida Update: HB 1495 Becomes Law

Posted at 6:00 PM ET

Florida Governor Charlie Crist signed the omnibus insurance bill (HB 1495) into law yesterday, along with 40 other bills. Over the next six years, this measure is intended to reduce the state’s property-catastrophe exposure to USD12 billion, with private reinsurers making up the difference.

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May 28th, 2009

Chart: Cat Bond Issuances as of May 20, 2009

Posted at 9:30 AM ET

cap-markets-update

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May 28th, 2009

Climate Change, Part IV: (Re)insurance Industry Response

Posted at 1:00 AM ET

klein_chris_bioChristopher Klein, Head of Global Business Intelligence
Contact

As the debate on climate change has progressed, the (re)insurance industry has not stood by as mere observers. Although agreement on the issue is far from universal, the matter is being addressed, including an adjustment to catastrophe modeling, the creation of new (re)insurance products, and the construction of defenses against climate change-related claims.

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May 27th, 2009

What Is Microfinance?

Posted at 9:00 AM ET

Alex Bernhardt, Assistant Vice President
Contact

We are all quite familiar with basic consumer finance. At a minimum, as insurance industry professionals we understand the role of banks, payment servicers, and (of course) insurers in the modern economy. In fact, at a certain level, we don’t even notice. Credit cards, mortgages, and electronic fund transfers are commonplace, requiring little thought beyond the basic elements of a transaction — i.e., swipe your card, sign your name, and you’re done. Yet, there are some parts of the world in which the financial services and infrastructure which we often take for granted are rare — or don’t exist at all. In many developing nations - and even in parts of the developed world — large swathes of the population have little or no access to the very foundations of consumer finance that have become embedded in the cultures of developed economies. This is a problem that the microfinance movement seeks to solve.

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May 27th, 2009

Climate Change, Part III: Liabilities Heating Up

Posted at 1:00 AM ET

klein_chris_bioChristopher Klein, Head of Global Business Intelligence
Contact

Whether it is a matter of calculating the potential catastrophic loss due to increased storm activity or the hurt caused in court, the potential liability of climate change is a threat for the (re)insurance industry to consider. It’s not just the rising temperatures but the climate change debate itself that has lead to liabilities and losses. Class action lawsuits have charged oil, gas, and chemical companies, as well as other groups, with negligence in causing climate change and resultant property damage. Meanwhile, recent severe catastrophe events have stressed the (re)insurance industry’s coffers and cast doubt over the accuracy of previous risk assessments.

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May 26th, 2009

Climate Change, Part II: What a Warmer World Could Mean

Posted at 7:00 AM ET

klein_chris_bioChristopher Klein, Head of Global Business Intelligence
Contact

The scientific debate wrestles over both causation and existence of climate change. Putting aside any particular political stance, it behooves carriers to examine what could happen should the world indeed be getting warmer. Without getting wrapped up in scare tactics or predictions of worst-case scenarios, the potential impact of climate change can be examined to determine possible points of liability and loss for the (re)insurance industry. If temperatures do rise, the potential effect on a realm of issues — including property damage, health, security, and the economy — could change the way (re)insurers conduct certain areas of their business.

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