July 17th, 2009

Week’s Top Stories: July 11 - July 17, 2009

Posted at 1:00 AM ET

U.S. D&O Reinsurance Renewals at July 1, 2009: Consistent with the overall trend of the past six months, the July 1, 2009 directors and officers (D&O) reinsurance renewal cycle in the United States was one characterized by increased concerns about how an economy that is continuing to sputter will impact commercial D&O profitability going forward and a lack of reinsurance capacity.

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Beware the Benign Hurricane Forecast: The 2009 hurricane season is expected to be moderate, but that’s no reason to let your defenses down. In setting your expectations for the coming months, it pays to consider severity as well as frequency. Most major forecasts address the number of storms anticipated — but they don’t account for severity. A mild Atlantic hurricane season could still trigger outsized insured losses, and an exposed (re)insurer could feel the shocks on its bottom line, return on equity (ROE) ratio, and even market capitalization.

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Prop-Cat Reinsurance Rate Increases Steady at July 1 Renewal: Property-catastrophe reinsurance rate increases were steady at the July 1, 2009 renewal. In the United States and Latin America, capacity was sufficient to meet demand. U.S. property-catastrophe reinsurance rates increased 15 percent year-over-year, in line with the trend from January to June. In Latin America, preliminary data varied by country, but upward pressure on pricing was offset by supply and local market competition to keep reinsurance rate increases contained.

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Get the Most out of Cat Models, Part V: Creating New Ideas: Catastrophe models may be invaluable, but they are not all-encompassing. The vendors tend to focus on what can be known — and quantified — which leaves some parts of (re)insurer portfolios unaddressed. Depending on the nature of these gaps, carrier exposures can remain quite high, diluting substantially the effects of any risk management planning and execution. To alleviate this concern, reinsurance brokers have extended catastrophe model capabilities with a variety of tools to help clients limit their exposures further. Guy Carpenter has developed several model enhancements — such as GC LiveCatTM and GC ForeCatTM, available through the i-aXs platform — to facilitate risk identification and capital management beyond the capabilities of the major catastrophe modeling firms.

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Guy Carpenter Wins Reinsurance Initiative of the Year: Guy Carpenter’s intellectual capital website, www.GCCapitalIdeas.com, was selected as the “Reinsurance Broker Initiative of the Year” at the 2009 British Insurance Awards, presented at Royal Albert Hall in London on July 8. The awards, in their 15th year, recognize outstanding performance and innovation throughout the insurance and reinsurance industries. This is the first year for the “Reinsurance Initiative of the Year” category.

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And, you may have missed …

Earthquake Off New Zealand’s South Island: A powerful earthquake struck near the southwest coast of New Zealand’s South Island in the relatively remote and unpopulated Fiordland region at 09:22:32 UTC on 15 July (20:22:32 local time), causing minor damage and prompting a brief tsunami warning. The earthquake, measuring 7.6 Mw, was located around 150 kilometers (95 miles) west-northwest of Invercargill City and 175 kilometers (110 miles) west-southwest of Queenstown, according to the U.S. Geological Survey (USGS). The USGS added that the quake was centred about 35 kilometers (22 miles) underground. The initial earthquake was followed by another strong earthquake of 5.8 Mw at 09:42 UTC (20:42 local time).

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