Cat Bond Update: Second Quarter 2009*: The catastrophe bond market continues to advance, though issuances are down from 2008. The activity represents a positive rally from the hiatus during the second half of 2008. For the first half of 2009, nine bonds have been issued, with aggregate risk capital of USD1.38 billion. The continuing stabilization of financial markets and a decrease in catastrophe bond spreads, however, could result in more issuance activity in the second half of the year, particularly for sponsors which had considered issuances in the first and second quarters but deferred their plans because catastrophe bond spreads were considered to be too wide (i.e., catastrophe bond protection was considered to be too expensive).
GC Podcast 02 — July 1 LAH Renewals (David Rains): David Rains, Global Head of the Life, Accident & Health Specialty, discusses the July 1, 2009 life, accident, and health reinsurance renewal in this new GC Capital Ideas podcast. Click the audio player below to listen to the interview, or download the interview in a file that will work with your iPod.
Guy Carpenter LiveCatTM Hurricane Index: The Guy Carpenter Hurricane Index helps (re)insurers assess the potential losses from hurricanes making landfall in the Atlantic Basin by defined regions: Northeast, Southeast, Florida, and Gulf. Guy Carpenter created this index in response to the (re)insurance industry’s questions about the credibility of catastrophe models after the 2004 and 2005 hurricane seasons and their need to better understand and manage their catastrophe risk. Unlike most indices, which do not differentiate by location and only take into account frequency or severity and historical climatologic information, the Guy Carpenter Hurricane Index also considers current meteorological information and forecasts about live events, the forecast landfall location, and the forecast landfall probability and the conditional severity.
Update: Typhoon Morakot: Typhoon Morakot is located approximately 90 miles (145 kilometers) southeast of Taipei in Taiwan and is tracking west-northwest, according to the Joint Typhoon Warning Center (JTWC). Morakot has intensified into a Category 2 typhoon over the last 24 hours and is moving at 8 mph (13 kmph) with sustained winds of around 98 mph (157 kmph). According to the JTWC, Morakot is forecast to weaken slightly before making landfall in northern Taiwan as a Category 1 typhoon at around 18:00 UTC (01:00 on August 8, 2009 local time). The storm is then expected to continue to weaken as it exits into the Taiwan Strait before making landfall in China on August 8 as a tropical storm.
A Sense of Tranquility: A tumultuous market is beginning to show signs of calm. After more than nine months of financial market volatility — and uncertainty as to reinsurance rates — we are looking back on three relatively stable renewals and a full quarter of financial results. Many forecasted the worst last September, and now, we’re seeing that insurers and reinsurers have been able to adapt to a capital-constrained environment. Slowly, earnings are recovering, and capital is becoming available — both of which are keeping reinsurance rate increases under control. This is the result, however, of a precarious balance between supply and demand, one which could be disrupted by a shock to the marketplace.
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Solvency II — New Developments on Counterparty Default Risk: In its series of Consultation Papers on Level 2 Implementing Measures for Solvency II, CEIOPS drafted a new proposal for the calculation of counterparty credit risk. While Consultation Paper 28 (March 2009) gives a general overview of the proposal, the more recent Consultation Paper 51 (July 2009) provides insight into the details of the model.
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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.