August 28th, 2009

Week’s Top Stories: Aug 16 - 28, 2009

Posted at 11:59 AM ET

1H2009 Reinsurer Financial Update: Capital Returns: Underwriting and investment gains contributed to a general increase in capital in the first half of 2009. Some reinsurers have even regained half or more of what they lost as a result of last year’s hurricanes and financial shocks. Financial market stability has opened several options unthinkable nine months ago, including share buybacks, dividends and even maintaining a bit of extra capital as a cushion — after all, it was the excess capital held at the beginning of last year that helped reinsurers withstand the effects of the financial crisis.

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Five Ways to Improve Your Workers Comp Portfolio: Some workers compensation risks seem too difficult to cover. Excess loss rates are unpredictable, on the rise and difficult to analyze with the conventional tools. And, reinsurance may not be available at some layers. A carrier that can find ways to write business for these groups, however, can identify a revenue opportunity ahead of its competitors. Together, reliable modeling and disciplined underwriting can open new markets in a mature industry in which peers tend to look for merely incremental advantages. Using Guy Carpenter’s Reveal® v1.1 excess loss model, now available through the i-aXs® platform, workers compensation carriers can identify the drivers of severity at the class code level, making it possible to develop a plan for protecting capital and profitability.

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Five Ways to Allocate Capital: No single approach to capital allocation is objectively superior. Those that are more effective require an investment of time and resources, while the simpler methods sacrifice accuracy. A tradeoff is required based on a (re)insurer’s priorities and capabilities. Before you make a choice, however, be sure you’re aware of the alternatives.

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New Issue of MMC Viewpoint Magazine Now Available: Marsh & McLennan Companies, Inc. (MMC) has published Volume 2, 2009 of Viewpoint, the journal that highlights the firm’s latest thinking on today’s critical issues and risks. The new issue is available for download on mmc.com.

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What Does Solvency II Mean for Insurance Groups?: When Solvency II becomes effective in 2012, group support — which would have allowed capital held at the group level to cover the requirements of any company in the group — will be not permitted. This prohibition will require group entities to hold capital according to the Solvency Capital Requirements (SCR) in each individual entity. The application of group-level diversification benefits to individual entities will not be allowed. This last-minute change to the original framework directive may cause some groups to change their structures. At a minimum, they are likely to rethink how much risk capital will be carried at the group level versus the operating entity level given that the risk capital needed in the group will increase without recognition of group support.

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Most Popular Keyword: Solvency II

And, you may have missed …

NAIC Summer Meeting: At the National Association of Insurance Commissioners (NAIC) summer meeting, discussions continued regarding the Reinsurance Regulatory Modernization Framework, which would change the reinsurance collateral requirements. There appear to be a number of issues that would delay implementation of this framework including both constitutional and non-constitutional issues.

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