September 11th, 2009

Week’s Top Stories: Sep 5 - 11, 2009

Posted at 1:00 AM ET

Guy Carpenter Addresses the Return of Capital to the Reinsurance Industry at Monte Carlo Rendez-Vous: Guy Carpenter & Company, LLC hosted a press briefing at Rendez-Vous in Monte-Carlo on September 5, 2009, focusing on the return of capital to the reinsurance market. Brian Duperreault, President and Chief Executive Officer of Marsh & McLennan Companies, Inc., opened the briefing. Peter Zaffino, President and CEO of Guy Carpenter, then led a panel of Guy Carpenter executives that included Vice Chairman Richard Booth, Henry Keeling, President and CEO of International Operations, Chris Klein, Global Head of Business Intelligence and David Priebe, Chairman of Global Client Development.

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Guy Carpenter’s 2009 World Catastrophe Report Finds Rates Rising as Industry Rides Out Financial Crisis: Guy Carpenter & Company, LLC’s annual survey of the global property catastrophe reinsurance market, World Catastrophe Reinsurance Market 2009, finds reinsurance rates increasing by an average eight percent through the 2009 reinsurance renewals. The report states that the increase was largely a result of the financial crisis and its negative impact on reinsurers’ balance sheets, and exacerbated by Hurricanes Ike and Gustav. The study also concludes that little movement in reinsurance rates should be expected at the January 1, 2010 reinsurance renewal, barring a major property catastrophe or financial set back.

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Guy Carpenter Briefing Finds Rising Interest Rates Could Affect Reinsurers’ Claims-Paying Ability over Long Term, Industry Stable despite Lingering Effects of Financial Crisis: A briefing published today by Guy Carpenter & Company, LLC looks ahead to the possible effects of inflation on long-tail reinsurance, as well as the impact of the credit crunch on reinsurers in the wake of the subprime mortgage crisis. The briefing, Casualty Specialty Update, examines the twin pressures that inflation and the global credit crunch are exerting on the global casualty reinsurance industry.

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Capital Markets Thaw, Come Back: The role of capital markets in the (re)insurance industry was uncertain a year ago. The eruption of the financial catastrophe within weeks of last year’s Rendez-Vous caused credit markets to seize and wreaked havoc on equities. Access to capital not in the reinsurance system already effectively closed. Today, however, the situation is vastly different. Financial markets are thawing, and equity values are coming back. Investors are showing more confidence in insurance risks — both directly, through catastrophe bonds*, and indirectly, via equity markets. Mergers and acquisitions* (M&A) are gaining momentum, as well. We’ve pierced last year’s cloud of pessimism, and the opportunities ahead are quite clear.

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Inflation Threathens Long-Tail (Re)Insurance: Interest rates are low right now, so monetary inflation is not an issue in the short term for the (re)insurance market. Look into the future a bit, however, and you can see how monetary inflation could turn into a threat. In two to five years, the effects of such measures as “quantitative easing” (i.e., a government’s pumping money into a financial system to attain near-term stability) will be visited upon long-tail (re)insurers. Further, other inflationary factors will continue to increase the cost of writing this type of business. Legal inflation, medical inflation, social inflation and emerging risk inflation are poised to drive the cost of underwriting long-tail risks ahead of monetary inflation. Planning for these elevated costs now can make a profound impact on future profitability.

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Most Popular Keyword: World ROL Index

And, you may have missed …

GC Podcast 03 — Casualty Catastrophe (David Lewin): David Lewin, Head of the European Casualty Specialty, discusses casualty catastrophes and Guy Carpenter’s innovative Casualty Cat model, developed in conjunction with Arium, Ltd., 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.

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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. David Priebe is the Chairman of Global Client Development at Guy Carpenter & Company LLC.

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