Update: Risk Profile, Appetite and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: In April 2009, Guy Carpenter’s Financial Intelligence Team published a briefing entitled Risk Profile, Appetite and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness. That briefing included definitions of Risk Profile, Appetite and Tolerance and how these concepts fit into an Enterprise Risk Management (ERM) framework. It also presented the results of our initial Risk Tolerance Benchmarking study, which summarized the information publicly disclosed in this area.
MGA M&A Appetite Remains: Program administrators and managing general agents (PAs/MGAs) appear to be interested in making acquisitions. This year, 72 percent of participants in Guy Carpenter’s Fifth Annual Specialty Insurance Program Issuing Carrier Survey indicated an interest in growing through acquisition, up slightly (though not materially) from 70 percent in 2008. A mature segment of the insurance industry, this remains one of the few ways to accelerate top-line growth and capture market share.
Mergers & Acquisitions Update: Third Quarter 2009*: A mergers and acquisitions (M&A) trend is beginning to form in the (re)insurance industry. With capital being restored to carriers’ balance sheets, M&A is expected to accelerate next year and particularly in 2011. Both strategic and tactical opportunities are being pursued, and as some (re)insurers capitalize on them, others will follow. A podcast at the end of this article provides deeper commentary and insights into the (re)insurance M&A market.
Baden-Baden Reinsurance Symposium Focuses on Capital Creativity in the European (Re)Insurance Market: Guy Carpenter & Company, LLC hosted “Capital Creativity — the Road to Renewals,” the Baden-Baden Reinsurance Symposium held in Baden-Baden on October 25. The event focused on the effective management of capital in the (re)insurance industry.The symposium was moderated by Chris Klein, Global Head of Business Intelligence at Guy Carpenter. Henry Keeling, President and CEO of International Operations at Guy Carpenter, provided the opening remarks, followed by presentations from Luzi Hitz, CEO of PERILS; Clemens von Weichs, CEO of Allianz SE, Reinsurance Division; and Victor Peignet, CEO of SCOR Global P&C. Wolfgang Gerstner, Lord Mayor of the City of Baden-Baden, welcomed attendees to the city.
Five Ways to Find and Manage Hidden Risks: Some casualty risk accumulations stay hidden, but this doesn’t mean your exposure disappears. A single event could trigger a chain reaction of insured losses on professional and product liability covers, depleting your capital and possibly destroying shareholder value. In extreme cases, even solvency could be threatened. Using Guy Carpenter’s Casualty Cat model, developed jointly with Arium, Ltd., it’s possible to identify some of these “casualty catastrophe” risks early — before they drain your balance sheet.
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Despite a Year of Change, Stable Renewal Is Likely: Capital management discipline has guided the (re)insurance industry through a turbulent year. Volatile financial markets, capital constraints and general uncertainty caused many carriers, a year ago, to fret over the coming renewal and the availability of capacity. Some were calling for sharp increases in reinsurance rates, and concerns of a capital shortfall were widespread. As we have seen, however, this did not occur. Despite the calamity visited upon the global financial services industry, (re)insurers have persevered, and the coming renewal is likely to be notable for its stability.
* 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.