Archive for December, 2009



December 31st, 2009

2009 Top Stories: Charts

Posted at 12:30 AM ET

With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

Chart: 2009 H1N1 Swine Flu Lethality Rate 1.98 Percent: As of May 6, 2009, there have been 1,516 cases confirmed globally by the World Health Organization (WHO), with 30 fatalities. Consequently, H1N1 has shown a lethality rate of only 1.98 percent. While any loss of life is tragic, the implications of swine flu have not reached pandemic proportions.

Read the article >>

Chart: World ROL Index, Jan 1, 2009: The Guy Carpenter World ROL Index gained 8 percent, after two years of substantial declines. Despite the magnitude of catastrophes and financial losses, the turnaround in pricing was substantially less pronounced than those that followed Hurricane Andrew in 1992, the terror attacks of September 11, 2001, and Hurricanes Katrina, Rita, and Wilma in 2005.

Read the article >>

Continue reading…

December 30th, 2009

2009 Top Stories: Podcasts

Posted at 12:30 AM ET

With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

GC Podcast 01 — July 1 Renewals (Chris Klein): Guy Carpenter Global Head of Business Intelligence Christopher Klein discusses the July 1, 2009 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.

Read the article >>

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.

Read the article >>

Continue reading…

December 29th, 2009

2009 Top Stories: Capital Markets

Posted at 12:30 AM ET

With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

Cat Bonds Persevere in Tumultuous Market*: A slow issuance year in 2008 masks a story of resilience and risk management flexibility. After a record-setting year in 2007, catastrophe bond issuances fell 62 percent by issuance volume and 52 percent by transaction count last year. During the first half of the year catastrophe bond issuance was tempered by ample capacity and favorable rates in the traditional reinsurance market, dampening sponsor demand for alternative capacity sources, with the fourth quarter quieter than expected. Overall, however, catastrophe bonds generally withstood the impact of onerous market forces and survived a substantial financial market test of their utility as risk and capital management instruments.

Read the article >>

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).

Read the article >>

Continue reading…

December 28th, 2009

2009 Top Stories: Reinsurer Financial Updates

Posted at 12:30 AM ET

With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

Reinsurer Financial and Cat Losses High, Bermuda Hit Most: A tough year for reinsurers is coming to a close. The worldwide financial catastrophe has impaired investment assets and put downward pressure on profits. At the same time, combined ratios were sent higher by an above-average year for catastrophe losses, especially as a result of Hurricane Ike. So, we enter 2009 with capital constrained, shareholders’ funds diminished, and a combined ratio for the Guy Carpenter Global Composite at its second-highest level in five years.

Read the article >>

Lloyd’s 2008 Results — Resilience in a Tough Market: Lloyd’s of London (”Lloyd’s”) competitive position strengthened in 2008, largely because of effective risk management oversight and relatively conservative investment allocation. The capital structure has proved resilient in the face of the worldwide financial catastrophe and financial strength ratings remain strong and stable. As a result, Lloyd’s is well-positioned to benefit from current market dislocation.

Read the article >>

Continue reading…

December 25th, 2009

2009 Top Stories: Solvency II

Posted at 12:30 AM ET

With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

Where Are We on Solvency II?: Solvency II will require insurers and reinsurers domiciled in the European Economic Area (EEA) to assess their regulatory capital requirements within a forward-looking risk sensitive framework. Solvency II has reached a decisive point in its development, as the focus moves to how the directive will be implemented in practice and how it will shape the competitive landscape of the insurance industry. From a quantitative perspective, the results of the Quantitative Impact Study 4 (QIS 4) were published by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) in November 2008. From a political perspective, the group support concept was abandoned to avoid further jeopardizing the targeted implementation by 2012.

Read the article >>

Cat Risk in a Solvency II Environment: Many approaches exist for use in assessing catastrophe risks. Under Quantitative Impact Study 4 (QIS4), the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) provided a list of those that can be used for Solvency II compliance and, in the interim, managing risk and capital effectively. The full stochastic modeling of catastrophe risk using an internal model, such as Guy Carpenter’s G-Cat® tools and MetaRisk®, provides the most information.

Read the article >>

Continue reading…

December 24th, 2009

2009 Catastrophe Update: Outlook for 2010

Posted at 10:52 AM ET

Julian Alovisi, Assistant Vice President, Instrat®

 

Predictions that the El Niño phenomenon is likely to persist through the northern hemisphere winter and into spring could have a significant impact on natural hazards worldwide next year. El Niño events have historically produced floods and drought in the more impoverished regions of the world such as southern Africa and parts of South America. Prolonged dry periods may occur in Southeast Asia, Southern Africa and Northern Australia during an El Niño event, while heavy rainfall and flooding have hit Peru and Ecuador in the past. In the United States, El Niño’s potential impact includes above-average precipitation in the south, with below-average rainfall in the Pacific Northwest and the Ohio and Tennessee Valleys.

The El Niño phenomenon is also likely to curtail tropical cyclone development during the Australia cyclone season, which runs from November 1, 2009 to April 30, 2010. The GCACIC has predicted below-average activity in the Australia region for the 2009/10 season, with 8 tropical cyclones expected to develop, significantly less than the long-term average of 11 (click here for more details).

However, the first Atlantic hurricane forecast for 2010 has just been released by the CSU and it suggests the El Niño event will have dissipated by the time the season starts. Consequently, the CSU predicts an above-average hurricane season in 2010, with 11 to 16 named tropical storms, 6 to 8 hurricanes and 3 to 5 major hurricanes expected to develop. The forecast serves as a timely reminder that catastrophe activity remains unpredictable as the reinsurance industry prepares for 2010 renewals.

December 24th, 2009

2009 Top Stories: Modeling

Posted at 12:30 AM ET

With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

CRESTA Zone Updates: Swiss Re and Munich Re, which are responsible for Catastrophe Risk Evaluating and Standardising Target Accumulations (CRESTA) boundaries, have recently made some major updates to the zones in a number of countries. In the Asia-Pacific region, the CRESTA boundaries for Australia, China, Japan, and New Zealand have undergone significant changes.

Read the article >>

Get the Most Out of Cat Models, Part I: Manage the Unknown: Insurer and reinsurer reliance on catastrophe models has become part of the fabric of risk management. Though they provide guidance rather than clear courses of action, these tools help quantify risk and deploy their capital as effectively as possible. But, they aren’t perfect. Every catastrophe model has specific strengths and weaknesses, which is why risk-bearers tend to use several models to evaluate exposures, with the final decisions on whether to cover a particular risk shaped by loss history, company objectives and risk manager judgment. As a result, models are crucial to (re)insurer success … as long as they are used properly.

Read the article >>

Continue reading…

December 23rd, 2009

2009 Catastrophe Update: Other Significant Events of 2009

Posted at 10:03 AM ET

Julian Alovisi, Assistant Vice President, Instrat®

 

In 2009, there were frequent reminders of the risks posed by earthquakes, and it was Asia again that suffered the most when two massive earthquakes struck Indonesia and the Samoa region in the space of a day. The most deadly earthquake of the year hit southern Sumatra in Indonesia on September 30, killing more than 1,100 people. The earthquake, measuring 7.6Mw, left around 500,000 people homeless after 250,000 homes were damaged, half of them completely destroyed.

Continue reading…

December 23rd, 2009

2009 Top Stories: ERM and Capital Management

Posted at 12:30 AM ET

With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

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.

Read the article >>

(Based on the earlier briefing published April 30, 2009)

Risk Modeling Part IV: ERM: A misunderstanding of models and exposure data is not the primary cause of most modeling failures. Indeed, many companies that have suffered in recent catastrophes, both physical and financial, had substantial and sophisticated resources invested in risk analysis. What is often missing is the connection between analysis and management decisions, and this is the link that the rapidly evolving practice of enterprise risk management (ERM) is meant to create.

Read the article >>

Continue reading…

December 22nd, 2009

Update: Cyclone Laurence

Posted at 10:54 AM ET

cyclone-laurence-update-smallTropical Cyclone Laurence made its second landfall in northwest Australia as a category 3 storm on the Saffir Simpson Scale (equivalent of a category 5 storm on the Australian Bureau of Meteorology Scale) on December 21, according to the Joint Typhoon Warning Center (JTWC). Laurence developed in the Timor Sea on December 13 and made its first landfall near Kuri Bay on the north Kimberley coast in Western Australia State as a category 2 cyclone (Saffir Simpson Scale) on December 16. Here, the cyclone brought powerful winds and heavy rain to the north Kimberley coastline before weakening as it tracked inland. The storm eventually re-emerged in the Indian Ocean and made a second landfall along the sparsely populated Pilbara coast.

Continue reading…