August 27th, 2010

Week’s Top Stories: August 21 - August 27, 2010

Posted at 10:26 AM ET

QIS5 - Premium and Reserve Risk: Sufficient Consideration of Non-proportional Reinsurance?   On July 6, 2010 the Committee of European Insurance and Occupational Pensions Supervisors published the technical specification for the latest Solvency II Quantitative Impact Study (QIS) 5. QIS5 is scheduled to be carried out from August to November of 2010, with a report summarizing the results scheduled for release in April of 2011. Guy Carpenter & Company, LLC has observed a return to capital requirements more in line with QIS4 and an implicit incentive for the use of an internal model regarding the non-life premium and reserve and risk.

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Chart: Guy Carpenter Global Reinsurance Composite First Half 2010: Combined Ratio:   The weighted average of the combined ratio of the Guy Carpenter Global Reinsurance Composite increased from 92.1 percent at end of year 2009 to 102.5 percent at first half 2010, the highest combined ratio since 2005, the year of the Katrina/Rita/Wilma Hurricanes.

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Chart: Guy Carpenter Global Reinsurance Composite First Half 2010:   Earnings:   Total earnings for the Guy Carpenter Global Reinsurance Composite in the first half of 2010 decreased by 6.4 percent to USD4.8 billion compared with the same period in 2009. The principal driver was an underwriting loss of USD901 million compared with profit of USD2.4 billion in the prior year.

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Update:  Hurricane Danielle:  Danielle has strengthened over the last 24 hours to become the second hurricane of the 2010 Atlantic hurricane season, and the storm is currently located approximately 1,110 miles (1,790 kilometers) east of the Lesser Antilles, according to the National Hurricane Center (NHC). Danielle packs sustained winds of around 100 mph (160 kmph) and is currently traveling in a westerly direction. Danielle is expected to take a turn to the west-northwest and then the northwest over the next 24 hours. The storm is also forecast to strengthen during this time as it moves into a favorable environment for intensification, and the NHC says Danielle could become a major hurricane by Wednesday. The NHC said hurricane-force winds extend 30 miles (45 kilometers) from the center of the storm while tropical storm-force winds extend 115 miles (185 kilometers).

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Catastrophe Bond Update: Second Quarter 2010 - Activity Surges…Reflecting Favorable Issuance Conditions and Strong Investor Demand:* In the second quarter of 2010, eight catastrophe bond transactions were completed, and USD2.05 billion of risk capital was issued making it the second most active second quarter on record. USD1.70 billion of this total (and all but one transaction) included exposure to U.S. wind as sponsors and investors focused on this peril, leading into what is expected to be an active North Atlantic hurricane season.

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And, you may have missed…

GC Videocast - Dramatic Improvement in Reinsurer Earnings and Balance Sheets Following Financial Crisis:    Chris Klein, Guy Carpenter’s Head of Business Intelligence, reviews the dramatic change and improvement in reinsurers’ fortunes following the global financial crisis. He reviews the year- end 2009 earnings results of the Guy Carpenter Bermuda Reinsurance Composite. He also reviews the primary drivers for capital decline and then growth among those reinsurers in 2008 and 2009, respectively. The impact of capital growth on capacity is also discussed.

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Contributors
• Cory Anger, Managing Director**
• Chi Hum, Managing Director**
• Hong Guo, Managing Director**
• Ryan Clarke, Vice President**
• Brad Livingston, Analyst**

ILW market commentary provided by
• Barry Law, Managing Director (Guy Carpenter London)
• Larry Rothstein, Vice President (Guy Carpenter London)

*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, Inc. 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.

**Registered Representatives of MMC Securities Corp.

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