John Tedeschi, Chief of Catastrophe Modeling
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Most insurance professionals begin their careers in this industry in a straightforward way, happening upon an opportunity completely by accident, no matter if the entry is through underwriting, reinsurance or perhaps even probabilistic modeling. Actuaries, who had their well-thought plan firmly before them as the natural outcome from years of exams are the exception.

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Claude Lefebvre, Head of GC Analytics European Operations
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Insurance-related catastrophe modeling has undergone a constant evolutionary drive for the past 25 years. The impetus behind the development of cat models began with the realization that large-scale events needed tracking to provide better means of managing insurance exposures to natural disasters.

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Henry Keeling, President and CEO of International Operations
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The (re)insurance industry is once again facing a familiar challenge: what to do with excess capital? The stretches between major catastrophe events tend to be characterized by robust balance sheets, increased retentions and the ability to absorb risk. Periodically, a loss event occurs, and balance sheet rehabilitation begins. So, despite the occasional shock loss, excess capital is not excessive - rather, it’s the norm. And yet not all carriers have developed effective strategies for making this capital productive.

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Typhoon Megi made its second landfall in the southeastern Chinese province of Fujian at around 06:00 UTC on October 23 with sustained winds of around 65 mph (100 kmph), according to the Joint Typhoon Warning Center (JTWC). Reports said the severe weather associated with Megi caused damage and disruption in Fujian Province. Southwestern parts of Taiwan were also subjected to tropical-storm force conditions as Megi approached the Chinese coastline, bringing powerful winds to the region and triggering flooding and landslides across the island. At least 12 people died in storm-triggered mud and landslides in Taiwan, reports said.

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Richard strengthened into a hurricane over the weekend before making landfall over the central coast of Belize as a category 1 storm earlier today. Richard is currently located approximately 90 miles (150 kilometers) west of Belize City (population of around 100,000 people) and packs sustained winds of around 65 mph (100 kmph), according to the National Hurricane Center (NHC). The storm is moving in a west-northwest direction and this general motion with a decrease in forward speed is expected over the next day or so. On this forecast track, Richard is expected to move into northern Guatemala and southeastern Mexico today and the extreme southern Gulf of Mexico tonight or early tomorrow. The NHC said tropical storm-force winds extend 80 miles (130 kilometers) from the center of the storm.

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Chris McKeown, President & CEO of North America Broking Operations
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It feels like 2007 all over again. Following contained increases in the United States in 2009, property-catastrophe reinsurance rates fell again in 2010, continuing a trend that has been the norm since Hurricanes Katrina, Rita and Wilma struck in 2005. Low levels of catastrophe losses, abundant capital at attainable prices (generally) and advances in risk and capital management practices are some of the main reasons why rates have generally fallen. Even when they did increase in 2009, influenced by the 2008 financial crisis and Hurricane Ike, they did not skyrocket.

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Peter Zaffino, President & CEO
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Not long ago, the primary responsibility of the reinsurance broker was the structuring and placement of reinsurance, the collection of claims and creating the legal documents for the reinsurance transaction. We were “transaction engineers” for the reinsurance placement on behalf of our clients. But times have changed, and it has dramatically altered the role of the reinsurance intermediary.

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Nick Frankland, CEO of European Operations
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The first renewal of 2011 is right around the corner, and as always at this time of year, the sport of reinsurance rate forecasting has begun. It is an uncertain exercise, of course, as a late-year mega-catastrophe could change the market almost immediately, but given today’s rate environment in Europe, it looks like the new year will bring another cedant-advantaged renewal. Capital is abundant across the industry, as (re)insurers have endured an active catastrophe year with help from reserve releases and investment gains.

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Chart: Regional Catastrophe Reinsurance Rate Fluctuations:    Rates in the United States fell during the January, April, June and July 2010 renewals. The decline in prices varied by region, exposures and loss history but generally moved in a channel of down 6 percent to down 15 percent. Risk-adjusted catastrophe prices in the United States fell by an average of 8 percent through 2010, though the picture was somewhat complicated by adjustments to catastrophe models that decreased predicted losses for earthquake and wind perils. Factoring in modeling adjustments, rates declined by 12 percent on average. Rates in the United States have fallen back to levels last seen in 2008 as improved investment returns and low catastrophe losses in 2009 bolstered (re)insurers’ balance sheets and exerted gradual downward pressure on prices.

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Guy Carpenter Asia Pacific Catastrophe Report; Executive Summary:  The Asia Pacific region has significant exposure to a wide variety of catastrophe perils: within the region lie some of the world’s most active earthquake areas, the northwest Pacific typhoon zone and numerous other localized threats of windstorm, flood, hail, snow, freeze and fire. In fact such catastrophe exposures could be said to be the “greatest” of any region of the world. These exposures generate a clear need for insurance for commercial ventures and for individuals with economic well-being and reinsurance for the insurance company aggregators of this exposure.

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Update: Typhoon Megi:   Typhoon Megi is currently located approximately 280 miles (450 kilometers) southeast of Hong Kong, according to the Joint Typhoon Warning Center (JTWC). The storm has weakened over the last 24 hours, with sustained winds currently reaching 110 mph (175 kmph), equivalent to a category 2 typhoon. Megi is slowly tracking north at 6 mph (10 kmph) and the JTWC now expects the storm to make landfall in the Chinese province of Fujian on October 23 UTC as a category 1 typhoon. The JTWC said typhoon-force winds currently extend around 75 miles (120 kilometers) from the center of the storm while tropical storm-force winds extend around 205 miles (330 kilometers).

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Intellectual Property Risk Management in Asia: A Growing Concern: The strategic importance of intellectual-asset management has undeniably increased in Asia in recent years. Since the integration of China into the world economy the Chinese government has been placing increasing value on intellectual property rights (IPR) and its protection. The country’s patent office now leads the world in patent applications.

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World Catastrophe Reinsurance Market: The World Catastrophe Reinsurance Market 2010 report finds that surplus capital in the reinsurance market has been depressing prices, causing them to fall by 6 percent on average through the 2010 renewal season. Guy Carpenter estimates that the reinsurance market was overcapitalized by as much as USD20 billion, or 12 percent, at the beginning of 2010. While this amount came down to approximately 8 percent by the end of June, reinsurers’ excess capital continued to be the main driver of rate reductions at the 2010 renewals. If no market-changing event were to occur in the second half of the year, surplus capital is likely to remain the driving force behind continued rate softening at next year’s January 1 renewal, according to the study.

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Solvency II - Rationale for the Capital Requirement Increase for Underwriting Risk: In its series of Consultation Papers on Level 2 implementation Measures for Solvency II, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) drafted, in Consultation Paper 71, a new proposal for the calibration of non-life underwriting risk. Additionally, CEIOPS published its final and third set of advice to the European Commission (EC) at the end of January 2010. It is noteworthy that non-life underwriting risk is not covered in this final advice. Thus, the calibration changes suggested in CP 71, which would lead to an average of a 35 percent increase in the SCR for non-life underwriting, are still valid. It should be noted that the proposals in the CP are subject to a consultation process resulting in final recommendations by the end of March 2010 and therefore may not be final. The purpose of this briefing is to outline the rationale provided by CEIOPS behind the proposed increase in the SCR in respect of non-life underwriting risk.

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Tropical Storm Richard became the seventeenth named storm of the 2010 hurricane season after it developed in the Caribbean Sea on October 21. The storm is located approximately 235 miles (380 kilometers) south-southeast of the Cayman Islands and packs sustained winds of around 40 mph (65 kmph), according to the National Hurricane Center (NHC). Richard is currently nearly stationary in the Caribbean Sea and little forward motion is expected today. A slow westward motion with a gradual increase in forward speed is expected tomorrow. A general west-northwest track is forecast thereafter and Richard is expected to strengthen into a hurricane over weekend before making landfall in Belize on October 25. The NHC said tropical storm-force winds extend 105 miles (165 kilometers) from the center of the storm, predominantly to the north and east.

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