Archive for November, 2010



November 30th, 2010

Catastrophe Bond Update: Third Quarter 2010 – Activity (and Great Expectations) Persists, Part IV: Outlook for Fourth Q 2010 and First Q 2011

Posted at 1:00 AM ET

GC Securities, a division of MMC Securities Corp.*

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Outlook for the Fourth Quarter of 2010 and First Quarter of 2011

Market fundamentals are supporting a strong bid for new transactions. Issuers are aware of the potential execution benefits associated with bringing transactions in the fourth and first quarters rather than contending with a crowded issuance environment during the second quarter. This is particularly true for U.S. wind exposed transactions. Origination efforts are ongoing across a variety of different perils, risk profiles, structures and triggers. While we expect the focus of the catastrophe bond market will remain on the peak U.S. perils there is also building interest across other non peak-perils. These include European wind, Japanese wind and Japanese earthquake, among others. Indeed, looking ahead to the fourth quarter of 2010 and beyond there seems to be a favorable coincidence of attractive issuance conditions for protection buyers along with a supportive investor base. The perceived spread between reinsurance and catastrophe bond pricing is congruent with the benefits of catastrophe bond protection. The investor base is sustaining legitimate inflows from institutions seeking a stable source of alternative beta rather than opportunistic yields. These factors should contribute to an active issuance environment for the balance of 2010 and an even more active 2011.

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November 29th, 2010

Catastrophe Bond Update: Third Quarter 2010 – Activity (and Great Expectations) Persists, Part III: Market Dynamics

Posted at 1:00 AM ET

GC Securities, a division of MMC Securities Corp.*

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Third Quarter Market Dynamics

Spreads generally tightened during the third quarter, particularly after the mid-point of the U.S. hurricane season. Concerns over U.S. hurricane concentrations abated, while maturities and net new inflows continued. To date, the 2010 hurricane season, though quite active in terms of storm formation, has not produced land-falling storms causing significant insured losses within the United States. There is now a renewed focus on the fact that 40 percent of the existing catastrophe bond issuance will mature by the end of June of 2011. Notwithstanding this maturity schedule, catastrophe bond market participants are eager to demonstrate growth and sustained issuance throughout the reinsurance pricing cycle and are therefore eager to see additional new issuance. In the absence of a certain visible pipeline (though much market chatter about fourth and first quarter transactions persists) in the current secondary market cat bond buyers are generally outstripping sellers, prompting prices of existing bonds to appreciate.

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November 26th, 2010

Week’s Top Stories: Nov. 20 - Nov. 26, 2010

Posted at 8:00 AM ET

2010 Market Update: Insight from Guy Carpenter’s Credit, Bond and Political Risk Team: Guy Carpenter & Company has released its fourth annual market update from its London-based Credit, Bond and Political Risk Team. Mid-year 2010 results for the leading credit insurers show strong improvements. All key insurers in the class have enacted core underwriting plans to turn around prior results. The general success in avoiding severity losses has made apparent the primary challenge in a downturn: Reducing and avoiding attritional losses. The surety sector continues to show significant growth potential, though reinsurers are concerned that the market has yet to experience the true extent of losses that will come out of the economic downturn.

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Catastrophe Bond Update: Third Quarter 2010 - Activity (and Great Expectations) Persists, Part I: Issuance, Redemptions:  From the standpoint of catastrophe bond issuance, the third quarter of 2010 was consistent with historical cat bond market precedent. Following a second quarter of eight transactions and USD2.05 billion of issuance, activity was light as two transactions closed (the same number of transactions as in the third quarter of 2009), generating USD232 million of risk capital. Both transactions were received positively and were in fact over-subscribed. Issuance, however, was outstripped by significant maturities of existing catastrophe bonds prompting risk capital outstanding to decline seven percent over the course of the third quarter. At quarter end risk capital outstanding stood at USD10.99 billion, roughly equal to mid-year 2006. Market sentiment remains positive as catastrophe bonds (and catastrophe risk generally) as an asset class is clearly on the rise.

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Change and Consistency; Guy Carpenter Specialty Insurance Program Issuing Carrier Survey:  Little has changed at the core of the Program Administrators and Managing General Agents (MGA/PA) market from last year, though there has been activity in targeted areas. In general, the MGA/PA space has shown progress in recovering from the 2008 financial crisis and subsequent recession, indicating resilience, consistency and strength. Yet, over the past five years, since Guy Carpenter & Company, LLC (”Guy Carpenter”) began tracking the MGA/PA market, there have been some significant shifts, showing that the market has matured.

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Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of Enterprise Risk Management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

Read the article »

Turn Insurance Portfolio Modeling and Management into a Strategic Advantage: Companies that optimize the use of economic capital models to holistically manage portfolios may gain a powerful advantage in the marketplace. Improved risk decision-making and capital allocation can translate to profitable growth and an increase in shareholder value. But, it takes a commitment: ongoing integration and evaluation of the models in the operation may create ongoing benefits to results.

Read the article »

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Solvency II - Approval of Internal Models:  The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) published many consultation papers in 2009 focusing on Level 2 implementation measures for Solvency II. Consultation Paper (CP) 37 addressed the procedures for approval of internal models. It was followed by a final paper entitled “CEIOPS Advice for Level 2 Implementing Measures on Solvency II ‘The procedure to be followed for the approval of an internal model’”, published in October, 2009. This series reviews the implementation measures described in the final papers.

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November 25th, 2010

Chart: Managing General Agents/Program Administrators Survey Results: Personal Lines Appetite

Posted at 1:00 AM ET

Guy Carpenter’s survey of managing general agents and program administrators demonsrated that interest in growing personal lines was modest, with umbrella and auto lines garnering 7.7 percent of the attention of respondents each. There was no indicated interest in growing medical lines of business, and only 2.6 percent of survey participants expressed an appetite for more homeowners business.

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November 25th, 2010

Chart: Managing General Agents/Program Administrators Survey Results: Commercial Lines Appetite

Posted at 1:00 AM ET

Guy Carpenter’s survey of managing general agents and program administrators demonsrated that interest in growing most commercial lines was low. General liability stood out, with 67.5 percent of respondents indicating an appetite for it. Property, inland marine and auto liability also resonated with many respondents - at 50 percent, 47.5 percent and 42.5 percent, respectively. For the remainder, less than a third of survey participants indicated an appetite for growth. Generally, we see MGAs becoming more sophisticated as they focus on more complex commercial risks using cutting edge analytical and underwriting tools.

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November 24th, 2010

Catastrophe Bond Update: Third Quarter 2010 – Activity (and Great Expectations) Persists, Part II: Risk Capital Outstanding, Industry Loss Warranties

Posted at 1:00 AM ET

GC Securities, a division of MMC Securities Corp.*

Contact

Risk Capital Outstanding

Total risk capital outstanding declined from the second quarter of 2010 to the third quarter, reaching USD10.99 billion - down from USD11.82 billion. This represents a net decrease of USD826 million (7 percent). Risk capital outstanding has declined in each quarter of 2010 thus far. While this is not surprising given the roll-off of the bulk of the USD7 billion issued in 2007, it also suggests the cat bond market should have a strong appetite for additional transactions during the fourth quarter of 2010 and into 2011.

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November 23rd, 2010

Catastrophe Bond Update: Third Quarter 2010 – Activity (and Great Expectations) Persists, Part I: Issuance, Redemptions

Posted at 1:00 AM ET

GC Securities, a division of MMC Securities Corp.*

Contact

From the standpoint of catastrophe bond issuance, the third quarter of 2010 was consistent with historical cat bond market precedent. Following a second quarter of eight transactions and USD2.05 billion of issuance, activity was light as two transactions closed (the same number of transactions as in the third quarter of 2009), generating USD232 million of risk capital (1). Both transactions were received positively and were in fact over-subscribed. Issuance, however, was outstripped by significant maturities of existing catastrophe bonds prompting risk capital outstanding to decline seven percent over the course of the third quarter. At quarter end risk capital outstanding stood at USD10.99 billion, roughly equal to mid-year 2006. Market sentiment remains positive as catastrophe bonds (and catastrophe risk generally) as an asset class is clearly on the rise.

Continue reading…

November 22nd, 2010

2010 Market Update: Insight from Guy Carpenter’s Credit, Bond and Political Risk Team

Posted at 4:00 AM ET

David Edwards, Managing Director
Contact

Guy Carpenter & Company, LLC (Guy Carpenter) has released its fourth annual market update from its London-based Credit, Bond and Political Risk Team.

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November 19th, 2010

Week’s Top Stories: Nov. 13 - Nov. 19, 2010

Posted at 11:00 AM ET

Change and Consistency; Guy Carpenter Specialty Insurance Program Issuing Carrier Survey:    Little has changed at the core of the Program Administrators and Managing General Agents (MGA/PA) market from last year, though there has been activity in targeted areas. In general, the MGA/PA space has shown progress in recovering from the 2008 financial crisis and subsequent recession, indicating resilience, consistency and strength. Yet, over the past five years, since Guy Carpenter & Company, LLC (”Guy Carpenter”) began tracking the MGA/PA market, there have been some significant shifts, showing that the market has matured.

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Imelda Powers Joins Guy Carpenter’s Global Analytics:  Guy Carpenter & Company announced the appointment of Imelda Powers as Managing Director of Global Analytics, effective immediately. Dr. Powers initially will be based in New York and will relocate to Beijing. She will report to Bill Kennedy, Global CEO of Analytics, Capital Markets, Specialty Practices and Advisory.

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Turn Insurance Portfolio Modeling and Management into a Strategic Advantage:  Companies that optimize the use of economic capital models to holistically manage portfolios may gain a powerful advantage in the marketplace. Improved risk decision-making and capital allocation can translate to profitable growth and an increase in shareholder value. But, it takes a commitment: ongoing integration and evaluation of the models in the operation may create ongoing benefits to results.

Read the article »

Chart: Global Reinsurance Composite: Average Price to Book Ratio:  This chart shows the price to book ratio of the global reinsurance sector over two decades. These valuations are clearly volatile and affected by cyclical pricing, investment returns, and by the impact of large catastrophes. Given the current operating environment and market conditions, investors appear to believe near-term profitability will be low.

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Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness:  Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of Enterprise Risk Management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

Read the article »

Most Popular Keyword:   Imelda Powers

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TRIA, U.S. Terrorism and International Terrorism: Effect on the Insurance and Reinsurance Markets: Commercial insurers are strongly supportive of the Terrorism Risk Insurance Act of 2002 (TRIA), as it provides them an ultimate safety net for their terrorism exposures. However, the residual risk for terror events retained by insurers below the triggers and retention levels set by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA), coupled with the relatively high cost of reinsurance in key exposure zones, means that insurers remain cautious about terrorism exposure. As a result, they continue to avoid accumulating high-profile urban exposures.

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November 18th, 2010

Change and Consistency; Guy Carpenter Specialty Insurance Program Issuing Carrier Survey: Index

Posted at 1:00 AM ET
Robert J. Kimmel,  Program Specialty Practice Leader, Carl A. Bach, Program Specialty Practice and John H. Barrows, Program Specialty Practice
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Little has changed at the core of the Program Administrators and Managing General Agents (MGA/PA) market from last year, though there has been activity in targeted areas. In general, the MGA/PA space has shown progress in recovering from the 2008 financial crisis and subsequent recession, indicating resilience, consistency and strength. Yet, over the past five years, since Guy Carpenter & Company, LLC (”Guy Carpenter”) began tracking the MGA/PA market, there have been some significant shifts, showing that the market has matured.

Click here to read Change and Consistency; Guy Carpenter Specialty Insurance Program Issuing Carrier Survey, Part I:  Market Size, Challenges >>

Click here to read Change and Consistency; Guy Carpenter Specialty Insurance Program Issuing Carrier Survey, Part II: Program Appetite and Size, Operating Platform 

Click here to read Change and Consistency; Guy Carpenter Specialty Insurance Program Issuing Carrier Survey, Part III: Reinsurance Purchase, Respondents, Acquisitions >>

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