December 24th, 2010

Week’s Top Stories: December 18 - 24, 2010

Posted at 9:00 AM ET

2010 Catastrophe Update:   Global Insured Losses in 2010:  2010 has proved difficult for the reinsurance industry. Spiraling costs from disasters in the first six months of the year particularly, coupled with overcapitalization in the reinsurance sector, created a difficult operating environment. Despite the lack of big U.S. losses in what was one of the most active Atlantic hurricane seasons on record, insured losses from global catastrophes reached USD36 billion in 2010, up from USD27 billion in 2009 . Natural hazards continued to be the largest source of losses in 2010 at USD31 billion, while man-made disasters cost (re)insurers USD5 billion. Total losses (both insured and uninsured) reached USD222 billion1. Some 260,000 people lost their lives to worldwide disasters in 2010, including around 220,000 people in the Haiti earthquake.

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Solvency II Update: QIS5 Windstorm Scenarios Are Within Range of Industry Models:  European insurers and reinsurers will face requirements for full compliance with the new Solvency II capital regime requirements in just over two years. Even if this introduction is phased in - as the European Commission has reportedly indicated it could be - these requirements will have a wide-ranging and profound impact on the insurance industry throughout Europe.

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China’s Costly Floods in 2010 Likely to Have Limited Impact:  China experienced one of its worst seasons of flooding in 2010 since the Yangtze River floods of 1998. Although the economic losses from its flood-related disasters are significant, the impact on the insurance industry is likely to be limited due to low insurance penetration levels in China, finds Guy Carpenter & Company. This assessment and other findings are presented in China Floods Report 2010, a new report.

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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.

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World Catastrophe Reinsurance Market: Part I, Introduction, Catastrophe Events:   2010 has been a difficult year for the reinsurance industry after it suffered one of the most costly first halves on record. Spiraling costs from disasters such as the Chilean earthquake and the Deepwater Horizon explosion in the Gulf of Mexico meant (re)insurers’ catastrophe budgets took a severe hit even before the hurricane season had started. Although insured losses reached USD23 billion in the first six months and an active hurricane season has been forecast, reinsurance rates generally declined through the 2010 renewals as surplus capital drove down prices.

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And, you may have missed…

Modeling Capabilities in Europe:   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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