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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Chart: Guy Carpenter Global Reinsurance Composite, Source of Earnings, 9 Months 2010

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Chart: Guy Carpenter Global Reinsurance Composite, Change in Equity, 9 Months 2010

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Chart: Guy Carpenter Global Reinsurance Composite, Return on Revenue, 9 Months 2010

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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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Most Popular Keyword:   structure of the reinsurance market

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The Evolving Risk Manager and Portfolio Management: 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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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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Chart: Guy Carpenter Global Reinsurance Composite, Return on Equity, 9 Months 2010

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Guy Carpenter’s CasCat® Named “Insurance Initiative of the Year”:  Guy Carpenter & Company announced that its CasCat® model has been named “Insurance Initiative of the Year” at the Insurance Day 2010 London Market Awards. The annual awards, presented December 2 at London’s Grosvenor House Hotel, are selected by a distinguished panel of independent judges and recognize outstanding work in the London (re)insurance market.

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Chart: Catastrophe Bond Issuance, 3rd Quarter 2010:  Risk capital issued in the third quarter declined 56 percent from the third quarter of 2009. Last year, two transactions resulted in USD412 million in risk capital issued, while this year, only USD232 million of risk capital was issued, also through two transactions.

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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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Uncover and Mitigate Product Liability Risk: Avert a Casualty Catastrophe: Casualty Cat, a new model developed jointly by Guy Carpenter and Arium, Ltd., seeks to identify the hidden product liability accumulations in a carrier’s portfolio and delivers the insights needed for informed action.

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Guy Carpenter & Company today announced that it has been awarded the Wholly-Owned Foreign Enterprise (WOFE) broking license by the China Insurance Regulatory Commission (CIRC).

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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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Risk capital issued in the third quarter declined 56 percent from the third quarter of 2009. Last year, two transactions resulted in USD412 million in risk capital issued, while this year, only USD232 million of risk capital was issued, also through two transactions. 

For the first three quarters of 2010, 12 catastrophe bonds were issued, for USD2.58 billion in risk capital . Year to date issuance is up 44 percent relative to the USD1.79 billion issued during the first three quarters of 2009.

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