January 21st, 2011

Week’s Top Stories: January 15 - January 21, 2011

Posted at 10:00 AM ET

2011 Reinsurance Renewal Rates: Overview: An overview of reinsurance rates reveals a picture of a generally softening market on an overall basis, with ample reinsurer capacity available for most lines. But beneath this generality lies a range of experiences for individual reinsurance buyers, according to the class of business, their own loss record and the territorial scope. In many cases, reinsurance purchasing strategies in a softening market were one of the few places buyers could turn to mitigate the effect of soft conditions in original markets.

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Global Reinsurance Outlook: Points of Inflection, Positioning for Change in a Challenging Market: Executive Summary: Early predictions that January 1, 2011 reinsurance renewal rates were likely to fall have been proven correct.

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Floods in Queensland, Australia:  Heavy rain has triggered severe floods across a huge swathe of Queensland State in Australia, affecting around 200,000 people and inundating thousands of buildings in the affected towns and cities. An area the size of France and Germany combined in southern and central Queensland has been badly affected by the floods, with several communities cut off or inundated and coal mine production disrupted. Australian Prime Minister Julia Gillard has described the situation as “a major natural disaster” and said recovery would take “a significant amount of time”. As of January 4, the Australian Bureau of Meteorology has eight flood warnings in place in Queensland. Queensland State Premier Anna Bligh said the economic damage from the floods was likely to run into the billions of dollars. The Insurance Council of Australia has declared the floods a catastrophe but no insured loss estimates have been released.

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2011 Reinsurance Renewal Rates: United States Property: Rates on line decreased by an average of 7.5 percent on US programs, but there were significant variations depending on cedents’ results, regional characteristics and coverage.

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Industry Issues and Trends: Lloyd’s Market: New Year, New Strategy:  The new year follows a challenging renewal season for the bellwether Lloyd’s Market, which, despite losses incurred during 2010, showed that rates continued to soften. Lloyd’s enters 2011 focused on its new market-level strategy plans and preparation for Solvency II, now less than two years away from implementation.

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Chart: Insurance Linked Securities Risk Capital*: This chart represents the 144A Catastrophe Bond market. Capital outstanding peaked at approximately USD14 billion in 2007 and has remained fairly stable at approximately USD12 billion. It should be noted that other formats exist for investors, in addition to the 144A realm, such as the industry loss warranty market and collateralized reinsurance.

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*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.

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