Reinsurance Market and Rate Direction Still in Transition at April 1, 2011 Renewals: With substantial first quarter insured losses from catastrophes in Australia, Japan and New Zealand and the political unrest in the Middle East and North Africa, the direction of global reinsurance rates at April 1, 2011 renewals varies by region and line of business. Guy Carpenter & Company released its annual report on the state of the reinsurance market at the April 1 renewals period. As the quarter comes to a close, it is the most costly first quarter on record for the industry.
Guy Carpenter’s Approach to Model Changes: From time to time, a catastrophe model vendor makes material updates to its model, generating a stir among companies who use its results in risk financing decisions. At Guy Carpenter & Company, we help companies understand the model limitations, and the impacts of model changes on their portfolios in the context of the industry as a whole. By researching the latest version of the model in relation to other models, we develop a broad understanding of expert views, and share these insights to help our clients use the outputs in the proper perspective and prepare for future model developments. A new briefing provides key insights.
2011 North Atlantic Tropical Cyclone Season Forecasts: With the start of the 2011 Atlantic hurricane season just a couple of months away, tropical cyclone activity forecasts have started to emerge. AccuWeather, the Colorado State University and Weather Services International have released forecasts for the forthcoming hurricane season so far and there seems to be a general consensus that 2011 will see above-average activity.
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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Sidecars Have a Specific Role to Play: The popularity of sidecars seems to have ended. The availability of traditional capital and access to insurance-linked securities and other alternatives simply has made sidecars less attractive. But, reinsurers know that the market can harden at any time, with one mega-catastrophe creating near-immediate demand for fresh capital. Low overhead and an inherent exit strategy are likely to help these vehicles regain prominence in the next hard market-with investors and reinsurers alike.