Archive for May, 2011



May 31st, 2011

Continental European Legislative and Judicial Trends: Update on Legal Issues Regarding the Absolute Limitation Period for Insurance Claims in Austria

Posted at 1:01 AM ET

David Lewin, Managing Director
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Background

In a recent judgment dated September 1, 2010, the Austrian Supreme Court (Österreichischer Oberster Gerichtshof, (OGH)) ruled that in “timely stepped” insurance cases the insured is at least obligated to file a declaratory lawsuit in time to avoid a limitation of the insurance claim at hand.

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May 31st, 2011

Continental European Legislative and Judicial Trends: Introduction

Posted at 1:00 AM ET

David Lewin, Managing Director
Contact

The May 2011 issue of Recent Legislative and Judicial Developments in Continental Europe Affecting the Casualty Insurance Industry is the latest installment in Guy Carpenter & Company Ltd.’s (Guy Carpenter’s) legislative update series, designed to provide our international clients and markets with a concise overview of key trends in the Continental European legal environment. These issues have had an impact on insurers and reinsurers or are expected to have an effect in the near future.

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May 30th, 2011

Top GC Capital Ideas Stories of May 2011

Posted at 1:00 AM ET

1. Tohoku Quake and Tsunami…An Industry Meets the Challenge - Economic Impact: Now that we are more than a month on from the Great Tohoku Earthquake, the (re)insurance industry can take advantage of hindsight to understand the implications of this tragedy and take steps to improve capital management for the future, in order to better protect cedents and original insureds. Of course, the situation remains fluid. New information continues to become available, and that will have a salient impact on the actions that (re)insurers take as a result of the catastrophe. Yet, there is some early information that carriers can use to manage their capital.

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2. GC Securities*: Catastrophe Bond Market Surges to Record High for First Quarter Issuance: The catastrophe bond market posted its most active first quarter on record for new issuance in Q1 2011, according to a new report by GC Securities*. Four transactions came to market in the first quarter of 2011, securing USD1.02 billion of new and renewal risk transfer capacity. This represents a significant increase over the USD300 million issued during the same time period in 2010.

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3. Tohoku Quake and Tsunami…An Industry Meets the Challenge - Reinsurance Market Short-Term Implications: The recent catastrophe in Japan has implications beyond reinsurance rates and balance sheets. Carriers have already begun to watch for rate changes and anticipate changes to catastrophe models. Both issues, along with the capital implications, will set the tone for the industry in the near term.

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4. Guy Carpenter Publishes Third Installment of “Succeeding Under Solvency II” Guide for Re/Insurers: Guy Carpenter & Company announced the publication of Succeeding Under Solvency II - Special Considerations for Reinsurers and Counterparty Risk, the third report in the firm’s series on Solvency II preparedness developed for re/insurers operating in or covering risks in Europe. The first two reports addressed re/insurance industry requirements and key issues under Pillars I, II and III.

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5. Workers Compensation Reserve Risk Development: The Cat That May Be Lurking in Your Balance Sheet: Sudden natural disasters such as the tragic Tohoku earthquake in March are not the only catastrophes that can impact insurers’ balance sheets and policyholder surplus. Such well publicized natural catastrophes only account for about 10 percent of insurers’ notable capital and surplus impairments triggering regulatory action and concern. Of the remaining 90 percent, by far the single largest cause of impairments over the past 40 years (1969-2009) emanated from inadequate pricing and deficient loss reserves - resulting in approximately 40 percent of the cases.

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6. 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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7. Tohoku Quake and Tsunami…An Industry Meets the Challenge - Impact on Commercial Insurance: Bowring Marsh is the International placement arm of Marsh, where we advise our global network and clients on direct, market based solutions, predominantly for property and casualty exposures. The vast majority of our clients are sophisticated, risk management buyers with an emphasis on global, multinational businesses.

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8. 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. The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) Index lost 7.5 percent - the second consecutive annual decline. Contributing to this move has been a combination of factors, including moderate loss activity and abundant levels of industry surplus.

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9. Guy Carpenter Expands Asia Flood Modeling Capabilities: Guy Carpenter & Company announced that it has extended the coverage of its Asia flood model to include the main flood risk areas in Jakarta, Indonesia.

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10. Guy Carpenter Publishes Second Part of Re/Insurance Industry’s Guide to Succeeding Under Solvency II: Guy Carpenter & Company released a new briefing, Succeeding Under Solvency II - Corporate Governance (Pillar II) and Disclosure (Pillar III), the second report in a special series for re/insurers operating in or covering risks in Europe. The first report, published earlier this month, focused on Pillar I requirements.

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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. 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.

May 27th, 2011

Week’s Top Stories: May 21 - May 27, 2011

Posted at 10:00 AM ET

Summary of 2011 Hurricane Season Forecasts:  With the start of the Atlantic hurricane season just a few days away, Guy Carpenter has summarized the various forecasters’ predictions for the 2011 season. AccuWeather, the Colorado State University (CSU), the National Oceanic and Atmospheric Administration (NOAA) and Weather Services International (WSI) have released forecasts for the forthcoming season and there seems to be a general consensus that 2011 will see above-average activity with an increased risk of hurricane landfalls in the United States.

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Chart: Historical Evidence of the Inaccurate Estimation of Workers Compensation Losses: Loss reserves for WC are essentially forecasts of losses that will be paid over five, 10 and 15 or more years. As a result, they are one of the most challenging risks to quantify on balance sheets. Under standard reserving methods, an actuary examines historic data, measures existing patterns and makes forecasts based on the assumption that those patterns will repeat. Alternatively, an actuary can adjust the patterns for forecasted changes.

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GC Securities* 2011 Transactions:  We review here all 2011 GC Capital Ideas stories reporting GC Securities’ transactions.

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GC Securities*: Catastrophe Bond Market Surges to Record High for First Quarter Issuance: The catastrophe bond market posted its most active first quarter on record for new issuance in Q1 2011, according to a new report by GC Securities. Four transactions came to market in the first quarter of 2011, securing USD1.02 billion of new and renewal risk transfer capacity. This represents a significant increase over the USD300 million issued during the same time period in 2010.

Read the article >>

Marsh and RIMS Survey: Excellence in Risk Management VIII: According to Excellence in Risk Management VIII: Greater Expectations, Greater Opportunities, a new survey conducted by Marsh and the Risk and Insurance Management Society (RIMS), executives in the C-suite expect risk managers to step up and take a more active role in integrating enterprise-wide risk management with their organizations’ broader strategic goals.

Read the article >>

Most Popular Keyword:   integrating enterprise risk management

And, you may have missed…

Long Tail Liabilities and Reserve Volatility: Dynamic Reserve Model (DRMTM): The convergence of a variety of pressure points at this time is leading to a set of unique circumstances that present opportunities around business strategy and capital allocations for the insurance industry. Future inflation is one of the pressure points. Inflation and uncertainty about its extent and timing is a function of untested but powerful monetary and fiscal policy actions. In addition to inflation’s potential effect on insurer liability management there is also an impact on the volatility of assets backing the liabilities. A reignition of the kind of severe inflation last seen in the 1970s is most likely not factored into any current insurer management practices for establishing reserves or setting capital levels.

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Click here to register to receive e-mail updates >>

* 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.

May 27th, 2011

Severe Weather in United States

Posted at 6:23 AM ET

gctornadoimage1Severe weather hit mid-west regions of the United States earlier this week, spawning dozens of tornadoes that killed around 140 people, damaged thousands of buildings and likely caused billions of dollars of insured losses, according to reports. The severe weather also brought strong winds, heavy rain and large hail to several communities. Several states suffered power outages and widespread property and infrastructure damage has been reported. Early estimates suggest insured losses are likely to run into the billions of dollars and come on top of five tornado outbreaks in April that are expected to incur insured losses in excess of USD10 billion, according to preliminary estimates from Property Claim Services (PCS).

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May 26th, 2011

Floods in the United States

Posted at 10:23 AM ET

smallmapcatiHeavy rainfall has triggered severe floods across central and southern regions of the United States since April as the Mississippi River overflowed and flooded thousands of homes and businesses. High levels of precipitation, combined with springtime snowmelt, caused the Mississippi River and many of its tributaries to rise to record levels. Nine states have been affected by major flooding, with Missouri, Kentucky, Tennessee, Arkansas, Mississippi and Louisiana particularly badly hit. President Barack has Obama declared the western counties of Kentucky, Tennessee and Mississippi federal disaster areas.

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May 26th, 2011

Guy Carpenter Publishes Update on Key European Legal Developments Impacting Insurance Industry

Posted at 1:00 AM ET

In a new report released today, Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist and a member of Marsh & McLennan Companies (NYSE: MMC), examines key legal issues unfolding in Europe that are of significance to the insurance industry.

Click here to download your copy of Recent Legislative and Judicial Developments in Continental Europe Affecting the Casualty Industry >>

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May 26th, 2011

Summary of 2011 Hurricane Season Forecasts

Posted at 1:00 AM ET

With the start of the Atlantic hurricane season just a few days away, Guy Carpenter has summarized the various forecasters’ predictions for the 2011 season. AccuWeather, the Colorado State University (CSU), the National Oceanic and Atmospheric Administration (NOAA) and Weather Services International (WSI) have released forecasts for the forthcoming season and there seems to be a general consensus that 2011 will see above-average activity with an increased risk of hurricane landfalls in the United States. The most recent forecasts are outlined in the table below.

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May 25th, 2011

Marsh and RIMS Survey: Excellence in Risk Management VIII

Posted at 1:00 AM ET

According to Excellence in Risk Management VIII: Greater Expectations, Greater Opportunities, a new survey conducted by Marsh and the Risk and Insurance Management Society (RIMS), executives in the C-suite expect risk managers to step up and take a more active role in integrating enterprise-wide risk management with their organizations’ broader strategic goals.

Continue reading…

May 24th, 2011

Chart: Historical Evidence of the Inaccurate Estimation of Workers Compensation Losses

Posted at 1:00 AM ET

Loss reserves for WC are essentially forecasts of losses that will be paid over five, 10 and 15 or more years. As a result, they are one of the most challenging risks to quantify on balance sheets. Under standard reserving methods, an actuary examines historic data, measures existing patterns and makes forecasts based on the assumption that those patterns will repeat. Alternatively, an actuary can adjust the patterns for forecasted changes.

Continue reading…