Archive for June, 2011



June 30th, 2011

Update: Tropical Storm Arlene

Posted at 7:52 AM ET

arlene-2-smallTropical Storm Arlene made landfall near Cabo Rojo in Mexico’s Veracruz State at around 09:00 UTC earlier today with sustained winds of around 65 mph (100 kmph), equivalent to a strong tropical storm, according to the National Hurricane Center (NHC). Arlene has since moved inland and is currently located around 45 miles (70 kilometers) north-northwest of Tuxpan, Mexico and 45 miles (70 kilometers) south-southeast of Tampico, Mexico. The center of the storm is expected to continue moving inland over mainland Mexico today. Arlene is expected to weaken within the next 24 to 36 hours, and to dissipate by Friday as it moves over the mountains of Central Mexico. The NHC said tropical storm-force winds extend 140 miles (220 kilometers) from the center of the storm.

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June 29th, 2011

Tropical Storm Arlene

Posted at 11:23 AM ET

arlene1-smallTropical Storm Arlene became the first named storm of the 2011 Atlantic hurricane season when it developed in the southwest Gulf of Mexico earlier today. Arlene is currently located around 190 miles (300 kilometers) east of Tampico in Mexico and packs sustained winds of around 40 mph (65 kmph), according to the National Hurricane Center (NHC). The storm is traveling in a west-northwest direction and is likely to take a turn toward the west later today. The storm is expected to strengthen as it nears the northeastern Mexican coastline but remain at tropical storm strength. The NHC said tropical storm-force winds extend 115 miles (185 kilometers) from the center of the storm.

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June 29th, 2011

Guy Carpenter Wins 2011 Trading Risk Award For Derivative Initiative of the Year

Posted at 1:00 AM ET

Guy Carpenter & Company has been named the winner of the 2011 Trading Risk Award for Derivative Initiative of the Year.

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June 28th, 2011

GC Capital Ideas Top Stories: Second Quarter 2011

Posted at 1:00 AM ET

1. 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.

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2. 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 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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3. Wide Range of Outcomes Seen in June 1, 2011, Florida Reinsurance Renewals:   The June 1, 2011, renewals took place against the backdrop of record first-half catastrophe losses and uncertainty surrounding the release of version 11 of Risk Management Solutions’ (RMS) U.S. hurricane model. The heavy international natural catastrophe-related losses that occurred during the first quarter of 2011 - combined with the multi-billion dollar losses from tornadoes in the United States in April and May - have added to significant loss activity over the past 16 months, culminating in insured losses of close to USD100 billion.

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4. 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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5. 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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6. Guy Carpenter Publishes Second Part of Re/Insurance Industry’s Guide to Succeeding Under Solvency IIGuy 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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7. Japan April 1 Reinsurance Renewals, Tohoku Earthquake:  The Japanese market buys considerable amounts of earthquake reinsurance - both pro rata and excess of loss. Companies were able to renew unchanged capacity for pro rata treaties at the April 1, 2011 renewal, despite the occurrence of the Tohoku earthquake at a time when the renewal process was only partially completed. Typical ceding commissions for this kind of business have ranged between the low and high teens over the past few years. In most but not every case, these commissions were reduced by up to 3 percent in order to achieve placement goals. Many reinsurers also looked for greater detail on primary underwriting practices.

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8. 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.

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9. A.M. Best Updates Its Comments on Catastrophe Models: During a recent webinar, a panel convened by A.M. Best reviewed catastrophe models and addressed questions that arose as a result of the new RMS and AIR model versions that have been released. The discussion was focused on how A.M. Best wants companies to demonstrate a solid understanding of their catastrophe risk exposure and where it fits within their risk tolerances. The panel outlined the need for rated companies to engage in ongoing discussions with their A.M Best analysts regarding the efficacy of model output, specifically, the companies’ confidence in the model output and the reasoning behind this view.

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10. 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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June 27th, 2011

Guy Carpenter Asia-Pacific Climate Impact Centre Publishes Second Annual Report on Region’s Climate

Posted at 1:00 AM ET

Guy Carpenter Asia-Pacific Climate Impact Centre (GCACIC), a joint initiative of Guy Carpenter & Company, LLC and City University of Hong Kong, released its second annual report, which presents findings from 19 research projects that were conducted by GCACIC members on climate issues in the Asia-Pacific region in 2010.

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June 24th, 2011

Week’s Top Stories: June 18 - 24, 2011

Posted at 11:00 AM ET

Succeeding Under Solvency II: Entire White Paper Series: Guy Carpenter recently published a series of three white papers on Solvency II covering key issues of relevance to (re)insurers. We bring the entire series together here.

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Top Chart Room Stories on GC Capital Ideas: GCCapitalIdeas.com’s most popular area is the Chart Room, where we present our knowledge graphically. At this mid-point in the year, we highlight the most popular stories that have appeared in the last six months.

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CAT-i Reports on New Zealand Earthquakes: We bring together here the key CAT-i reports on GC Capital Ideas covering the New Zealand earthquakes that have occurred in three periods in the last year.

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Jonathan Stephenson Named CEO of Guy Carpenter’s Pacific Region: Guy Carpenter & Company announced that Jonathan Stephenson has been appointed Managing Director of Guy Carpenter’s Australia operations and CEO of the firm’s Pacific region, effective July 1, 2011.

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Wide Range of Outcomes Seen in June 1, 2011, Florida Reinsurance Renewals:  The June 1, 2011, renewals took place against the backdrop of record first-half catastrophe losses and uncertainty surrounding the release of version 11 of Risk Management Solutions’ (RMS) U.S. hurricane model. The heavy international natural catastrophe-related losses that occurred during the first quarter of 2011 - combined with the multi-billion dollar losses from tornadoes in the United States in April and May - have added to significant loss activity over the past 16 months, culminating in insured losses of close to USD100 billion.

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Most Popular Keyword:   rms v11

And, you may have missed

A National Flood Modeling Solution for Mainland France:   Guy Carpenter has developed a state-of-the-art probabilistic flood model for mainland France in collaboration with hydrological and hydraulic modeling experts, JBA Consulting (JBA) and Intermap Technologies (Intermap), a global provider of high-quality 3D digital elevation models.

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June 23rd, 2011

Marsh & McLennan Companies Awarded LEED Gold Certification for New York Offices of Guy Carpenter

Posted at 1:00 AM ET

Marsh & McLennan Companies, Inc. announced that LEED Gold Certification has been awarded to Guy Carpenter for its headquarters at 1166 Avenue of the Americas in New York. LEED (Leadership in Energy and Environmental Design) is the U.S. Green Building Council’s certification system for the design, construction and operation of green buildings.

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June 23rd, 2011

Top ERM Stories in First Half 2011

Posted at 1:00 AM ET

Here we present the top stories on enterprise risk management that appeared in GC Capital Ideas in the first six months of 2011.

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.

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Guy Carpenter Wins Enterprise Risk Management Award: Guy Carpenter & Company has won an award for its thought leadership and innovative research in enterprise risk management (ERM) from the Joint Risk Management Section of the Casualty Actuarial Society, Canadian Institute of Actuaries and Society of Actuaries. Working with research firm Risk Lighthouse LLC, Guy Carpenter accepted the 2011 Award for Practical Risk Management Applications at the 2011 ERM Symposium, held March 14-16 in Chicago.

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Succeeding Under Solvency II: Pillar One, Capital Requirements; Part I: Despite its nominally European focus, Solvency II presents a wide range of considerations - and opportunities - to insurance entities worldwide. This new regulatory framework will enact a fundamental change in the way the European insurance industry looks at risk and risk management practices, as it will force the convergence of all aspects of risk quantification with those of business decision making. All businesses that have operations, subsidiaries or affiliates in Europe, write coverage in Europe or do business with insurers in Europe should be preparing now for these wide-ranging changes.

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Navigating the A.M. Best Supplemental Rating Questionnaire Changes: Recent changes related to the A.M. Best Supplemental Rating Questionnaire (SRQ) will have a sweeping impact on U.S. property and casualty insurers. Respondents are facing new questions regarding enterprise risk management (ERM), new considerations for workers compensation coverage, and the release of the new version 11 of the RMS RiskLinkTM model, all of which will factor into a company’s A.M. Best rating.

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June 22nd, 2011

Succeeding Under Solvency II: Entire White Paper Series

Posted at 1:00 AM ET

Guy Carpenter recently published a series of three white papers on Solvency II covering key issues of relevance to (re)insurers. We bring the entire series together here.

Succeeding Under Solvency II: Pillar One, Capital Requirements; Part I: Despite its nominally European focus, Solvency II presents a wide range of considerations - and opportunities - to insurance entities worldwide. This new regulatory framework will enact a fundamental change in the way the European insurance industry looks at risk and risk management practices, as it will force the convergence of all aspects of risk quantification with those of business decision making. All businesses that have operations, subsidiaries or affiliates in Europe, write coverage in Europe or do business with insurers in Europe should be preparing now for these wide-ranging changes.

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Succeeding Under Solvency II: Pillar One, Capital Requirements; Part II: Pillar One’s Impact on Insurers: The first pillar of Solvency II is the quantitative component of the new regulations. It deals with the capital requirements of insurers wishing to provide coverage in the EC markets.

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Succeeding Under Solvency II: Pillar One, Capital Requirements; Part III - Conclusion: It is clear that Solvency II presents a host of challenges to (re)insurers. With a disciplined and thoughtful approach, many companies will see opportunities to lessen the impact - or even to improve their competitive stance in the industry. Below we explore in detail some of the key considerations, challenges and opportunities associated with Solvency II.

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Succeeding Under Solvency II, Corporate Governance (Pillar Two) and Disclosure (Pillar Three): Preparation: Preparing for “Pillar V”: Implementation of the Solvency II regime is approaching rapidly. The directive is expected to take effect in January 2013 and will mostly affect, but not be limited to, (re)insurers operating in or covering risks in Europe.

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Succeeding Under Solvency II, Corporate Governance (Pillar Two): To support Solvency II compliance, (re)insurers need to implement rigorous corporate governance programs that address all areas of the company, from the tone and activities of company leadership through granular risk and capital management activities. The corporate governance framework should define a clear and robust organizational structure - including an adequate operational structure, the clear allocation of tasks and responsibilities, organizational transparency and efficient information systems across all business activities. The structure should delineate a clear separation between the risk management function and the audit function. There should be a clearly apparent independence of the two functions from each other. Management’s responsibilities must be evident.

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Succeeding Under Solvency II, Disclosure (Pillar Three), How Guy Carpenter Can Help: Two levels of disclosure are required under Pillar III of Solvency II: regulatory and public. The details discussed above about Pillar II reflect the corporate governance disclosures necessary under the directive. Pillar I requirements address the disclosure of risk and capital levels to regulators. Additionally, (re)insurers affected by Solvency II will have to disclose risk and capital information - as well as modeling details - to the public.

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Succeeding Under Solvency II, Reinsurance and Counterparty Risk: Impact of Solvency II on the Reinsurance Market: In this briefing, the third in the series, we concentrate on special considerations for reinsurance and counterparty risk.

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Succeeding Under Solvency II, Reinsurance and Counterparty Risk: Solvency II Counterparty Default Risk Considerations: Counterparty default risk is one of the core components of the Solvency Capital Requirement (SCR). This module has undergone substantial change over the several quantitative impact studies (QIS) as the supervisors attempted to find an appropriate measure of the risk. In the QIS 5 final report, EIOPA noted that this module received the most criticism for the “overly complex approach” relative to the materiality of counterparty default risk within the overall risk-based capital requirement. We expect to see additional changes that will simplify the calculation of risk.

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Succeeding Under Solvency II, Reinsurance and Counterparty Risk: How Guy Carpenter Can Help: Solvency II will profoundly impact the reinsurance market, though perhaps not exactly in the ways reinsurers or regulators have anticipated. This impact will not be limited to European reinsurance markets, but will be felt globally. Advances in disclosure and overall market strength will come with costs, including a more volatile pricing environment.

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June 21st, 2011

CAT-i Reports on New Zealand Earthquakes

Posted at 1:00 AM ET

We bring together here the key CAT-i reports on GC Capital Ideas covering the New Zealand earthquakes that have occurred in three periods in the last year.

June 14, 2011: Earthquake in New Zealand: Another strong earthquake hit New Zealand’s South Island at 02:20 UTC on June 13, destroying buildings already weakened by two previous earthquakes that hit the region in September 2010 and February 2011. The latest event, measuring 6.0 Mw, was located 13 kilometers (8 miles) west of Christchurch and centered a shallow 9 kilometers (5.6 miles) underground, according to the U.S. Geological Survey (USGS). The New Zealand Institute of Geological and Nuclear Sciences (GNS Science) recorded a magnitude of 6.3 for the event. According to the USGS, more than 430,000 people live in areas impacted by a Modified Mercalli Intensity (MMI) of V or higher. Christchurch, New Zealand’s second largest city with a population of around 364,000, experienced intensity VII on the MMI scale, equivalent to severe shaking with the potential to cause heavy damage to vulnerable structures and moderate/heavy damage to more resistant structures. The event was preceded by a 5.2 Mw earthquake and around 40 aftershocks have been recorded. GNS Science has warned the latest seismic activity is likely to trigger new aftershocks.

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March 3, 2011: Update: Earthquake in New Zealand: The official death toll from the earthquake that hit New Zealand’s South Island at 23:51 UTC on February 21 has now reached 161, according to the latest reports. The epicenter of the earthquake, of magnitude 6.3, was located only 3 miles (5 km) from the city of Christchurch on New Zealand’s South Island, at a shallow depth of 2.5 miles (4 km), according to the U.S. Geological Survey (USGS).

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September 6, 2010: Earthquake in New Zealand: A powerful earthquake hit New Zealand at 16:35 UTC on September 3, causing widespread but generally moderate damage, according to reports. The earthquake, measuring 7.0 Mw, was located 30 miles (45 kilometers) west of Christchurch, according to the U.S. Geological Survey (USGS). The USGS added that the quake was centered a shallow 3.1 miles (5 kilometers) underground and was felt as far north as New Plymouth on the North Island. The New Zealand Institute of Geological and Nuclear Sciences (GNS) said the earthquake was the most destructive to hit New Zealand in almost 80 years, after a magnitude 7.9 tremor hit the North Island city of Napier in 1931. The GNS added that the recent earthquake occurred on an unknown fault that appears not to have ruptured for at least 16,000 years. More than 80 aftershocks have hit New Zealand’s South Island since the main earthquake, the most powerful at 5.4 Mw.

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