August 5th, 2011

Week’s Top Stories: July 30 - August 5, 2011

Posted at 10:00 AM ET

Chart: Pricing Behavior for US Property Cat at June 1 and July 1, 2011: Evaluating the pricing behavior for national and regional renewals excluding Florida at June 1 and July 1, we see that the general market response in both groups was fairly consistent. Pricing for lower layers increased less significantly than upper layers. In both cases, there was some additional pressure on upper layer pricing due to demand for those limits. In particular with regional writers, there was an up tick in minimum capacity charges that had been pushed to fairly low levels in recent years.

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Chart: Percent of Authorized Capacity Utilized at Renewal, Property Cat - 2010 and 2011: A significantly larger percentage of authorized capacity was utilized to fill out the 2011 renewals as compared to 2010. April through June renewals in 2011 signed almost 95 percent of authorized capacity, as opposed to approximately 90 percent in 2010.

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Tropical Storm Emily: Tropical Storm Emily is currently located in the eastern Caribbean Sea, approximately 90 miles (145 kilometers) south of Port-au-Prince Haiti, according to the National Hurricane Center (NHC). Emily packs sustained winds of around 50 mph (85 kmph). The storm is moving slowly on a west-northwest track after spending the early morning stationary just south of the Hispaniola Island. The NHC predicts Emily will maintain its west-northwest track for most of Thursday, and a further northwest turn and increase in forward speed will likely occur over the next 24 hours.

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Chart: Cat Bond* Risk Capital Issued and Outstanding 1997 - 2011 Q2: The second quarter of 2011 saw four catastrophe bonds came to market, totaling USD592 million of new bond issuance.

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Chart: US Prop Cat June and July 2011 Market Quoting Behavior: Unadjusted change in rate-on-line increased approximately 3 percent to 6 percent. Quoting behavior did not demonstrate the same level of deviation from renewal activity seen at June 1 with the Florida renewals. The range in the June and July non-Florida renewals from the average quote for a program was up approximately 5 percent to down 10 percent. This is very close to the overall average for the 2010 renewal season.

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And, you may have missed…

Flooding: The Possible Changes Under Global Warming: Flood events often occur rather suddenly so there may not be enough time to implement disaster mitigation measures. A good understanding of the causes of individual floods is therefore crucial in increasing the lead time for issuing warnings. From the insurance perspective, such an understanding could provide a better estimate of the possible losses. With global warming being a reality, it would also be of importance to estimate how the frequency of occurrence of flood events may change.

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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.

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