August 12th, 2011

Week’s Top Stories: August 6 - 12, 2011

Posted at 8:46 AM ET

Update: U.S. Credit Downgrade Implications:  Standard & Poor’s has downgraded the U.S. sovereign debt rating to AA+ from AAA. Implications for (re)insurers worldwide are mixed. Although there are broad economic implications, markets appear to have anticipated at least some of these, which could forestall rash or catastrophic outcomes. The long-term effects, however, could be profound.

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Terror Attacks at Historically High Levels, Still Pose Threat to (Re)Insurance Industry, According to Guy Carpenter Report:  A new report on global terrorism and the terror reinsurance market, released by Guy Carpenter, finds that while recorded incidents of terror around the world remain at historically high levels and terrorism remains a serious risk to the (re)insurance industry, the industry continues to meet the current demands for terrorism risk transfer.

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Typhoon Muifa:  Muifa developed on July 25 to become the sixth named storm of the West Pacific typhoon season, bringing heavy rain to the Philippines as it moved across the Pacific Ocean. The storm is currently located approximately 50 miles (90 kilometers) southwest of Okinawa in Japan, according to the Joint Typhoon Warning Center (JTWC). The storm has strengthened since its formation to become the third typhoon of the season. Muifa currently packs sustained winds of around 98 mph (157 kmph), equivalent to a category 2 typhoon. The storm is expected to slowly strengthen as it moves over the northeastern Philippine Sea towards eastern China.

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Microinsurance and Haiti: The Theoretical Becomes Real: Microinsurance is often touted as an important potential new revenue stream for insurers operating in developed markets, as well as the foundation for outsized growth in emerging economies. Yet with few tangible examples of the effectiveness of microinsurance, such prospects tend to remain relegated to the realm of the “potential.” A recent catastrophe in Haiti signals that change may be afoot, however, as microinsurance payouts work to help borrowers recover from loss more quickly.

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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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Most Popular Keyword:   Typhoon Muifa

And, you may have missed…

Modeling the Impact of a Casualty Catastrophe: Look no further than today’s headlines to see how a single catastrophic event or lawsuit can have far-reaching effects. Over the past few years, several incidents, seemingly isolated, have ballooned into cross-border, cross-industry and cross-business line catastrophes. Chain reactions of liability - such as the Deepwater Horizon oil spill, the collapse of Lehman Brothers and the Chinese Drywall product recall - have led insurers to ask: How do I assess the impact of a major legal liability catastrophe on my portfolio? And it’s not just the industry waiting for an answer: stockholders, analysts, rating agencies and regulators are listening, too.

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