August 26th, 2011

Week’s Top Stories: August 20 - 26, 2011

Posted at 11:00 AM ET

Update: Hurricane Irene: Hurricane Irene is currently located approximately 105 miles (170 kilometers) north of Nassau in the Bahamas and 610 miles (980 kilometers) south of Cape Hatteras in North Carolina, according to the National Hurricane Center (NHC). The storm packs sustained winds of around 115 mph (185 kmph), equivalent to a category 3 hurricane. Irene is expected to strengthen over the next 24 hours, potentially reaching category 4 status as it approaches the southeastern coast of the United States.

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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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Guy Carpenter Publishes First Industry Risk Benchmarks Report: Guy Carpenter & Company announced publication of its first Industry Risk Benchmarks report, which provides risk benchmarks for loss ratios and reserves, by line of business, for coefficient of variation (standard deviation/mean), correlation and cycles.

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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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First Six Months 2011: Subdued Merger and Acquisition Activity: The recent volatility in the financial markets and the difficult operating environment in general continue to stifle merger and acquisition (M&A) activity. Property/casualty (P&C) M&A activity for risk-bearing entities in the first half of 2011 was at a similar level to that seen in the past two years. There were 22 announced and closed transactions with an aggregate deal value of almost USD3.4 billion during the first half of 2011. In terms of transaction value, this pace is on track to match the level seen during 2009 and 2010.

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And, you may have missed…

Reinsurance Brokers: Orderly Markets and Optimized Results, Executing the Transaction: The primary role of the reinsurance broker is to help insurers move risk out of their portfolios, most often - unsurprisingly - via the purchase of reinsurance. Cedents have three basic objectives for the use of reinsurance: reduce risk held, optimize the productivity of capital and manage earnings. The first is clear - reinsurance entails the act of transferring risk to another party. In doing this, the cedent gains flexibility in deploying the capital it has on hand, which produces revenue, market share and market capitalization growth opportunities. Insurers also use reinsurance to remove some volatility from their earnings. Consequently, reinsurance is much more than a tactical risk management tool; rather, it is of strategic value to every cedent in the marketplace.

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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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