Archive for September, 2011



September 30th, 2011

Update: Oil Refinery Fire, Bukom Island, Singapore

Posted at 4:36 PM ET

oil-refine-small1A large fire broke out at Royal Dutch Shell’s massive Pulau Bukom refinery near Singapore on September 28, damaging parts of the plant and prompting the closure of the entire facility. Reports said the fire at the 500,000 barrels-a-day refinery in Pulau Bukom, an island 5 kilometers (3 miles) off Singapore, started at about 13:15 local time (05:15 UTC) and burned for around 36 hours. Eyewitnesses also reportedly heard three large explosions at the facility. Shell has stated it is in the process of shutting down the whole refinery. Reports said the fire is the worst to affect the plant in 23 years.

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September 30th, 2011

Week’s Top Stories: September 24 - 30, 2011

Posted at 11:13 AM ET

North Atlantic Hurricane Models: All the major catastrophe modeling companies have reset their view of U.S./North American hurricane risk in the past year. Revisions to storm characteristics have been the key component of change for AIR, EQECAT and RMS. Many users have been frustrated by the lack of regard for risk management implications as some vendors packaged several significant U.S. hurricane changes into their releases. In subsequent GC Capital Ideas posts we will provide an overview of the significant changes to U.S./North Atlantic models over the last 12 months and give our view on each update.

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Losses Exert Upward Pressure on Property Catastrophe Pricing: The high catastrophe losses sustained in the first half of 2011 have already had an impact on capital and pricing in the reinsurance market. Since the January 1, 2011 renewal, the decline in the capital positions of some reinsurers has exerted pricing pressure on catastrophe-exposed markets. Indeed, according to the Guy Carpenter Global Property Catastrophe ROL Index, rates were flat to up 10 percent year-on-year as of July 1, 2011 (see Figure 2). However, rates in non-catastrophe lines continue to experience downward pressure.

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Model Updates Cause Uncertainty: Over the past 12 months, the three main catastrophe modeling companies, AIR Worldwide (AIR), EQECAT and RMS have updated many of their products or launched models for additional countries. The changes relate to earthquake, wind and flood risks. Some of the updates have created uncertainty within the market, and their longer-term implications are not fully known at the time of writing.

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Oil Refinery Fire, Bukom Island, Singapore: A large fire broke out at Royal Dutch Shell’s massive Pulau Bukom refinery near Singapore on September 28, damaging parts of the plant and prompting the closure of some units at the facility. Reports said the fire at the 500,000 barrels-a-day refinery in Pulau Bukom, an island 5 kilometers (3 miles) off Singapore, started at about 13:15 local time (05:15 UTC) and has now been burning for more than a day. Eyewitnesses also reportedly heard three large explosions at the facility. Reports said the fire is the worst to affect the site in 23 years.

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European Windstorm Models: AIR’s European windstorm model underwent a major update in 2010. There were, therefore, only a few changes in the 2011release, with an expansion in modeled countries to include the Czech Republic, Estonia, Finland, Latvia, Lithuania and Poland. The historical storms of Janika (2001) and Xynthia (2010) were also added to the model’s catalog.

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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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September 30th, 2011

Update: Typhoon Nesat

Posted at 8:57 AM ET

nesat-2-smallTyphoon Nesat developed on September 23 to the east of the Philippines and intensified to become the eighth typhoon of the West Pacific typhoon season two days later. Nesat continued to strengthen as it moved west towards the Philippine coast and the storm subsequently made landfall as a category 3 typhoon in the Philippine province of Aurora on September 26 with sustained winds of around 120 mph (195 kmph), according to reports. Following landfall in the Philippines, Nesat moved through the South China Sea and clipped Hainan Island in southern China on September 29  before passing through the narrow Qiongzhou Strait and making its third and final landfall in northern Vietnam as a tropical storm. Nesat brought severe weather to parts of the Philippines and China but early estimates suggest insured losses in both countries will be less than USD150 million.

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September 29th, 2011

Oil Refinery Fire, Bukom Island, Singapore

Posted at 3:07 PM ET

oil-refine-smallA large fire broke out at Royal Dutch Shell’s massive Pulau Bukom refinery near Singapore on September 28, damaging parts of the plant and prompting the closure of some units at the facility. Reports said the fire at the 500,000 barrels-a-day refinery in Pulau Bukom, an island 5 kilometers (3 miles) off Singapore, started at about 13:15 local time (05:15 UTC) and has now been burning for more than a day. Eyewitnesses also reportedly heard three large explosions at the facility. Reports said the fire is the worst to affect the site in 23 years.

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September 29th, 2011

Asia Typhoon Models

Posted at 1:00 AM ET

RMS RiskLink v11.0 (SP2)

RMS launched its Hong Kong typhoon model several years ago and expanded its coverage to China in 2011. Unlike other vendor models, RMS’s update offers modeling with demand surge and many secondary modifiers.

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September 29th, 2011

European Earthquake Models

Posted at 1:00 AM ET

AIR CLASIC/2 v13

AIR updated its pan-European earthquake model in July 2011 to cover many new countries beyond core earthquake-prone countries in the region. In the event of an earthquake, the new model saw increased probability of magnitude 7 or larger events in most core countries (Greece, Turkey, Switzerland, Israel and Italy). There was also a general reduction in average annual event rates (although Turkey and Israel saw increases in magnitude 8 and above). The update also introduced a finer soil data resolution and an improvement in analysis resolution from 2-digit to 5-digit postal code for Turkey. Expanded vulnerability mapping for construction and occupancy and additional construction and occupancy mixes were also included in the new model.

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September 28th, 2011

Model Updates Cause Uncertainty

Posted at 1:00 AM ET

Over the past 12 months, the three main catastrophe modeling companies, AIR Worldwide (AIR), EQECAT and RMS have updated many of their products or launched models for additional countries. The changes relate to earthquake, wind and flood risks. Some of the updates have created uncertainty within the market, and their longer-term implications are not fully known at the time of writing.

Continue reading…

September 28th, 2011

Guy Carpenter Introduces Earthquake Model for Iceland

Posted at 1:00 AM ET

Guy Carpenter & Company announced that its GC Analytics® Model Development Team has introduced a new, fully probabilistic earthquake model for Iceland. The model, developed in collaboration with the Iceland Catastrophe Fund (Viðlagatrygging Íslands), local scientific experts and experienced international consultants, provides insurers and reinsurers with a reliable, high-quality tool for managing potential exposures in a fully developed insurance market.

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September 28th, 2011

Sector Capital Position

Posted at 1:00 AM ET

The first increase in global property catastrophe pricing since 2008 has been driven by a range of factors, from the elevated global catastrophe activity outlined above to a moderation of global reinsurance capital growth. At the January 1, 2011renewal, Guy Carpenter estimated that the global reinsurance sector’s dedicated capital position was about USD20 billion above historical averages, given risks assumed. Since then, the catastrophe losses of around USD70 billion, when offset against premiums, investment income and other factors, have resulted in the reinsurance sector’s excess capital position roughly halving to about USD10 billion.

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September 27th, 2011

Typhoon Nesat

Posted at 9:05 AM ET

nesat-smallTyphoon Nesat developed on September 23 to the east of the Philippines and intensified to become the eighth typhoon of the West Pacific typhoon season two days later. Nesat continued to strengthen as it moved west towards the Philippine coast and the storm subsequently made landfall as a category 3 typhoon in the Philippine province of Aurora on September 26 with sustained winds of around 120 mph (195 kmph), according to reports. Nesat is currently located in the South China Sea, approximately 170 miles (270 kilometers) northwest of the Philippine capital of Manila, according to the Joint Typhoon Warning Centre (JTWC). Nesat weakened as it moved across the Philippines and the storm currently packs sustained winds of around 100 mph (160 kmph), equivalent to a category 2 typhoon. However, the storm is expected to strengthen again as it moves through the South China Sea today. Nesat is tracking west at 18 mph (30 kmph) and the JTWC currently expects the storm to approach southern China later this week. The JTWC said typhoon force winds currently extend 45 miles (70 kilometers) from the center of the storm while tropical storm force winds extend 185 miles (300 kilometers).

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