Significant Insured Losses in First Half 2011: At least nine natural catastrophes resulted in insured losses of more than USD1 billion during the first half of 2011. Five were related to tornadoes and severe weather in the United States, causing a combined insured loss of more than USD14 billion. The La Niña climate phenomenon helped create the necessary conditions for tornado formation (warm/humid air and strong south winds near the surface, with colder air and strong westerly winds in the upper atmosphere). A very strong jet stream also contributed to the favorable conditions. If considered a single event, the tornado losses in the second quarter would have ranked as the fifth most expensive disaster in U.S. history, according to the Insurance Information Institute.
Record Breaking Global Losses in First Half 2011: The first six months of 2011 saw heavy losses from an exceptional accumulation of global natural catastrophes. A series of powerful earthquakes in New Zealand and Japan, combined with multi-billion dollar payouts from tornadoes and floods in the United States and Australia, meant the (re)insurance sector experienced the most costly first half on record in accident-year terms. Insured losses of around USD70 billion are estimated for the period, which is more than five times higher than the first-half average for the past ten years and second only to the full 12-month loss of 2005.
Impact of Catastrophe Model Updates: Adding to the pressure on the market was the impact of a new U.S. hurricane model release by Risk Management Solutions (RMS). The launch of RMS version (v)11 in February created uncertainty. The upgrade resulted in inland risk estimates rising substantially due to slower dissipation rates for hurricanes and heavier damage for lower wind speed events. There has also been some debate on the storm surge component of the model. Combined with the high global losses and their impact on reinsurers’ balance sheets, this had an effect on U.S. catastrophe pricing through the renewal season.
Guy Carpenter Addresses Insurer Strategies for Profitable Growth At Monte Carlo Rendez-Vous 2011: In its fourth annual press briefing held at the Reinsurance Rendez-Vous 2011 in Monte Carlo, Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist, identified and explored insurers’ opportunities for growth in today’s uncertain (re)insurance market.
Update: Typhoon Roke: Typhoon Roke made landfall near Hamamatsu City in Shizuoka Prefecture at around 05:00 UTC (14:00 local time) on September 21, killing at least six people and bringing powerful winds and heavy rain to the landfall region. Roke came ashore as a borderline category 1/category 2 typhoon, according to the Joint Typhoon Warning Center (JTWC).
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Capital Management Strategies Forced to Mature: As with everything that happened last year, the (re)insurance industry’s 2008 full-year financial results are open to interpretation. One could focus on the Guy Carpenter Global Reinsurance Composite’s shareholders funds decline of USD19.7 billion - not to mention a total net loss of USD6.1 billion - or zero in on the fact that most of this came from unrealized investment losses and note that most companies showed underwriting profits. Either way, capital has been depleted, and the capital positions that carried us through 2008 are not around this year. More than ever, capital management should be a top priority for every bearer of risk.