Catastrophe Bond Demand Remains Robust during Third Quarter 2011, Finds GC Securities*: The third quarter of 2011 was one of the most active on record for the catastrophe bond market, according to a new update from GC Securities. Three catastrophe bond transactions totaling USD512 million were completed during the third quarter, none of which contained exposure to U.S. hurricane peril. Excluding quarters in which there was no cat bond issuance, this is the first quarter since 2002 in which there was no transfer of U.S. hurricane risk.
Chart: Historical Capital Levels of Guy Carpenter Global Reinsurance Composite: The chart below shows historical capital levels for the Guy Carpenter Global Reinsurance Composite beginning in 1998. From a pricing perspective, rates tend to rise when capital levels in the sector tighten. Conversely, reinsurance rates on line often fall when capital levels are above trend. The decline in capital growth witnessed so far this year goes some way towards explaining the building pricing pressures seen in property catastrophe lines.
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.
Update: Floods in Thailand: Thailand has experienced its worst flooding in years over the last few months, leaving more than 420 people dead and causing severe damage across northern and central regions of the country. The floods have severely damaged and disrupted manufacturing operations in Thailand. Flooding has forced at least seven huge industrial estates in central regions to close, prompting the Federation of Thai Industries to warn that damage to the industrial sector will be in the billions of dollars.
Third Quarter 2011: Update on Property/Casualty M&A Activity: During the third quarter 2011, financial market volatility and a difficult operating environment continued to stifle, but not completely hinder, merger and acquisition (M&A) activity for property/casualty (P&C) risk-bearing entities. During the quarter, the most significant activity was in the form of deals announced, as opposed to transactions closing.
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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, Inc. 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.