February 3rd, 2012

Week’s Top Stories: January 28 - February 3, 2012

Posted at 11:00 AM ET

January 2012 Reinsurance Renewal: Asia Pacific: Reinsurance rate increases at the January 1, 2012, reinsurance renewal in Australia and New Zealand continued the July 1, 2011 renewal trend. Half a year ago, rates were up more than 50 percent for property-catastrophe reinsurance in the region, due to unprecedented loss frequency and severity. Primary rates in China were generally stable during 2011. No significant catastrophic events occurred in 2011. In the Taiwanese primary market, rates stabilized in 2011, declining an estimated 5 percent on average.

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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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Guy Carpenter’s January 2012, Reinsurance Renewal Report: Executive Summary: The (re)insurance sector experienced historic catastrophe losses in 2011, many in areas not previously considered ‘peak’ risks. Devastating earthquakes in Japan and New Zealand, floods in Thailand and Australia and a record-breaking tornado season in the United States contributed to insured losses in excess of USD100 billion. As carriers continue to penetrate new growth regions, ‘cold spot’ losses are expected to increase.

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Periodic Payment Orders - Issues and Implications for Reinsurance: Following the passage of the Courts Act 2003, which gave courts in England and Wales the power to impose rest-of-life structured settlements, known as periodical payment orders (PPOs) to provide for the long-term care and loss of earnings of severely injured third parties, the actual incidence of such awards in the market has been relatively low. It is clear however that the trend towards PPOs has accelerated over the past year, partly driven by low interest rates. This trend presents real challenges to both insurers and reinsurers of casualty classes, particularly for motor.

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Guy Carpenter Examines Multi-Model Approach in New Report on Managing Catastrophe Model Uncertainty: Guy Carpenter published a new report on the effective use of property catastrophe models by property insurers. The report addresses the merits of adopting a multi-model approach to estimate risk and control uncertainty. Three strategies for using multiple models are examined: model blending, model morphing and model fusion. The study also provides extensive background on how catastrophe models are used and the potential sources of uncertainty in cat model results.

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And, you may have missed…

Intellectual Property Risk Management in Asia: A Growing Concern: The strategic importance of intellectual-asset management has undeniably increased in Asia in recent years. Since the integration of China into the world economy the Chinese government has been placing increasing value on intellectual property rights (IPR) and its protection. The country’s patent office now leads the world in patent applications.

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