February 17th, 2012

Week’s Top Stories: February 11 - 17, 2012

Posted at 10:00 AM ET

Calling All General Insurance Reserving Actuaries: Does the Bootstrap Model “Work”?  Guy Carpenter’s extensive back-testing of reserve distributions created using the popular paid chain ladder bootstrap method has shown that these distributions materially under-estimate reserve risk.

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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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GC Securities* Completes Japan Earthquake Catastrophe Bond:  GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/SIPC, announced the placement of the Series 2012-1 Class A Notes, with notional principal at $300 million, through a newly created catastrophe bond shelf program, Kibou Ltd. The bond will ultimately benefit ZENKYOREN, National Mutual Insurance Federation of Agricultural Cooperatives (”Zenkyoren”), which was accessed via Hannover as the transformer reinsurer.

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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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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.

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Most Popular Keyword:  cat bond peril


And, you may have missed…

Solvency II Pillar Two: Corporate Governance:  To support Solvency II compliance, (re)insurers need to implement rigorous corporate governance programs that address all areas of the company, from the tone and activities of company leadership through granular risk and capital management activities. Consistent with the principles of enterprise risk management, the corporate governance framework should define a clear and robust organizational structure - including an adequate operational structure, the clear allocation of tasks and responsibilities, organizational transparency and efficient information systems across all business activities.

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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. Cory Anger and Chi Hum are registered representatives of MMC Securities Corp.

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