2011 Catastrophe Losses and Reinsurance Capital: Part I: The reinsurance sector faced multiple headwinds in 2011. Significant losses in Australia, New Zealand, Japan, the United States and Thailand resulted in (re)insurers paying out more than USD100 billion in claims. Adding to the pressure on the market has been the impact of major catastrophe model releases, particularly for US wind risks. Nevertheless, reinsurance capital has remained resilient despite these pressures. The sector’s dedicated capital position recovered from most of its losses in 2011 and ended the year at a level close to that at the start of the year.
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.
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.
January 2012 Reinsurance Renewal: Credit, Bond & Political Risk: In the credit and bond primary market, rates are flat, but these are not rate-driven classes. In political risk and especially structured credit, rates are under considerable upwards pressure for obvious reasons. The outlook for 2012 is turbulent, given the prevailing macroeconomic uncertainty and instability around the world. Loss ratios are quite likely to increase.
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.
Most Popular Keyword: risk profile
And, you may have missed…
Merger and Acquisitions in Uncertain Markets: The global reinsurance sector is adrift. With little conviction in the market’s next move, the challenges of organic growth by primary (re)insurers have heightened. Economic uncertainty, volatility in global equity markets and sovereign debt concerns are dampening CEOs’ confidence. Rates remain challenged, and cost savings are hard to find in the property and casualty (P&C) space. With stocks plummeting and credit markets getting roiled, the pace of deals for the remainder of 2011 is expected to slow.
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.