Archive for May, 2012



May 31st, 2012

Capitalizing on Growth Opportunities in Emerging Markets, Part II

Posted at 1:00 AM ET

Alexander MoczarskiAlexander Moczarski, President and Chief Executive Officer, Guy Carpenter & Company and Chairman, Marsh & McLennan Companies International
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Considerations for Market Entry

For (re)insurers considering entry into an emerging market, several developments should be monitored in the regions under consideration. Is there a growing need for infrastructure and commercial/industrial insurance for transportation, utilities and agribusiness industries? Is there a prospect for deepening insurance penetration, especially in personal lines, as the population’s disposable income grows? Are income levels growing, allowing the purchase of “middle class” lifestyle products that require insurance? How is longevity increasing and creating new/additional insurance needs?

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May 30th, 2012

Capitalizing on Growth Opportunities in Emerging Markets, Part I

Posted at 1:00 AM ET

Alexander MoczarskiAlexander Moczarski, President and Chief Executive Officer, Guy Carpenter & Company and Chairman, Marsh & McLennan Companies International
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As (re)insurers are challenged to deliver healthy, accretive returns in maturing and increasingly competitive markets, emerging markets present growth opportunities that may not be found in the United States or Europe. Regulatory challenges, tightening reserve levels and capital requirements, coupled with volatile global economies and a low interest rate environment, are forcing companies to seek non-traditional or emerging growth strategies.

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May 29th, 2012

Chart: Evolution of Shareholders’ Funds, 2010 - Q1 2012

Posted at 1:00 AM ET

The figure presents the evolution of shareholders’ funds for the companies in the Guy Carpenter Global Reinsurance Composite, 2010 - Q1 2012.

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May 29th, 2012

Chart: Guy Carpenter Global Reinsurance Composite, Return on Equity, Q1 2012

Posted at 1:00 AM ET

Return on Equity, Guy Carpenter Global Reinsurance Composite, 2004 - Q1 2012

roe-may-24

 

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May 28th, 2012

Top Modeling Stories in GC Capital Ideas: First Half 2012

Posted at 1:00 AM ET

Here we highlight the top stories on modeling that have appeared in GC Capital Ideas in the first six months of 2012.

1. Spatial and Temporal Earthquake Clustering - Earthquake Aftershocks, EQECAT Perspective: Forecast Models: Earthquake sequences appear to be globally continuous over time. This suggests that seismic sources or faults may be part of a critically-stressed, self-organized network where earthquakes occur as a chain reaction with respect to one another. Earthquakes trigger other earthquakes as stresses move around in the fault network.

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2. Spatial and Temporal Earthquake Clustering - Earthquake Aftershocks, EQECAT Perspective: Probabilistic Hazard Analysis: The purpose of probabilistic seismic hazard analysis (PSHA) is to quantify the rate (or probability) of exceeding various ground-motion levels at a site or sites, given all possible earthquakes. PSHA involves the following three steps: Characterization of the seismic-hazard source model(s); Specification of the ground motion model(s) or attenuation relationship(s); and Probabilistic calculation.

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3. Spatial and Temporal Earthquake Clustering - Earthquake Aftershocks: EQECAT Perspective: Introduction: EQECAT recently released a white paper examining earthquake clustering in the context of seismic hazard and loss assessment. The paper, Spatial and Temporal Earthquake Clustering: Part 2 - Earthquake Aftershocks, is EQECAT’s second in a three-part series about spatial and temporal earthquake clustering.

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4. 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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May 25th, 2012

Week’s Top Stories: May 19 - 25, 2012

Posted at 9:00 AM ET

Chart: Reinsurance Valuations at a Long-Term Low: The challenging macroeconomic environment of subdued growth and low interest rates meant the reinsurance sector ended 2011 trading near 20-year lows. As the chart below illustrates, the average price to book ratio for the sector of 0.893 is just greater than one and a half standard deviations down from the 20-year average of 1.32.

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Oliver Wyman: Strategic Impact of Solvency II: Guy Carpenter sister company, Oliver Wyman, has published a new report on Solvency II. The road to implementing Solvency II has been longer and more circuitous than expected. In Oliver Wyman’s joint report with Morgan Stanley, Solvency II: A Long and Winding Road, they provide insights on implementation progress thus far. The report also discusses key debates in the industry, which will have a significant impact upon the insurance landscape across Europe.

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6.0Mw Earthquake in Northern Italy: A strong 6.0Mw earthquake hit northern Italy at 02:03 UTC on May 20, causing severe shaking in the Emilia Romagna region and surrounding areas. Damage has been reported across Emilia Romagna, particularly to historic buildings, commercial properties and agriculture in towns and cities close to the earthquake’s epicenter. According to the U.S. Geological Survey (USGS), the epicenter was within 10 kilometers (6 miles) of the towns of Camposanto, San Felice sul Panaro, Finale Emilia and Crevalcore, and it was also centered a shallow 5.1 kilometers (3.2 miles) underground. Shaking was felt in the nearby city of Bologna and as far away as Milan and Venice, but no major damage was reported there.

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Spring Conditions Suggest Tempered Atlantic Hurricane Season, Part I: On the heels of two very active years, the 2012 April hurricane season forecasts expect that activity will be around 20 percent below the long term average (1950-2011). This briefing discusses how current atmospheric and oceanic patterns will likely reduce storm formation and how these same patterns are expected to contribute to the hurricane steering flow through the heart of the season.

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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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And, you may have missed…

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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May 24th, 2012

Spring Conditions Suggest Tempered Atlantic Hurricane Season, Part II

Posted at 1:00 AM ET

The Atlantic Warm Pool (AWP) is defined as an area of the ocean with SSTs greater than 28.5°C (83°F). When this area is very large the average position where storms form in the MDR shifts to the east (1), making it more likely that the storm will recurve harmlessly north through the central Atlantic. This shift in genesis position occurs due to the more rapid development of tropical waves moving off of Africa into the Atlantic as these disturbances encounter more favorable atmospheric and oceanic conditions. Once a storm forms it is steered by deeper level flow in the atmosphere, making it more susceptible to being pulled north by passing mid-latitude troughs. A quicker, more easterly forming storm also experiences longer exposure to an internal storm tendency to move north that is called the Beta Effect. The opposite effect occurs during years with cooler SSTs in the tropical Atlantic, with storms taking longer to form, shifting the genesis location westward. This allows the storms to be steered by the shallow trade winds and flow further west, threatening landfall in the western Atlantic/Caribbean Sea.

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May 24th, 2012

Chart: Risk Capital Outstanding

Posted at 1:00 AM ET

Total risk capital outstanding in the catastrophe bond market increased by 5.2 percent from USD12.14 billion to USD12.77 billion during the first quarter of 2012.

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May 23rd, 2012

Spring Conditions Suggest Tempered Atlantic Hurricane Season, Part I

Posted at 1:00 AM ET

On the heels of two very active years, the 2012 April hurricane season forecasts expect that activity will be around 20 percent below the long term average (1950-2011). This briefing discusses how current atmospheric and oceanic patterns will likely reduce storm formation and how these same patterns are expected to contribute to the hurricane steering flow through the heart of the season.

Continue reading…

May 23rd, 2012

Oliver Wyman: Strategic Impact of Solvency II

Posted at 1:00 AM ET

Guy Carpenter sister company, Oliver Wyman, has published a new report on Solvency II. The road to implementing Solvency II has been longer and more circuitous than expected. In Oliver Wyman’s joint report with Morgan Stanley, Solvency II: A Long and Winding Road, they provide insights on implementation progress thus far. The report also discusses key debates in the industry, which will have a significant impact upon the insurance landscape across Europe, including:

Continue reading…