Archive for May, 2012



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:

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May 22nd, 2012

Chart: Catastrophe Bond Issuance by Quarter

Posted at 1:00 AM ET

The first quarter of 2012 was the most active first quarter on record in the catastrophe bond market.

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May 21st, 2012

6.0Mw Earthquake in Northern Italy

Posted at 10:01 AM ET

may-21-italy-earthquake-smallA strong 6.0Mw earthquake hit northern Italy at 02:03 UTC (04:03 local time) 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 centerd 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 here.

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May 21st, 2012

Chart: Reinsurance Valuations at a Long-Term Low

Posted at 1:00 AM ET

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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May 21st, 2012

Chart: Evolution of Shareholders’ Funds: Guy Carpenter Global Reinsurance Composite

Posted at 1:00 AM ET

The figure shows the evolution of shareholders’ funds for the Guy Carpenter Global Reinsurance Composite and illustrates the stability of capital levels for the reinsurance sector. 

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May 18th, 2012

Week’s Top Stories: May 12 - 18, 2012

Posted at 11:00 AM ET

GC Securities:* Catastrophe Bond Issuance Tops USD1.3 Billion in Q1 2012: The first quarter of 2012 was the most active first quarter on record for the global catastrophe bond market, according to GC Securities. During the quarter, a total of USD1.34 billion of risk capital was issued through eight transactions, exceeding last year’s record of USD1.02 billion for the same time period.

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Lessons Learned From the Catastrophes of 2011: The Marsh Point of View: Guy Carpenter sister company, Marsh, has just published “Lessons Learned from the Catastrophes of 2011.” According to the report, the scale of the catastrophes experienced in 2011 exceeded previous loss-modeling predictions and has challenged established thinking on the nature of risk. Companies now need to re-examine their risk management strategies and introduce new methodologies to strengthen their operational and financial resilience.

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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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Reinsurance Rates Rise at April 1, 2012 Renewals: Reinsurance rates rose as the market continues to work through the impact of the events of 2011, according to Guy Carpenter. In a briefing released today, Guy Carpenter reports that this year’s April 1 renewals are continuing the general trends observed at January 1, 2012.

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What to Watch in 2012: 2012 will undoubtedly be a challenging year, but Guy Carpenter believes that growth opportunities exist - or can be created - for companies that have the fortitude to see and develop them. Below we examine 10 major themes that the (re)insurance sector will face in 2012.

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TRIA, U.S. Terrorism and International Terrorism: Effect on the Insurance and Reinsurance Markets: Commercial insurers are strongly supportive of the Terrorism Risk Insurance Act of 2002 (TRIA), as it provides them an ultimate safety net for their terrorism exposures. However, the residual risk for terror events retained by insurers below the triggers and retention levels set by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA), coupled with the relatively high cost of reinsurance in key exposure zones, means that insurers remain cautious about terrorism exposure. As a result, they continue to avoid accumulating high-profile urban exposures.

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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.

May 17th, 2012

Catastrophe Bond Update: First Quarter 2012 - Market Dynamics and Outlook

Posted at 1:00 AM ET

The first quarter of 2012 was dominated by a significant amount of activity in both the primary and secondary markets. The primary market showed signs of market firming despite a record level of issuance being completed. Transactions for which modeling uncertainty was more meaningful or that addressed perils already significantly represented in the market, in some instances faced more challenging marketing environments. From a structural perspective, investors and sponsors continued to demonstrate an interest and willingness to update structural features of transactions. In light of recent transactions, changes were made to further ensure that in a post-event loss scenario all stakeholders in the transaction are provided an ability to efficiently express their views in the instances in which judgment is required. Transparency also continued to increase as multiple sponsors elected to include company loss files (CLFs) as a supplement to the transaction offering materials. These enhancements both in spirit and practical impact are important indicators of the market’s continued advancement.

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May 16th, 2012

Catastrophe Bond Update: First Quarter 2012 - Redemptions and Risk Capital Outstanding

Posted at 1:00 AM ET

Catastrophe Bond Redemptions

In the first quarter of 2012 the equivalent of USD711.3 million of risk capital matured. The composition of these maturities is shown immediately below.

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May 15th, 2012

Catastrophe Bond Update: First Quarter 2012

Posted at 1:00 AM ET

The first quarter of 2012 was the most active first quarter on record in the catastrophe bond market. Sponsors sought to lock in capital markets capacity for a diverse array of perils and structures in a somewhat uncertain traditional market environment. Capital providers proved up to the task, albeit at slightly increased pricing relative to market levels in late 2011.

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