August 10th, 2012

Week’s Top Stories: August 4 - 10, 2012

Posted at 2:14 PM ET

Chart: U.S. Property Catastrophe Rate on Line Index: Based on early calculations at July 1, overall property catastrophe pricing for 2012 as compared to 2011 was up 6.5 percent.

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Chart: U.S. Property Catastrophe Capacity Utilization for Reinsurance Renewals: Now that reinsurers have had time to assess and implement their response to market conditions, there has been more willingness generally to deploy significant capacity where terms have met reinsurer requirements, particularly as renewals in May, June and July were impacted by pricing adjustments in 2011.

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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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Chart: July 2012 Market Quoting Behavior for Property Catastrophe: Quoting behavior was less volatile at July 1, 2012, when compared to the corresponding period in 2011, with a range around the average quote for lead markets of down 6 percent to up 6 percent.

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Chart: Non-Traditional Market Capacity in the Property Catastrophe Risk Transfer Market: It is worth noting that while the 144A catastrophe bond* market is the most visible component of direct capital markets capacity in the catastrophe risk market, it is not the largest. Other conduits, particularly collateralized reinsurance and sidecar participations are also meaningful as additional sources of risk transfer capacity.

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And, you may have missed…..

North Atlantic Hurricane Models: All the major catastrophe modeling companies have reset their view of U.S./North American hurricane risk in the past year. Revisions to storm characteristics have been the key component of change for AIR, EQECAT and RMS. Many users have been frustrated by the lack of regard for risk management implications as some vendors packaged several significant U.S. hurricane changes into their releases.

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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 U.S. 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 an offer to buy any security, financial instrument, reinsurance or insurance product. The securities mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act. **GC Analytics is a registered mark with the U.S. Patent and Trademark Office.

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