Global Perils: As Table 1 shows, the three perils of wind, earthquake and flood have caused the heaviest losses to (re)insurers. While hurricanes in the United States have unsurprisingly generated the biggest wind losses, the most expensive earthquakes and floods have a more international flavor. Indeed, the most expensive earthquake loss and flood loss on record occurred last year in Japan and Thailand, respectively. Moreover, both the Tohoku earthquake/tsunami and the Thai floods revealed risks that (re)insurers had not previously considered, with CBI claims - resulting from supply chain failure - accounting for a large share of insured losses.
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 (ERM) 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.
Update: Sandy: As always, our immediate thoughts and concerns are with those directly affected by Sandy, both in North America, and across the Caribbean. Many areas along the East Coast, and the Caribbean, bear signs of unspeakable consequences from this historic storm. The death toll in North America is now at least 55 (including one in Canada), in addition to the 67 who died in the Caribbean last week.
Thailand Flood 2011: Executive Summary: In 2011, Thailand experienced its worst flooding in years, leaving more than 800 people dead and causing severe damage across northern and central regions of the country. The floods, lasting a few months, severely damaged and disrupted manufacturing operations in Thailand. Flooding also forced seven huge industrial estates in central regions to close, causing damage to the industrial sector in the billions of U.S. dollars.
Guy Carpenter Asia Pacific Catastrophe Report 2012; Executive Summary: At the time we were publishing our 2011 Asia Pacific Catastrophe report; there was a growing realization that losses from the Thai flooding ongoing at the time were going to be significant. The Thai flood losses came at the end of a run of losses in the Asia Pacific region that were large, unprecedented in recent times and possibly unexpected by many market participants. In 2012, a benign catastrophe year and increased rates around the world have enabled reinsurers to start to recoup the losses of 2010/11 and overall Guy Carpenter’s Global Reinsurance Composite grew its aggregate capital position by USD10 billion during the first half of 2012. We estimate that reinsurers’ two year loss ratio for global catastrophe treaty is around breakeven, despite some loss creep on 2011 year losses.
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