Terrorism (Re)Insurance Market Today: The unrest around the world outlined earlier in the report has begun to impact the terror (re)insurance market, not only with regard to supply and demand but also in terms of how risks and coverages are defined. Although there is an abundance of capacity in the market due to the absence of a recent major terrorism loss (resulting in a stable to softening treaty terrorism market), civil unrest and/or riot coverages in some international terrorism programs are impacting several carriers.
Guy Carpenter Opens New Office in DIFC, Dubai: Guy Carpenter & Company has opened its first office in the Middle East and has received a license from the Dubai Financial Services Authority (DFSA) to operate as an insurance intermediary in the Dubai International Financial Centre (DIFC).
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.
Guy Carpenter Publishes Second Annual Insurance Risk Benchmarks Report: Guy Carpenter has published its second annual Insurance Risk Benchmarks, a resource designed to help insurers assess risk parameters and improve economic capital modeling. The report provides benchmarks for underwriting and reserve risk by line of business and by industry segment for U.S. exposures, and can be used by insurers when benchmarking their economic capital models.
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. It is interesting to note that prior to 2011, none of the industrial parks in Thailand had been flooded over the past 40 years.
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Adapting to an Evolving Market of More Permanent Capital Market Capacity: A new capital management paradigm is challenging the traditional reinsurance model. Historically, significant market losses from major catastrophic events and low investment yields were a catalyst for an improved rate environment. Faced with current economic conditions, reinsurers are finding it more difficult to generate adequate returns in excess of their cost of capital, and are seeing an increased competitive threat from alternative capacity from the capital markets.