January 1, 2013 Renewals Bring Stable Reinsurance Pricing: Guy Carpenter reports that the reinsurance sector enters 2013 equipped with ample dedicated capital and stable pricing. In its 2013 global renewal report, The Route to Profitable Growth, Guy Carpenter finds that the January 1, 2013 renewals took place against a stable backdrop, with only loss-affected lines and select regions experiencing price volatility. The market was supported by a combination of factors including lower than normal catastrophe losses during the first nine months of 2012, new reinsurance capacity and record-high levels of capital.
Guy Carpenter’s January 1 Reinsurance Renewals Press Briefing: Nick Frankland: Nick Frankland, CEO, EMEA Operations, said, “This renewal has seen a reduction in the amount of catastrophe reinsurance being purchased and a greater capacity concentration ….. among a smaller number of counterparties. An issue this raises is that of counterparty credit and operational risk. Reinsurer panels are being reduced on programs as major cedents look to establish larger, more meaningful partnerships with key reinsurers. As a result the question of scale will become an increasingly important one in our industry and will likely have a knock-on effect on mergers and acquisitions activity as we establish what is too small and what is big enough.”
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.
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Future of TRIPRA and Implications on the (Re)Insurance Market: There are now limited expectations of terrorism insurance being addressed in Congress before TRIPRA’s expiration in 2014. If TRIPRA is not extended or is substantially modified, there will be an impact on embedded terrorism insurance coverage, standalone terrorism pricing/demand for capacity and TRIPRA captive placements.