January 7th, 2013

GC Capital Ideas Top Stories: December 2012

Posted at 1:00 AM ET

1. Global Unrest and Political Instability Prompts Reevaluation of Terrorism Risk and Coverage: The dramatic rise in political instability and civil unrest across the globe, including uprisings in the Middle East and protests in Greece and Spain, has triggered a significant shift in the nature of terrorism risk and has highlighted the need for tailored terrorism and political violence protection, according to a new report on global terrorism and the terror reinsurance market, “Tensions Building: the Changing Nature of Terrorism Risk and Coverage,” released by Guy Carpenter.

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2. 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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3. Superstorm Sandy: Initial Impacts and Implications: Guy Carpenter has published a new briefing. As documented by the National Hurricane Center, Superstorm Sandy made landfall as a post-tropical cyclone at 8PM EDT, Monday Oct 29, 2012, with maximum sustained winds of 80 miles per hour.

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4. 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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5. Indexation Clauses in Liability Reinsurance Treaties: A Comparison Across Europe: The Indexation Clause - otherwise referred to as the Stability Clause, Inflation Clause or Severe Inflation Clause (SIC) - is designed to maintain the real monetary value of the retention and (where applicable) the limit under a long-tail excess of loss reinsurance treaty over the duration of the claims payout pattern. The clause is only relevant to losses that are of a long-tail nature (i.e., that take a long time to become paid) and is commonly found in the terms and conditions of motor liability, general liability and professional liability third party loss excess of loss reinsurance contracts of European cedents.

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6. Recent Legislative and Judicial Developments in Continental Europe Affecting the Casualty Insurance Industry: Recent Legislative and Judicial Developments in Continental Europe Affecting the Casualty Insurance Industry is the latest installment in Guy Carpenter’s legislative update series, designed to provide our international clients and markets with a concise overview of key trends in the Continental European legal environment. These issues have had an impact on insurers and reinsurers or are expected to have an effect in the near future.

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7. Guy Carpenter Asia-Pacific Climate Impact Centre Issues Predictions of Tropical Cyclone Activity in Australian Region: Guy Carpenter Asia-Pacific Climate Impact Centre, a joint initiative of Guy Carpenter & Company and City University of Hong Kong, issued its annual predictions for the 2012/2013 tropical cyclone season for the Australian region. The final forecast is for near-normal activity (12 tropical cyclones) for the region.

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8. Periodic Payment Orders - Issues and Implications for Reinsurance: Following the passage of the Courts Act 2003, which gave courts in England and Wales the power to impose rest-of-life structured settlements, known as periodical payment orders (PPOs), to provide for the long-term care and loss of earnings of severely injured third parties, the actual incidence of such awards in the market has been relatively low. It is clear however that the trend towards PPOs has accelerated over the past year, partly driven by low interest rates. This trend presents real challenges to both insurers and reinsurers of casualty classes, particularly for motor.

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9. 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.

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10. Guy Carpenter Opens New Office in DIFC, Dubai: Guy Carpenter has opened its first office in the Middle East and has received a license from the Dubai Financial Services Authority to operate as an insurance intermediary in the Dubai International Financial Centre (DIFC).

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