May 1st, 2013

GC Capital Ideas Top Stories: April 2013

Posted at 1:00 AM ET

1. April 1 Renewals See Reinsurance Pricing Stabilize amid Dynamic Capital Growth: Guy Carpenter reports that dynamic capital growth and ample reinsurance capacity resulted in a relatively stable renewal at April 1, 2013. In a briefing released today, Guy Carpenter comments that the convergence of traditional and alternative capital sources is changing the marketplace, with non-traditional capacity now making up an estimated 14 percent of global property catastrophe limit.

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2.  Chart: Five Most Expensive Earthquakes for Insurers: Over the last two years, several powerful earthquakes have caused widespread damage, leading to significant losses for (re)insurers. Four out of the five most costly earthquakes on record have occurred since the start of 2010, and all four of these events were located outside the United States.

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3. What About the “S” in ORSA? Actuaries Raise Their Hands: At the 2012 Casualty Actuarial Society (CAS) Annual Meeting in Orlando, Florida, the general session, “Economic Capital Modeling for ORSA in the U.S. Property and Casualty (P&C) Industry:  The Stakeholders Convene,” afforded participants a novel opportunity to satisfy their continuing education credits. In that session, attendees hypothetically viewed the P&C industry as a single large company. Audience members were shareholders and session panelists adopted various executive and leadership roles in the company.

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4. Chart: Ratio of Insured Loss to Economic Loss from Recent Earthquake Events: Earthquake insurance coverage in developed and emerging economies varies widely, and earthquake coverage can be low, even in certain established markets. Of all the earthquakes that have caused economic losses over USD1 billion over the last three years, only events in New Zealand and Chile saw the (re)insurance sector contribute more than 25 percent of the overall cost.

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5.  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.

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6. Reinsurance Pricing Trends: Here we review recent GC Capital Ideas posts that have focused on 2013 reinsurance pricing trends.

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7. Oliver Wyman Report: Recovery and Resolution Plans for Insurers: When banks in Europe and the United States became unable to honor their financial obligations in 2007 and 2008, governments bailed them out. But why? The standard answer is that politicians faced a terrible choice. They had to choose between saving insolvent banks largely “as is” in the short-term, or unleashing economic chaos. Recovery and Resolutions Plans (RRPs) are supposed to stop such a dilemma arising again.

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8. Chart: Global Flood Risks and Flood Model Coverage by Three Main Modeling Vendors: Flood risk is poorly modeled at a global level, particularly in developing countries where flooding is a regular occurrence.

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9. Marsh United States Insurance Market Report 2013: Guy Carpenter sister company Marsh’s 2013 United States Insurance Report reveals that although U.S. commercial insurance rates are expected to continue firming in many lines of business and industry sectors in 2013, traditional signs of a conventional hard market are not evident as price increases are not uniform, capacity is plentiful and competition among insurers remains intense.

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10. Chart: Countries Operating Compulsory or Optional Terrorism Pools: A summary of the compulsory and optional terrorism pools that operate around the globe.

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