Changing Hazard Landscape: Severe Convective Storms: No observable trends have been detected in the United States with either tornado or hail climatology, according to the scientific literature at large and the IPCC. The tornado events of the very active 2011 season are not unprecedented in history. Such outbreaks have occurred before - in 1974, for example, and such outbreaks will occur again.
Global Warming: Losses: Economic losses resulting from natural disasters increased from USD75.5 billion in the 1960s to USD659.9 billion in the 1990s. Insured losses have also increased, and “the dominant signal is of significant increase in the values of exposure.” Furthermore, the IPCC states that “failure to adjust for time-variant economic factors yields loss amounts that are not directly comparable and a pronounced upward trend for purely economic reasons.” As an example, the recent “trend” in hurricane losses for the coastal United States becomes indistinguishable when normalized by inflation and population density.
Guy Carpenter Mid-Year Report Highlights Catalysts for Growth in the (Re)insurance Industry: Guy Carpenter released its mid-year market report, highlighting a time of dynamic capital growth in the reinsurance industry. As investors supply capacity through a convergence of alternative and traditional vehicles, the report details the ways in which this new supply of capital and excess capacity has changed the nature of the sector’s capital structure.
Effective Enterprise Risk Management: With Solvency II and similar regimes in place and still on the horizon in some countries, and the continuing evolution of rating agency requirements, the last decade has seen the (re)insurance industry fully embrace the practice of enterprise risk management (ERM). As a trusted advisor to (re)insurers globally, Guy Carpenter has observed firsthand what it takes to implement ERM successfully. An ERM program’s effectiveness may be enhanced with the benefit of adherence to a set of simple tenets.
July 1 Renewals Indicate Downward Pressure on Reinsurance Rates Likely to Continue through 2013: Guy Carpenter & Company reports that reinsurance market rates on line (ROLs) continued to be driven by an influx of capital from third-party investors at the July 1 renewals, in spite of catastrophe losses reaching approximately USD20 billion during the first six months of 2013 (above the ten-year average for the period). In a briefing released today, Guy Carpenter comments that robust catastrophe bond, sidecar and collateralized reinsurance activity throughout the year has for the first time pushed pricing in the capital markets to “decouple” or breakaway from levels set by the traditional market. This has in turn prompted downward pressure on overall traditional market pricing.
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Floods in Colorado, United States: A period of excessive rainfall between September 10 and 15 has triggered excessive flooding in Northeastern Colorado. Rainfall has exceeded five inches over a very large area, and some local rainfall amounts have exceeded 15 inches. Damage has occurred as a result of rushing water and inundation, affecting homes, businesses and infrastructure over a large area.