The Total Value of Reinsurance for Long-Tail Business: Can we learn from Solvency II to unlock the hidden value of reinsurance for long-tail business?
Alternative Market’s Impact On Traditional Reinsurers: The April 1, 2014 and June 1, 2014 renewals indicate that competition from the capital markets continues to play a major role in the abundance of reinsurance capacity that is placing pressure on pricing. Here we review Guy Carpenter analyses examining the impact of the alternative markets on traditional reinsurers and how reinsurance carriers are expected to face that challenge through the year.
Reinsurance Pricing Falls Again at June 1, 2014 as Competition Heightens: Guy Carpenter reports that downward pressure on reinsurance pricing has increased since the June 1, 2013 renewal due to continued competitive pressure from alternative markets, strong reinsurer balance sheets and low loss experiences. In its June 2014 renewal briefing, Guy Carpenter reports that competition increased as markets offered abundant capacity at reduced pricing. Terms and conditions also came under pressure and multi-year transactions continued to be an area of investigation. Traditional reinsurers sought to protect their market share and alternative providers looked to utilize growing funds.
Chart: Reserve Cycle Measured by Accident Year: In this chart Guy Carpenter is looking at the reserve cycle in a different way: by studying the booked ultimate loss by accident year. We choose accident year because actuaries typically analyze losses according to their year of accident. The estimate of the ultimate loss for a particular accident year ideally should not change over time if the initial estimate was correct. However, using U.S. industry data, we find that as a particular accident year is re-estimated periodically, a cycle appears.
Guy Carpenter Report Reinforces Need for TRIPRA Renewal: Guy Carpenter released its latest report on global terrorism. The report highlights evolving global terrorism risks and the impact these risks have on the reinsurance market. It also emphasizes the vital role the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) plays in the United States ensuring the availability and affordability of terrorism (re)insurance capacity throughout the country.
And, You May Have Missed…
Chart: Global Property Catastrophe ROL Index: The Guy Carpenter Global Property Catastrophe Rate on Line index is presented for 1990 through 2014. The index fell by 11 percent at January 1, 2014.