February 12th, 2016

Week’s Top Stories: February 6 - 12, 2016

Posted at 8:00 AM ET

Rating Agency Developments: There is a great deal of overlap between the goals of government regulators and credit rating agencies. The difference, however, is in the output, with regulators providing a license to trade, or not, and the rating agencies offering a graduated scale of relative strength. Regulatory solvency approval can be viewed as a “qualifier” or minimum standard required to be considered by a customer. A credit rating, on the other hand, can act as a “winner” or differentiating factor that results in a successful sale.

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Guy Carpenter Reports Stable Capital at January 1, 2016 Renewals: Guy Carpenter & Company reports that overall capital levels dedicated to reinsurance have stabilized, showing no growth for the first time in several years.  In a highly competitive environment, companies assessed broader opportunities and the rate of incoming capital slowed. However, moderate loss experience kept capacity at abundant levels for the January 1, 2016 renewals. The continued scarcity of costly catastrophe losses and more than adequate capacity led to reinsurance pricing reductions, although there are signs the rate of descent is slowing as compared to 2015. 

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Chart: Global Property Catastrophe ROL Index 1990 to 2016: The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) index is presented for 1990 through 2016.

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Microinsurance Consortium and Venture Incubator Announces New Name: The Microinsurance Consortium, led by a group of leading companies in the insurance industry, announced a new name for their microinsurance venture incubator (MVI) - Blue Marble Microinsurance. The consortium consists of American International Group, Inc., Aspen Insurance Holdings Limited, Guy Carpenter & Company, LLC together with Marsh & McLennan Companies, Inc., Hamilton Insurance Group, Ltd., Old Mutual plc, Transatlantic Reinsurance Company, XL Catlin, and Zurich Insurance Group.

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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 (ERM) 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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And, You May Have Missed…

Escalating Medical Costs: The impact of rising healthcare expenses has been and will continue to be felt around the world, in developed and undeveloped nations alike. Rising healthcare costs are putting a strain on governments worldwide. Nowhere in the world, however, are expenses as high as they are in the United States, where the impact extends into the medical component of workers compensation costs. Although the rate of growth has seen some stability, it still outpaces the US growth rate of inflation. The figure illustrates that per capita spending in the United States in 2010 was over USD 8,000. A key driver for higher US costs is that it spends more on hospital care and medical specialists.

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