Archive for the ‘Reins Markets’ Category



April 24th, 2014

Capital Stewardship Options

Posted at 1:00 AM ET

Here we bring together recent GC Capital Ideas stories that have presented options that good capital stewards in the reinsurance industry are currently considering for deployment of excess capital. 

Maintaining the Status Quo: One of the biggest challenges facing reinsurers is deciding how to deploy excess capital to generate a return that meets or exceeds the expectation of investors or shareholders.

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Return to Shareholders:  As a principle, excess capital should be returned to shareholders in periods of low return opportunity (particularly below cost of capital) while more capital should be retained/deployed during periods that offer higher returns. The chart here on the Global Reinsurance Composite Return of capital shows that reinsurers have been relatively disciplined over the last eight years, with carriers returning more capital when the pricing environment has softened.

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Organic Growth: With an abundance of excess capital, negligible growth in global reinsurance spend and the pricing outlook continuing to soften, one of the biggest challenges facing reinsurers is deciding how to deploy this excess capital to generate a return that meets or exceeds the expectation of investors or shareholders. Here we consider the option of organic growth.

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M&A - Grow/Diversify by Product Line: As carriers explore M&A opportunities to grow in the current environment, there is strong interest from potential buyers looking for bolt-on opportunities rather than transformational transactions. Although this demand has not to-date triggered a significant increase in M&A transactions, the ingredients for more activity are now in place.

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M&A - Grow/Diversify by Territory: With growth opportunities limited in mature markets, many insurers are looking to emerging markets for future expansion, in particular China, Southeast Asia and Central and Latin America. The chart here highlights gross written premium growth in emerging markets compared to developed markets from a 2003 base.

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M&A: Achieve Meaningful Scale in Reinsurance: In a reinsurance market with abundant excess capital and where most reinsurance programs are oversubscribed, the need for a meaningful line size or differentiated underwriting contribution has never been more relevant.

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M&A: The Evolving Legacy (Run-Off) Market: The recent completion by legacy solution specialists of a number of acquisitions in the live insurance space could be a watershed moment for the standalone run-off market. The original business concept of a run-off manager was a pure focus on legacy business - to achieve finality in legacy claims and manage the outstanding book of legacy business in the same cost efficient way that an insurer would manage a renewal book of business.

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April 17th, 2014

ERM Benchmark Review Update 2013

Posted at 1:00 AM ET

Here we bring together the GC Capital Ideas four part Enterprise Risk Management Update story for 2013:

ERM Benchmark Review, 2013 Update: Part I: In April and October 2009, Guy Carpenter published two briefings titled “Risk Profile, Appetite and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness.” This briefing is an update of those studies that summarizes the information publicly disclosed on enterprise risk management (ERM) measures.

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ERM Benchmark Review, 2013 Update: Part II: Before focusing on the results of the latest study, we would like to reaffirm the definition of risk profile, risk appetite and risk tolerance found in our previous publications.

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ERM Benchmark Review, 2013 Update: Part III: The table quantifies the proportion of companies in the sample that disclose the method as well as the specific level of various risk quantifications. Compared to our previous ERM benchmark study, a new metric referring to catastrophe risk has been added. Taking advantage of the increased level of disclosure and transparency on catastrophe risk exposure, we have extended our reports to include this in view of its importance in the economic capital approach of (re)insurers.

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ERM Benchmark Review, 2013 Update: Part IV: Capital management using risk-based capital models and capital allocation is a central component of risk management practices. We have investigated this topic as a new chapter for our 2013 ERM Benchmark update. In this context, the table shows the portion of companies that publish concrete data on their excess capital - the amount of capital retained in excess of a certain target amount. The table also shows both the portion of companies using risk-based capital models in the risk management process and the portion giving some indication of the methodology of the capital allocation process.

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April 16th, 2014

Reinsurance Renewals in 2014

Posted at 1:00 AM ET

As we complete the April 1, 2014 reinsurance renewal, we review the GC Capital Ideas renewal stories of 2014. 

January 1, 2014 Renewals Bring Downward Pressure on Pricing: Guy Carpenter reports that reinsurance rates-on-line fell at the January 1, 2014 renewal in nearly all classes and regions. According to Guy Carpenter’s 2014 global renewal report, strong balance sheets, relatively low loss experiences and an unprecedented influx of convergence capital spurred competition and innovation at renewal. These factors led in turn to surplus capacity across most business segments as competition spilled beyond property catastrophe lines.

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April Renewals Bring Price Reductions & Focus on Tailored Coverage: Guy Carpenter reports that the April 1, 2014 renewal was marked by price reductions and more tailored reinsurance coverage. Strong balance sheets, an abundance of capacity and a consolidation of buying led to lower reinsurance pricing across most territories and business segments at the renewal.

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April 3rd, 2014

ERM Benchmark Review, 2013 Update: Part IV

Posted at 1:00 AM ET

Capital Management

Capital management using risk-based capital models and capital allocation is a central component of risk management practices. We have investigated this topic as a new chapter for our 2013 ERM Benchmark update. In this context, Table 3 shows the portion of companies that publish concrete data on their excess capital - the amount of capital retained in excess of a certain target amount. Table 3 also shows both the portion of companies using risk-based capital models in the risk management process and the portion giving some indication of the methodology of the capital allocation process.

Continue reading…

April 2nd, 2014

ERM Benchmark Review, 2013 Update: Part III

Posted at 1:00 AM ET

Risk Types

Table 1 (below) quantifies the proportion of companies in the sample that disclose the method as well as the specific level of various risk quantifications. Compared to our previous ERM benchmark study, a new metric referring to catastrophe risk has been added. Taking advantage of the increased level of disclosure and transparency on catastrophe risk exposure, we have extended our reports to include this in view of its importance in the economic capital approach of (re)insurers.

Continue reading…

April 1st, 2014

ERM Benchmark Review, 2013 Update: Part II

Posted at 1:00 AM ET

2013 Update General Observations

Before focusing on the results of the latest study, we would like to reaffirm the definition of risk profile, risk appetite and risk tolerance found in our previous publications:

Continue reading…

March 31st, 2014

ERM Benchmark Review, 2013 Update: Part I

Posted at 1:00 AM ET

In April and October 2009, Guy Carpenter published two briefings titled “Risk Profile, Appetite and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness.” This briefing is an update of those studies that summarizes the information publicly disclosed on enterprise risk management (ERM) measures.

Continue reading…

March 4th, 2014

Guy Carpenter Makes Senior Promotions

Posted at 11:30 PM ET

Guy Carpenter  today announced that Massimo Reina has been promoted to the position of CEO of Continental Europe and MENA, with immediate effect. He succeeds Peter Stubbings, who has taken up the position of Chairman of the firm’s Bermuda operations.

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January 5th, 2014

January 2014 Renewal Report: Capacity: Evolution, Innovation and Opportunity

Posted at 11:45 PM ET

354_354-renewal-2The January 1, 2014 renewal saw rates on line (ROLs) fall significantly in nearly all regions and business segments as relatively low loss experiences, strong balance sheets and an influx of capital spurred competition and innovation in the reinsurance market. This culminated in a marketplace focused on meeting individual client needs as reinsurers reacted to the challenge posed by alternative markets and alternative markets, in turn, sought to deliver unique solutions. Insurers also looked to capitalize by adapting their buying strategies and prioritizing their risk transfer goals. 

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January 2nd, 2014

Emerging Markets Stories on GC Capital Ideas

Posted at 1:00 AM ET

Here we bring together recent GC Capital Ideas stories that have focused on emerging markets.

Demand for Asia Pacific Catastrophe Reinsurance at a Record High in 2013: Total Asia Pacific catastrophe limit purchased in 2013 increased for the tenth year in a row, but once again failed to keep pace with strong gross domestic product growth in the region, according to a new report released today by Guy Carpenter.

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Capital Stewardship Option: M&A - Grow/Diversify by Territory:  With growth opportunities limited in mature markets, many insurers are looking to emerging markets for future expansion, in particular China, Southeast Asia and Central and Latin America.

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Opportunities in Latin America: A Microscopic Look: While markets in some developed countries are demonstrating signs of recovery from the economic uncertainty of the last few years, and the growth in some developing markets is slowing, emerging countries remain attractive for insurance companies seeking opportunities for profitable growth. Latin America is an especially significant emerging region - it is rich in natural resources, geographically close to the United States and all of its governments are democratic. Before entering and engaging in business in this region, it is necessary for companies to be familiar with the economic environment, political situation, regulations, trends and risks that may be encountered.

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