David Rains, FSA, MAAA, Managing Director and Head of Life, Accident & Health Specialty and Ryan Keith, Assistant Vice President
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With the passing of the Patient Protection and Affordable Care Act, the environment for health insurers has drastically changed. What we do know is that these changes will have a significant and immediate impact on every organization conducting business in the health care arena. In order to assess the current situation, brokers throughout Guy Carpenter & Company, LLC reached out to our business partners in all segments of the health care industry. In total, Guy Carpenter spoke with 24 various organizations about the immediate and long term effects of health care reform.

Part I: Introduction:  With the passing of the Patient Protection and Affordable Care Act, the environment for health insurers has drastically changed. Undoubtedly, the wheels of progress move slowly and we have only begun to understand the full impact that the reforms will have on our industry. What we do know is that these changes will have a significant and immediate impact on every organization conducting business in the health care arena.

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Part II: Changes With the Biggest Impact:  In addition to the themes addressed in the introduction, several other specific aspects of health care reform were on the top of most executives’ minds. Based on the feedback received, this article identifies the following seven aspects of health care reform that our business partners identified as having the biggest impact on their organization.

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Guy Carpenter & Company, LLC provides this report for general information only. The information contained herein is based on sources we believe reliable, but we do not guarantee its accuracy, and it should be understood to be general insurance/reinsurance information only. Guy Carpenter & Company, LLC makes no representations or warranties, express or implied. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Please consult your insurance/ reinsurance advisors with respect to individual coverage issues.

Readers are cautioned not to place undue reliance on any historical, current or forward-looking statements. Guy Carpenter & Company, LLC undertakes no obligation to update or revise publicly any historical, current or forward-looking statements, whether as a result of new information, research, future events or otherwise.

Statements concerning tax, accounting, legal or regulatory matters should be understood to be general observations based solely on our experience as reinsurance brokers and risk consultants, and may not be relied upon as tax, accounting, legal or regulatory advice, which we are not authorized to provide. All such matters should be reviewed with your own qualified advisors in these areas. 

Part I: Introduction and US Property:   Further erosion of rates was evident at the July 1, 2010 reinsurance renewal. Property rates were down by as much 15 percent despite substantial catastrophe loss activity in the first half of 2010. Heavy losses from the Chilean earthquake were insufficient to turn prices outside the areas immediately affected by the earthquake, despite the announcement of large increases in estimates from the largest European reinsurers. In the energy and casualty sectors, conditions were flat or down, but the Deepwater Horizon rig disaster may exert upwards pressure as more information emerges. Excess capital remains available to absorb losses as evidenced by continuing share buy-backs and the substitution of equity capital with less expensive debt.

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Part II: Latin America and Caribbean, Retrocession: In the Latin America and Caribbean region excluding Chile, terms and conditions in the property excess of loss and pro rata lines were unchanged at the July 1 renewal.

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Part III, Marine & Energy:  At the July 1, 2010 renewal, territories and marine classes that were unaffected by losses have seen rates remain stable. We have also witnessed a slowing in the decline of rates. The Deepwater Horizon Gulf of Mexico loss did not cloud reinsurers’ judgments when quoting international placements and each account was underwritten separately based on specific account losses and exposures.

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Part IV, Casualty: At the July 1 renewals the US casualty lines continued to demonstrate a soft pricing environment with few changes seen from the prior renewals in the year. The direct market showed a general improvement in profitability as underwriting results and net investment gains increased. This occurred as premiums declined, further impacting a soft reinsurance pricing environment. A recent development is a slowing in the decline of the subject premium base for many casualty lines. It appears to be stabilizing (even increasing in some lines) as a result of the recovering economy.

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Part V, Life, Accident & Health: The passage of health reform in the United States has put medical insurers in the challenging position of trying to understand how to manage unlimited lifetime claim maximums. In the short term, annual caps on payments are still allowed, easing the transition, but this change creates increased risk for insurers as volatility is increased and rate-making is necessarily based on assumptions rather than experience. We are seeing increased demand for high attachment medical excess reinsurance with high limits - many clients are looking for unlimited cover to match their required offering. This may create an excellent opportunity for reinsurers willing to step up to the challenge. Many are offering limits from USD10 million to USD20 million attaching at excess of USD5 million. A few reinsurers have come forward with unlimited coverage. Pricing is varying widely between carriers but should begin to converge for the very high attachments.

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Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.

Chris Klein, Director of Reinsurance Markets
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Casualty

US Casualty

At the July 1 renewals the US casualty lines continued to demonstrate a soft pricing environment with few changes seen from the prior renewals in the year. The direct market showed a general improvement in profitability as underwriting results and net investment gains increased. This occurred as premiums declined, further impacting a soft reinsurance pricing environment. A recent development is a slowing in the decline of the subject premium base for many casualty lines. It appears to be stabilizing (even increasing in some lines) as a result of the recovering economy.

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David Lewin, Managing Director
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Continental Europe’s legal framework continues to change and develop. This is evident at both the “macro” and “micro” levels.

At the “macro” level, governments across Europe are increasingly looking to reduce states’ cost burdens for healthcare. This has resulted in more restrictive judgments on cases involving accidents at work. We see this currently in the changes to workers compensation legislation in Norway, as well as in the acceptance of recourse measures against the private insurance industry by state bodies, evidenced by the current successful appeal (which could nevertheless be reversed) of the Swedish National Road administration against the motor liability insurer Länsförsäkringar.

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David Lewin, Managing Director
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On January 1, 2011 the new Swiss Code of Civil Procedure (CCP) will finally come into law. For the first time in history, Switzerland will have a unified civil procedure law. This development will end a unique situation in Europe, where 26 separate cantonal codes of procedure co-exist.

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David Lewin, Managing Director
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Class Action: Overview and Possible Impact

Category: Casualty
Tagged: Casualty, class action, Continental Europe, David Lewin, legal developments, legal update, Legislation