The previous sections suggested how “dark matter” can be lurking on an insurer’s balance sheets in the form of a casualty catastrophe or an emerging and not as yet fully understood risk such as cyber. While there have been significant advances in quantifying the uncertainty pertaining to these risks, it is worth considering how they may manifest themselves in the future and what can be done about them now to protect from the “dark matter” downside.
Posts Tagged ‘Catastrophe’
Casualty catastrophe occurrences have become increasingly common over the past decade. The recent 2008 financial catastrophe is the easiest to cite, due to its sheer size and the fact that it continues to unfold even today. But, there have been many others. The collapse of the “dotcom economy” led to scandals around initial public offering laddering and equity analyst conflicts of interest. Accounting firms were not alone in suffering financial loss related to such debacles as Enron, WorldCom, Tyco and Adelphia. While insured losses did not reach those of property catastrophes, economic damages were profound. Enron’s loss of USD66 billion in market capitalization alone - not including the economic damage caused to other companies - was more than double that of Hurricane Ike (approximately USD30 billion). The financial catastrophe is estimated to have caused economic damage of above USD1 trillion, with more likely to follow. When considered in the context of the Deepwater Horizon industrial accident, the casualty catastrophe that unraveled from the largest US offshore energy event over the past 40 years was by no means remote. Beyond the initial property loss of the actual drilling rig, liability risk in paying claims continues to extend and ripple throughout the supply chain involved as well as the environmental impact to numerous coastal and commercial businesses. Asbestos litigation, perhaps the longest casualty catastrophe on record, has paid out over USD70 billion and by some accounts may be entering its third wave. Therefore, asbestos is an emerging crystalizing risk that needs to be continuously monitored, measured and modeled for those who continue to be exposed to it.
Casualty (or liability based) catastrophes have become increasingly frequent and severe over the past decade, exposing (re)insurers to much more risk than they may have realized and reserved for. One root cause can trigger a chain reaction that can bleed balance sheets and even imperil solvency. Until recently, casualty carriers had little choice but to accept this risk as losses emerged.
Cyber-attacks and Terrorism Revealed as Top Emerging Risks for 2015, According to Annual Guy Carpenter Survey
Cyber-attacks and terrorism are ranked among the top emerging risks concerning the (re)insurance industry in the year ahead, according to a survey released today by Guy Carpenter. According to the findings, new products, expansion into new geographic markets and access to new distribution channels will be the primary drivers of profitable growth in 2015.
Guy Carpenter today published a new report highlighting the continued increase in 2014 of total Asia Pacific catastrophe limit purchased. However, a confluence of factors, including the weakening of some key zone currencies has meant that reinsurance premium spend in the region has declined significantly.
Mutual insurance companies of all sizes currently face challenging market conditions where success requires not only focused distribution and operational excellence, but also access to increasingly sophisticated analytics services and products. How these firms use their resources and advanced technology to respond to these issues will separate market outperformers from underperformers.
Guy Carpenter & Company released Part II of the two-part Ten-Year Retrospective of the 2004 and 2005 Atlantic Hurricane Seasons. Part II focuses on the 2005 hurricane season and the cumulative impacts of both the 2004 and 2005 seasons on the (re)insurance industry as well as the changes made in response to these two landmark seasons from both catastrophe model vendors and rating agencies.
Hurricane Gonzalo approached Bermuda late Friday as a Category 3 hurricane on the Saffir-Simpson scale, before making direct landfall as a strong Category 2. Maximum sustained winds at landfall were 110 mph according to the U.S. National Hurricane Center (NHC). The hurricane caused widespread structural damage and flooding, with downed trees and power lines. However, damage was less severe than expected, with no reported fatalities or major injuries in Bermuda. After clearing Bermuda, Gonzalo made a close approach to Atlantic Canada, bringing very large waves and storm force winds, but with minimal impacts. Gonzalo is now approaching the northern United Kingdom as a powerful post tropical cyclone, where it is expected to render very heavy rain and gusty winds exceeding 60 mph (100 kilometers per hour) over the next 24 hours.