Scott Lohman, Managing Director, Financial Intelligence Team
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Standard & Poor’s (S&P) is now performing additional analysis on loss reserves using a product called “Rescue,” which is developed by an outside vendor. Rescue obtains triangles from the company being examined instead of using Schedule P data. This approach offers data for more years for long-tail lines of business.

The in-depth analysis that S&P conducts with Rescue takes longer than the traditional approach (i.e., using Schedule P data), so it won’t use this approach every year. Rather, S&P will adjust total adjusted capital (TAC) to account for any difference between carried reserves and the company estimate.

Henry Keeling, President and CEO of Guy Carpenter’s International Operations
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The emerging consensus seems to be that Solvency II will cost a lot and make the (re)insurance business more complicated. If conventional approaches to regulatory compliance are applied, this is likely to be true. After all, compliance tends to be seen as just another expense. This does not have to be the case for Solvency II, however. Choosing the right approach could free capital for investment elsewhere, ultimately resulting in a competitive advantage. “Competitive compliance,” consequently, can create an upside where most would perceive only a cost to be managed.

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Donald Mango, Chief Actuary, and Susan Witcraft, Managing Director
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In choosing a capital allocation method, firms must balance the sophistication of the method with calculation time and resource commitment. One approach, co-xTVaR, strikes a balance between theoretical soundness and efficiency. In a capital-constrained environment, using co-xTVaR to allocate the cost of capital can provide a clear competitive advantage.

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Frank Achtert, Managing Director, and Eddy Vanbeneden, Managing Director
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Lately, discussion about the use of capital models in Europe has been driven by Solvency II. A major regulation is on the horizon and is progressively introducing considerable change in the how the insurance industry will manage risk. Important investment has already begun and will continue, as companies have to integrate this new regulatory regime in their management approaches. With Solvency II compliance driving the adoption of economic capital models, though, many (re)insurers could miss an opportunity to secure a competitive advantage. Instead of using compliance as the impetus for capital modeling, strategy should come first.

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Susan Witcraft, Managing Director, Financial Intelligence Team
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The financial catastrophe may be almost a year behind us, but we’re still dealing with the effects. Capital remains constrained, and it will be a while before balance sheets return to early 2008 levels. (Re)insurers have had to learn to do more with less — deploying limited capital in a way that maximizes earnings and reaches challenging return on equity (ROE) targets. With MetaRisk®, Guy Carpenter’s economic capital model, you can delve into the scenarios that could mean the difference between capital productivity and missed opportunity.

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Reinsurer Diversification: The Guy Carpenter Model: Instrat®, Guy Carpenter’s quantitative services unit, has developed a reinsurer credit model.

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Reinsurer Diversification: Roots and Benefits: Cedents are becoming increasingly concerned about the security of their reinsurers, particularly in light of the global financial catastrophe.

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Chart: GC Reinsurance Composite: Earning Sources at Nine Months: With the majority of Guy Carpenter Reinsurance Composite members’ third quarter results now reported, some clear trends have emerged.

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Get Credit for Your ECM with S&P: S&P has released a new framework for determining whether a carrier’s own ECM can receive partial credit in the S&P capital adequacy evaluation.

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Book Value Update, Nov 17, 2008: As publicly traded (re)insurers continue to report their third quarter results, the impact of the ongoing financial catastrophe is becoming more noticeable.

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Most Popular Keyword: asset impairment

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2008 Reinsurance Readers’ Awards: Your vote counts. Click here to participate in the 2008 Reinsurance magazine Readers’ Awards survey.

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Book Value Update: Earnings Announcement Impact: the erosion of balance sheets continues, as the effects of a global financial catastrophe spread across financial markets.

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Get Credit for Your ECM with S&P: Standard & Poor’s (S&P) has released a new framework for determining whether a carrier’s own ECM can receive partial credit in the S&P capital adequacy evaluation.

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Financial Catastrophes: No Storm, Plenty of Damage: throughout 2008, every major city in the world felt the reverberations of a “financial catastrophe,” triggered by the collapse of the subprime mortgage market.

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Uncover and Mitigate Product Liability Risk: Avert a Casuaty Catastrophe: Casualty Cat, a new model developed jointly by Guy Carpenter and Arium, Ltd., seeks to identify the hidden product liability accumulations in a carrier’s portfolio and delivers the insights needed for informed action.

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Defining the Value of Risk Management: the fundamental activity of risk-bearers has not been measurable, leaving a cloud of ambiguity in the middle of every carrier’s operation.

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Most Popular Keyword: asset impairment

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Alternatives to Alternative Capital: (re)insurers have come to expect that alternative sources of capital will always be available, but the well may be at risk of running dry.

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Susan Witcraft, Managing Director and Head of the Financial and Capital Advisory
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S&P has released a new framework for determining whether a carrier’s own ECM can receive partial credit in the S&P capital adequacy evaluation. Companies with a Strong or Excellent ERM capability rating, a sufficiently rigorous model, and a substantial reliance on the results in making major decisions will be most likely to receive partial credit. The use of third-party modeling solutions—such as Guy Carpenter’s MetaRisk® platform—may be helpful not only in the rating process but also in overall capital management diligence.

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MetaRisk®, the (re)insurance industry’s original decision support tool, has helped insurance companies make analytically informed decisions about their risk and capital management for nearly two decades. MetaRisk has been expanded to give you a full economic capital model with complete transparency. It can be used to data-mine the causes of risk and the financial consequences.  You can evaluate alternative risk and capital management opportunities and anticipate their impacts on your company’s balance sheet … before you have to make a commitment.

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