In honor of her being awarded Insurance Woman of the Year by the Association of Professional Insurance Women, we highlight Joan Lamm-Tennant’s recent article that appeared on GC Capital Ideas. Joan is Guy Carpenter’s Chief Economist and Risk Strategist.
Here we review recent stories on GC Capital Ideas that covered microinsurance.
While reinsurance premiums remained broadly stable in the established markets of the United States, Canada and Western Europe between 2007 and 2011, strong growth has been recorded in emerging market regions, particularly China, India and other countries in South and East Asia.
Flood risk is poorly modeled at a global level, particularly in developing countries where flooding is a regular occurrence.
Here we present recent GC Capital Ideas stories focusing on profitable growth.
Here we bring together recent GC Capital Ideas’ posts that have focused on the BRIC (Brazil, Russia, India and China) countries.
Increased Flood Loss Potential: Making use of all available tools and practicing comprehensive exposure management will both strengthen (re)insurers’ ERM practices and allow them to make informed risk management and reinsurance decisions as they enter new markets. Certainly, flood risk is prevalent and increasing in almost every developing economy.
Lloyd’s: What Will Success Look Like? If Lloyd’s is successful in achieving the growth and diversification outlined in its near-term and long-term strategic plans, it can expect to capitalize on business opportunities in emerging market economies such as the BRIC countries (Brazil, Russia, India and China). Growth, however, will not necessarily be limited to these markets. Other countries in Southeast Asia, Eastern Europe and Latin America are experiencing strong growth and increasing insurance penetration, and these territories also present attractive opportunities for Lloyd’s.
Growth Potential in Developing Markets: Positive premium growth trends in developing markets are expected to be sustained over the next decade. During this time, emerging markets are expected to drive global economic growth, and foreign direct investment in these emerging regions is likely to increase. In Brazil alone, investment in infrastructure is expected to amount to USD550 billion over the next few years as the country prepares to host the soccer World Cup in 2014 and the summer Olympics in 2016. China and India too are expected to continue to see robust growth in the next ten years.
State of the Reinsurance Market, Part II: Inflation/Deflation Expectations, Investment Returns: Expansionary monetary policy has fueled concerns that inflation could increase in the medium term, but the picture is less clear in the near term. While consumer price indices in Brazil, Russia, India and China (BRIC), the United States and the rest of the G7 currently exhibit positive trends, consensus forecasts show borderline disinflationary trends in the nearer term in the United States and many developed markets.
Joan Lamm-Tennant, PhD, Chief Economist and Risk Strategist
Contact
The macroeconomic environment continues to be top-of-mind among insurance leaders. With growth in global real gross domestic product (GDP) slowing from 4.1 percent in 2010 to 3 percent in 2011, insurance leaders continue to experience significant headwinds challenging profitable growth. As reported by Swiss Re, insurance overall direct premiums declined 0.8 percent in real terms in 2011. Nevertheless, pockets of opportunities do exist and will continue in the near term. Stabilizing social/political conditions, investments in infrastructure and demographic progression continue to fuel strong positive GDP growth and increasing insurance penetration in emerging economies. In these economies, overall direct premiums increased 1.3 percent in real terms in 2011, with non-life premiums increasing 9.1 percent.
Here we gather recent GC Capital Ideas posts that focus on flood risk and flood events in the Asia Pacific region.
Floods in Eastern Australia: Ex-tropical cyclone Oswald tracked over parts of Queensland and New South Wales in eastern Australia between January 23 and January 30, resulting in widespread damage from flooding, severe storms and tornadoes.
Increased Flood Loss Potential: Making use of all available tools and practicing comprehensive exposure management will both strengthen (re)insurers’ ERM practices and allow them to make informed risk management and reinsurance decisions as they enter new markets. Certainly, flood risk is prevalent and increasing in almost every developing economy.
Flood Risks in Emerging Markets: Despite such important model limitations for earthquakes, the lack of modeling solutions for flood risks poses an even greater threat to (re)insurers. As illustrated by Figure 7 below, flood risk is poorly modeled at a global level by the three main modeling companies, particularly in developing countries where flooding is a regular occurrence.
Guy Carpenter Develops Database of Industrial Estates in China, Taiwan, Thailand and Indonesia: In 2011, Thailand experienced its worst flooding in years, which severely damaged and disrupted manufacturing operations in seven large industrial parks. Due in large part to the significant concentration of insured values in these parks, total insured loss from the 2011 flood is estimated to be in the range of USD15 to USD20 billion.
Guy Carpenter Asia Pacific Catastrophe Report 2012; Executive Summary: At the time we were publishing our 2011 Asia Pacific Catastrophe report, there was a growing realization that losses from the Thai flooding ongoing at the time were going to be significant. The Thai flood losses came at the end of a run of losses in the Asia Pacific region that were large, unprecedented in recent times and possibly unexpected by many market participants.
Thailand Flood 2011: Executive Summary: In 2011, Thailand experienced its worst flooding in years, leaving more than 800 people dead and causing severe damage across northern and central regions of the country. The floods, lasting a few months, severely damaged and disrupted manufacturing operations in Thailand. Flooding also forced seven huge industrial estates in central regions to close, causing damage to the industrial sector in the billions of U.S. dollars.
GC Capital Ideas has published several stories recently on emerging markets and how pursuit of them may contribute to profitable growth. We highlight several of the articles here.
How Guy Carpenter Can Help: Catastrophe Risks in Developing Economies: Guy Carpenter is uniquely positioned to help clients successfully grow their business in emerging markets. Our GC Global Analytics and Advisory team offers services and solutions that include industry-leading risk analytics, strategic and technical advice and capital advisory.
Increased Flood Loss Potential: Making use of all available tools and practicing comprehensive exposure management will both strengthen (re)insurers’ ERM practices and allow them to make informed risk management and reinsurance decisions as they enter new markets. Certainly, flood risk is prevalent and increasing in almost every developing economy. Recent studies by Swiss Re and the Organisation of Economic Co-operation and Development suggest flood loss potential will grow as emerging economies continue to prosper.
Flood Risks in Emerging Markets: Despite such important model limitations for earthquakes, the lack of modeling solutions for flood risks poses an even greater threat to (re)insurers. As illustrated by Figure 7 below, flood risk is poorly modeled at a global level by the three main modeling companies, particularly in developing countries where flooding is a regular occurrence.
Catastrophe Models: Implications of Emerging Market Growth on the (Re)insurance Sector: Natural disaster risk assessment relies on probabilistic catastrophe models and historical data. The three main catastrophe modeling companies, AIR Worldwide, EQECAT and Risk Management Solutions, have therefore traditionally created modeling solutions for perils and territories considered to be peak risks. Although each modeling company has in recent years launched products for countries outside the more established markets of the United States and Western Europe, several gaps in coverage remain, particularly in emerging markets.
Implications of Emerging Market Growth: ERM: Although improvements in ERM practices meant (re)insurers were better prepared for the major catastrophes of 2010 and 2011 than those in 2005, the global nature of these losses has prompted some companies to review their perception of risk. This international loss trend, along with insurance growth in emerging market regions, is driving the need for better and more comprehensive tools for modeling risk.
Click here to read additional stories about emerging markets >>
David Flandro, Global Head of Business Intelligence, Julian Alovisi, Assistant Vice President and Lucy Dalimonte, Senior Vice President
Contact
Guy Carpenter is uniquely positioned to help clients successfully grow their business in emerging markets. Our GC Global Analytics and Advisory team offers services and solutions that include industry-leading risk analytics, strategic and technical advice and capital advisory. We employ over 300 modeling, actuarial and advisory professionals through our GC Analytics®**, Global Advisory and GC Securities* teams who closely collaborate with Guy Carpenter’s global broking force to deliver the best insights and growth opportunities to our clients. We encourage you to contact your Guy Carpenter representative to review and discuss your modeling, advisory and capital needs in more detail. Among the specific services and tools we utilize and offer are proprietary modeling, the i-aXs® data management platform, MetaRisk®, portfolio management, predictive analytics, advisory services and actuarial expertise.
