Heavy rainfall across south eastern parts of the United States over the first half of this week resulted in several fatalities and extensive damage to property and infrastructure. Georgia has been the worst affected state. According to the State Insurance Commissioner, the flooding in Georgia has claimed nine lives and caused around USD250 million in damage to property and tens of millions of dollars in further damage to infrastructure.

It was reported that the governor of Georgia had declared a state of emergency in 17 of the worst-affected counties and had requested President Barack Obama to declare a state of emergency for Georgia as a whole.

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Heavy rainfall across the Central European region from June 22, 2009 to June 25, 2009 has caused severe flooding in several countries, including the Czech Republic, Austria, Poland, and Germany. The heavy rainfall is also reported to have prompted flood alerts for the Danube in the Slovak Republic and Hungary and has caused some flooding in Romania.

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Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist, today announced that its Instrat® quantitative and risk modeling group has introduced a new Pan Central and Eastern European (CEE) flood model. The flood model is the first developed by Guy Carpenter to cover multiple countries, effectively addressing the issue of between-country correlation of flooding events.

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Stephanie Vogg, Vice President
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2008 Reinsurance Market Position

For several years, catastrophe modeling has provided the basis for decisions on levels of reinsurance retentions and limits. All well-known modeling firms have products for modeling German storms. Some reinsurers also have developed in-house tools to estimate catastrophe exposure. The availability of new flood models and the density of extended elemental perils coverage in the primary insurance market have increased. Consequently, cedents have had a closer look at their catastrophe exposure. This, in turn, has lead to the purchase of some additional capacity.

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Walter Bernaerts, Senior Vice President
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2008 Reinsurance Market Position

Prices declined in Belgium during the 2008 renewal period. The downward trend was caused mainly by increased competition, which was driven by a greater need for diversification and another claims-free year. Most companies are buying cover in excess of the 100-year windstorm event. However, the actual amounts have varied depending on the catastrophe model used. A trend continues involving the management of additional volatility coming from new flood and earthquake exposures for homeowners policies through aggregate protections.

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Hamish Dowlen, Senior Vice President
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2008 Reinsurance Market Position

The 2006 “weight of snow” losses had an effect on the 2006/2007 renewal season, as many reinsurers had not previously considered this peril a serious risk for catastrophe programs. Due to the difficulty in ascertaining the duration of a weight of snow event, a number of programs abandoned an hours clause for this peril and introduced an annual aggregate feature instead. Loss-affected layers experienced modest price increases in most cases, but otherwise prices were stable or slightly reduced for the majority of companies.

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2008 Reinsurance Market Position

The range of business available to reinsurers is very limited, as catastrophic and political risks are handled by the Consorcio de Compensacion de Seguros and not the private insurance market. Nevertheless there are some residual exposures (i.e. deductibles and event triggers) which may need to be covered in the open market.

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Andrea Folegani, Senior Vice President
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2008 Reinsurance Market Position

Reinsurance rates have declined by 10 percent through 2008, with capacity mostly available from European reinsurers. This continues the rate-drop trend to its fourth consecutive year. The London market tended to be less competitive, as top layer rates on line (ROL) slipped around the 1 percent mark. Bermudian capacity showed more interest for Italian catastrophe programs, particularly for the purpose of diversification.

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2008 Reinsurance Market

Fire, Engineering and Workmen’s Compensation classes have been de-tariffed from January 2007. The main impact of this change has been a reduction in the premiums for these classes in the early stages of between 30 percent and 50 percent. The Regulator had restricted the reduction to a maximum of 51.3 percent from the basic rates of the old Tariff. From November 2007 the domestic companies were left free to determine their premium levels. Prices have come down for all lines of business, but the impact has been most keenly felt in the heavy industrial and large commercial sectors. The scheduled de-tariffication of terms and conditions which was proposed to take effect from April 1, 2008 has been put on hold by the Regulator.

De-tariffing has halted the trend of cross-subsidization of classes such as marine and health. The premiums in these classes have stabilized, and there have been no further reductions.

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Hamish Dowlen, Senior Vice President
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2008 Reinsurance Market Position

Little catastrophe reinsurance is purchased locally in Slovakia, with non-life premium in 2007 at USD1.3 billion. Larger international programs bought outside Slovakia protect the top seven non-life companies. But, reinsurers pricing exposures within group programs tend to view catastrophe business from Slovakia favorably. While reinsurers are aware of the heavy flood exposure, past losses have been modest and sometimes surprisingly low. This has kept pricing competitive and capacity plentiful.

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