Posts Tagged ‘Gary Venter’



April 18th, 2009

Manage the Cycle: Series Index

Posted at 1:00 AM ET

What Cycle? >>
(Monday, April 6, 2009)

Behavior Drivers >>
(Tuesday, April 7, 2009)

A History Lesson >>
(Wedensday, April 8, 2009)

Different This Time >>
(Thursday, April 9, 2009)

Protect Portfolio, Profitability >>
(Monday, April 13, 2009)

Step Out of Cyclical Thinking >>
(Tuesday, April 14, 2009)

April 14th, 2009

Manage the Cycle, Part VI: Step Out of Cyclical Thinking

Posted at 12:30 AM ET

venter_gary_thumbGary Venter, Adjunct Professor, Statistics, Columbia University
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The cycle is a myth, albeit a popular one. The recognition of patterns leads many to believe that the market is due for an event after a certain period of time has passed. The reality, though, is that there is no substitute for disciplined risk and capital management, regardless of when the last disaster occurred. Instead of thinking about cycles, think about risk. Think about capital. Continue reading…

April 13th, 2009

Manage the Cycle, Part V: Protect Portfolio, Profitability

Posted at 12:30 AM ET

venter_gary_thumbGary Venter, Adjunct Professor, Statistics, Columbia University
Contact

Profit pressure is the norm for the insurance industry. For short periods, market conditions may favor the risk-taker, but they are rare. Quickly, this mature, competitive industry returns to tighter margins and a battle for market share. Thus, managing to survive the leaner years until the market turns for a moment does not lead to long-term success. Carriers should optimize for tough markets … and be ready for the occasional favorable swing.

Continue reading…

April 9th, 2009

Manage the Cycle, Part IV: Different This Time

Posted at 1:00 AM ET

venter_gary_thumbGary Venter, Adjunct Professor, Statistics, Columbia University
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The reinsurance market is in an unusual state. The cost of capital increased last year, largely because of discord in capital markets. After five years of solid investment gains, the asset side of insurer and reinsurer balance sheets was hit by credit market calamity that bled into equity markets, as well. A busy catastrophe year, headlining Hurricanes Gustav and Ike in the Gulf of Mexico, caused severe damage. Together, however, these factors were insufficient to force a drastic change in the market. Reinsurance rates rose in pockets, but there was not a consistent universal outcome.

Quite frankly, it was different this time.

Continue reading…

April 8th, 2009

Manage the Cycle, Part III: A History Lesson

Posted at 1:00 AM ET

venter_gary_thumbGary Venter, Adjunct Professor, Statistics, Columbia University
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Like reinsurance rates and average elapsed times between catastrophes, the insurance and reinsurance industry’s average profitability shows false signs of cyclicality. The temporal distances between peaks (and valleys) are fairly regular. It’s easy to see the pattern and expect recovery or prepare for a drop. If this were true, though, action would be of little value. A cycle of generally low profitability recurring on a 10-year basis, for example, would imply that carriers could do little but brace themselves for an imminent drop — and later wait for the rising tide of a general market recovery. Of course, this is not how insurers and reinsurers operate.

Continue reading…

April 7th, 2009

Manage the Cycle, Part II: Behavior Drivers

Posted at 12:30 AM ET

venter_gary_thumbGary Venter, Adjunct Professor, Statistics, Columbia University
Contact

What most people in the insurance and reinsurance business call the “cycle” is really only the space between market-changing catastrophe events. Disaster strikes, and capital evaporates. Then, time passes, and carriers recapitalize. Reinsurance rates follow capitalization, typically spiking post-event and dropping during quieter periods. The spaces “in between” are not always the same. Several factors can accelerate or impede the return to stability, with the three major drivers being capital levels, information lags between an event and industry (and regulator) reaction, and macroeconomic factors.

Continue reading…

April 6th, 2009

Manage the Cycle, Part I: What Cycle?

Posted at 1:00 AM ET

venter_gary_thumbGary Venter, Adjunct Professor, Statistics, Columbia University
Contact

The insurance and reinsurance industry often talks about cycles. Although not as regular as the term “cycle” might imply, there are indeed systematic fluctuations of insurer and reinsurer underwriting results. Periods during which reinsurer capital positions are strong favor cedents, although they too might be hurting from their own market problems at such times. Then, a market-changing event occurs, and the market for reinsurance cover tightens. The cost to transfer risk climbs, as balance sheets are depleted, coverage becomes harder to find, and competition becomes less intense. Over time, of course, carriers replenish their coffers, and reinsurance rates come down again.

Continue reading…

March 25th, 2009

Guy Carpenter Western Region Seminar a Resounding Success

Posted at 11:00 AM ET

Guy Carpenter hosted (re)insurance industry executives from the western region of the United States on March 4 for a two-day event to discuss the challenges of managing risk and capital in a precarious economic climate. The event, “Shelter from the Storm: Managing Risk and Capital in Rough Seas,” included presentations by some of Guy Carpenter’s leading thinkers on issues from the cost and availability of capital to the effectiveness of models and the advantages of implementing an Enterprise Risk Management (ERM) framework. Ultimately, all discussions pointed back to the one crucial issue that cedents and markets will face in 2009: how to protect their balance sheets from the dual risks of financial and insured losses.

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March 20th, 2009

Capital Management: Concluding Thoughts

Posted at 1:00 AM ET

Gary Venter, Managing Director, Instrat®
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Balance is among the fundamental ingredients of financial strength. Outside capital, retained earnings, and reinsurance all contribute to a firm’s ability to absorb losses, each in a unique way. At times, these sources may be interchangeable - market conditions may make reinsurance more attractive than raising equity capital, for example. But, no single source universally excludes - or is necessarily preferable to - the others. Success comes from finding the right combination for a particular firm given prevailing market conditions. Some answers are better than others, and “optimal” changes almost constantly.

Continue reading…