Heavy rain has triggered severe floods in parts of central and eastern Europe over the last week, killing at least nine people, inundating homes and businesses and causing widespread damage and disruption. Parts of Poland, Hungary, the Czech Republic and Slovak Republic have been flooded after days of heavy rain burst river banks and inundated low-lying areas. The heavy rain was accompanied by strong winds, causing power outages and transportation disruption. Reports said southern Poland was worst-affected after the Vistula River burst its banks. Poland’s Prime Minister, Donald Tusk, said the damage caused by the flooding could cost more than EUR2 billion (USD2.5 billion).

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An Afriqiyah Airways plane carrying 104 passengers and crew on an international flight crashed as it attempted to land at Tripoli International Airport on May 12, killing all but one person on board. Afriqiyah Airways said Flight 8U771 was carrying 93 passengers and 11 crew. The sole survivor, a child reported to be Dutch, is being treated in a hospital. The Airbus A330-200 was flying from Johannesburg in South Africa to the Libyan capital when it crashed just short of the runway around 06:00 local time (04:00 UTC) after a nine hour flight, the airline said. Eyewitnesses said the aircraft started to break up as it came in to land in clear weather before totally disintegrating. Two flight recorders have been recovered and an investigation has been launched into the cause of the crash. Market sources quoted by Insurance Day said the aircraft had an insured value of USD123 million on a policy led by Catlin. Insurance Day added Afriqiyah Airways is thought to have a liability policy with a USD1 billion limit.

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An explosion and large fire on an oil rig in the Gulf of Mexico left 11 workers missing and 17 others injured on April 20. The blaze on the Deepwater Horizon drilling rig, which broke out around 22:00 local time (03:00 UTC on April 21), sent flames and smoke high into the sky about 40 miles off the coast of Louisiana. Seventeen workers were injured, three critically, and the 11 missing men are now feared dead. Reports said the rig, which is owned by Transocean Ltd, was under contract to the oil giant BP at a cost of USD533,000 (EUR395,000) a day and doing exploratory drilling. The rig was listing badly as it was consumed by flames and it eventually sunk on April 22, leaking oil into the Gulf of Mexico. The well is currently leaking oil at a rate of about 1,000 barrels per day. Reports said the rig was built in 2001 in South Korea at a cost of about USD350 million. Transocean said the 400-by-250-foot (120-by-80 meter) rig was located around 42 miles offshore Venice, Louisiana, on Mississippi Canyon block 252.

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Severe weather in southern regions of the United States spawned several tornadoes over the weekend, causing widespread property damage and killing at least 12 people. The storms affected the southern states of Alabama, Arkansas, Georgia, Louisiana, Mississippi and Tennessee. The dead included 10 people in rural Mississippi and 2 others in Alabama while at least 70 people were injured. A state of emergency has been declared in 17 Mississippi counties and reports said hundreds of properties have been destroyed or damaged.

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An explosion and large fire on an oil rig in the Gulf of Mexico left 11 workers missing and 17 others injured on April 20. The blaze on the Deepwater Horizon drilling rig, which broke out around 22:00 local time (03:00 UTC on April 21), sent flames and smoke high into the sky about 40 miles off the coast of Louisiana. Seventeen workers were injured, three critically, and rescuers are still searching for 11 missing people. It was not known whether the missing workers were able to make it to one of the rig’s lifeboats. Reports said the rig, which is owned by Transocean Ltd, was under contract to the oil giant BP at a cost of USD533,000 (EUR 395,000) a day and doing exploratory drilling. The rig is listing badly and threatening to topple over, the US Coast Guard said. Reports said the rig, which was built in 2001 in South Korea at a cost of about USD350 million, has a replacement value of up to USD700 million today. Transocean said the 400-by-250-foot (120-by-80 meter) rig is located approximately 42 miles offshore Venice, Louisiana, on Mississippi Canyon block 252.

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GC ForeCat is a product developed by Guy Carpenter in collaboration with WSI Corporation, the world’s leading provider of weather-driven business solutions, that provides pre-season hurricane landfall forecast rates for different regions in the United States. GC ForeCat revolutionises hurricane forecasting by estimating the rate of landfall for regions along the U.S. coastline. Four different regions (Gulf, Florida, Southeast and Northeast - see Figure 1) are derived with associated likelihood of tropical cyclones making landfall in each area. Monthly updates are anticipated up to and including May.

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A powerful earthquake hit a remote region in western China at 23:49 UTC on  April 13 (07:49 on  April 14 local time), destroying buildings, damaging infrastructure and killing at least 400 people. The earthquake, measuring 6.9 Mw, was located between China’s Qinghai Province and the Tibet Autonomous Region, some 28 miles (45 kilometers) northwest of Yushu and 235 miles (375 kilometers) south-southeast of Golmud, according to the U.S. Geological Survey (USGS). The USGS added that the quake had a shallow depth of 6.2 miles (10 kilometers) and it was the strongest earthquake to hit the region since 1976. At least 18 aftershocks have hit the area since the main earthquake, the most powerful at 5.8 Mw.

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John Major, Senior Vice President, Instrat
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Guy Carpenter’s Firm-Value Risk Modeling (FVRM) approach, described in two previous GCCapitalIdeas.com articles, takes Dynamic Financial Analysis (DFA) a step beyond existing techniques by modeling the impact of risk on the shareholder value of the (re)insurer.  This puts the two dimensions of DFA - risk and reward - on the same scale: value. The output of an FVRM analysis is the M-curve, that relates the (re)insurer’s book value (surplus) to its market (shareholder) value. When the (re)insurer is in financial distress, with insufficient surplus to cover its risks adequately, its market value reflects the possibility of imminent liquidation, and will typically be not much greater than book value. On the other hand, when the (re)insurer holds a generous capital buffer, its market value reflects a going-concern potential to generate a stream of profits and dividends, and will include some franchise value above and beyond its book value. There is a point, however, where the (re)insurer has so much capital that adding more does nothing to enhance its franchise value.

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At least 25 workers were killed in an explosion at a coal mine in Montcoal, West Virginia, on April 5. Reports said the blast occurred towards the end of the afternoon at the underground mine run by Performance Coal Company, a subsidiary of Massey Energy. The explosion at the Upper Big Branch Mine was the deadliest mining disaster in the United States since 1984, according to reports. In addition to the 25 fatalities, four miners are still missing and two others were hospitalised. A massive rescue operation was launched after the blast as emergency services rushed to the scene. However, the operation was suspended later because rising methane gas levels heightened the risk of another blast. The operation has since resumed, with rescuers drilling into the mine to release poisonous gases and ventilate the mine chamber.

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A magnitude 7.2 earthquake struck the Mexican peninsula of Baja California at 22:40:41 UTC on April 4 (15:40:41 local time). According to the US Geological Survey (USGS), the earthquake was centered approximately 104 miles (167 kilometers) east-southeast of Tijuana and 38 miles (60 kilometers) south-southeast of the city of Mexicali and occurred at a shallow depth of 6.2 miles (10 kilometers). Reports say that the quake is considered to be one of the strongest to have hit the region in years.

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