Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist, today announced that Stephen C. Mathews has been appointed Managing Director of GC Securities*, effective immediately. Mr. Mathews is based in New York and reports to Chris Ezbiansky, Head of M&A Advisory - Americas.
Here we rank the most viewed GC Capital Ideas Chart Room entries of the last half year.
1. Chart: Guy Carpenter Global Rate on Line Index, January 2013: The Guy Carpenter Global Property Catastrophe Reinsurance Rate on Line (ROL) index fell marginally at the January 1, 2013, renewal. This is the seventh consecutive annual renewal in which changes to the index have equaled 10 percent or less, indicating a global market with capacity appropriate to meet demand.
2. Chart: Guy Carpenter Regional Rate on Line Index, January 2013: There was variation regionally in the Guy Carpenter Regional Property Catastrophe Reinsurance Rate on Line (ROL) index. U.S. property catastrophe pricing was most affected by the landfall of Superstorm Sandy while other regions were flat to down.
3. Chart: Global Significant Insured Losses, 2011 to Q4 2012: 2012 insured losses in aggregate were “normal.”
4. Chart: U.S. and Bermuda Property-Casualty M&A Activity, 2004 to 2012: For the property and casualty sector, market consolidation was at the periphery.
5. Chart: Long-Term Evolution of Shareholders’ Funds, 1998 to Q3 2012: Dedicated reinsurance capital was at a record high immediately prior to Superstorm Sandy.
Click here to register to receive e-mail updates >>
* Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of an offer to buy any security, financial instrument, reinsurance or insurance product. The securities mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act. **GC Analytics is a registered mark with the U.S. Patent and Trademark Office.
For the property and casualty sector, market consolidation was at the periphery.
Guy Carpenter announced that Andrew Beecroft and Paul Rayner have been appointed as Managing Directors of GC Securities,* effective January 7, 2013.
Guy Carpenter’s 2013 Reinsurance Renewal Report Executive Summary was discussed at a press briefing held in London on January 3. It reports that the reinsurance sector enters 2013 equipped with ample dedicated capital and stable pricing. Guy Carpenter found that the January 1, 2013, renewals took place against a stable backdrop, with only loss-affected lines and select regions experiencing price volatility.
Guy Carpenter reports that the reinsurance sector enters 2013 equipped with ample dedicated capital and stable pricing. In its 2013 global renewal report, The Route to Profitable Growth, Guy Carpenter finds that the January 1, 2013 renewals took place against a stable backdrop, with only loss-affected lines and select regions experiencing price volatility. The market was supported by a combination of factors including lower than normal catastrophe losses during the first nine months of 2012, new reinsurance capacity and record-high levels of capital.
As the insurance industry readies itself for January 1 renewals, expansion into new geographic markets and new product development will be the primary drivers of profitable growth, according to a new survey released today by Guy Carpenter.
Here we review GC Capital Ideas’ recent series on alternative risk transfer.
Alternative Risk Transfer: Part I, Adverse Development Cover, Aggregate Stop Loss: Alternative risk solutions are used to address the following client motivations: rating agency issues, adverse development, earnings stability, reserve and premium leverage issues, reinsurance recoverables, terrorism risk, capital optimization constraints, mergers and acquisitions, discontinued lines of business, provide coverage for gaps in traditional placements and optimizing costs. The structured risk team designs customized solutions to achieve a particular client’s goals. An optimal reinsurance structure is determined by capacity needs, risk tolerances, capital management, cost of risk and degree of confidence in results. A cedent will need to balance the cost of transferring sources of risk with not only its own capital management strategies but also capital requirements imposed by rating agencies.
Alternative Risk Transfer: Part II, BCAR Impact, Quota Share and Working Layer Excess of Loss Covers: Purchasing an aggregate stop loss provides a positive impact to the BCAR score by decreasing the capital charge. In year one, the benefit of the purchase is applied to the premium risk charge for the current accident year with benefit to the reserve risk charge in future years. In the first year, the accident year stop loss may reduce the premium risk charge significantly. The biggest reduction in the premium risk charge will occur when the stop loss provides protection between A.M. Best’s estimate of the expected loss ratio and 35 percent to 45 percent above that estimate. The decrease in the capital factor is equal to the limit purchased net of the AP that must be paid in the event of a loss. Surplus is reduced by the after-tax margin paid. For the second year, the reduction in capital charge is applied against the loss reserves. This reduces the benefit in the second year from that achieved in the first year, as the reserves are net of loss payments made in year one.
M&A Drivers Going Forward
Guy Carpenter sees several potential merger and acquisitions (M&A) drivers in 2012 and beyond:
Property & casualty (P&C) merger and acquisition (M&A) activity in the United States and Bermuda in 2011, as measured by the number of transactions, was at a level below the previous year’s after being stifled by volatility in the financial markets and a difficult operating environment. In dollar terms, M&A activity for P&C risk-bearing entities in 2011 was at a higher level than that seen in the past two years (see Figure 1 below). The last six weeks of 2011 saw two of the largest deals, totaling more than USD6.3 billion combined, or almost 50 percent of the full year’s deal activity. The limited activity was in spite of attractive insurance sector valuations by absolute and relative standards, with the market value of many companies closer to estimated intrinsic value than any time in the past 20 years and the fact that potential acquirers had large cash balances. Somewhat tempering activity was the fact that many carriers turned to share buybacks as an effective use of cash to manage capital, as opposed to going on an acquisition spree.
