Stefan Schneider, Assistant Vice President
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2008 Reinsurance Market Position

All major catastrophe model vendors are active in the Nordic region and have models for windstorm. In 2008 RMS and EQECAT released .new model versions. A significant change is that forestry exposure now is included in the models, which in the light of the Erwin loss in 2005 is considered to contribute to the PML for forestry exposed portfolios. Furthermore, EQECAT released a model for windstorm exposure in Finland which is the first available model for this country. Due to the coming Solvency II requirements the Nordic cedents tend to buy coverage up to a 200 years return period.

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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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Berry Verkaar, Senior Vice President
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2008 Reinsurance Market Position

Continued overcapacity in the market for Dutch catastrophe business, with an increased interest from European and (new) Bermuda players is evident from the 2008 Dutch renewal season. Interest from the London market appears to have declined, as players in this region seem either unable or unwilling to match the prices currently charged for Dutch catastrophe business. Sustained pressure on price has led to a further 5 percent to 10 percent reduction (on average) for property-catastrophe programs.

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Gary Venter, Managing Director, Instrat®
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Property catastrophes make the news. Tangible and visual, the carnage can be conveyed with ease, and all can grasp the direct implications immediately. Yet for (re)insurers, there’s another type of catastrophe that could be far more destructive to balance sheets. This threat, which can remain hidden in a portfolio for decades, can arise with little warning and have profound consequences.

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Reinsurer Diversification: The Guy Carpenter Model: Instrat®, Guy Carpenter’s quantitative services unit, has developed a reinsurer credit model.

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Reinsurer Diversification: Roots and Benefits: Cedents are becoming increasingly concerned about the security of their reinsurers, particularly in light of the global financial catastrophe.

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Chart: GC Reinsurance Composite: Earning Sources at Nine Months: With the majority of Guy Carpenter Reinsurance Composite members’ third quarter results now reported, some clear trends have emerged.

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Get Credit for Your ECM with S&P: S&P has released a new framework for determining whether a carrier’s own ECM can receive partial credit in the S&P capital adequacy evaluation.

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Book Value Update, Nov 17, 2008: As publicly traded (re)insurers continue to report their third quarter results, the impact of the ongoing financial catastrophe is becoming more noticeable.

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2008 Reinsurance Readers’ Awards: Your vote counts. Click here to participate in the 2008 Reinsurance magazine Readers’ Awards survey.

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Christopher Klein, Global Head of Business Intelligence
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Instrat®, Guy Carpenter’s quantitative services unit, has developed a reinsurer credit model. It allows an analyst to input a mixture of reinsurers and measure the impact of the diversification effect. The model allows for the specification of correlation levels for reinsurer defaults. It also allows for the chance of partial recoveries.

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Casualty risk is rarely linear. A single event could affect many insureds across several lines of business, triggering disproportionate payouts, depleting balance sheets, and possibly threatening solvency. While carriers have been aware of the domino effect that could follow a casualty event, a realistic approach to risk mitigation has been elusive. Sufficient data and modeling capabilities historically have been in short supply. Fortunately, there is a new way to manage this threat. The Casualty Cat Model, developed jointly by Guy Carpenter and Arium, Ltd., makes it possible to track exposures throughout your portfolio and develop a plan for protecting your capital.

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Susan Witcraft, Managing Director and Head of the Financial and Capital Advisory
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S&P has released a new framework for determining whether a carrier’s own ECM can receive partial credit in the S&P capital adequacy evaluation. Companies with a Strong or Excellent ERM capability rating, a sufficiently rigorous model, and a substantial reliance on the results in making major decisions will be most likely to receive partial credit. The use of third-party modeling solutions—such as Guy Carpenter’s MetaRisk® platform—may be helpful not only in the rating process but also in overall capital management diligence.

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Rebecca Cheetham, Managing Director
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Flood is among Europe’s primary natural catastrophe risks, but solutions have been in short supply. Most models have not been able to address the complexity of this peril, rendering targeted risk management impossible. Fortunately, the market is advancing. Stochastic flood models are being developed to support carriers’ decision making and improve their use of capital.

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David Lewin, Head of International Casualty
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Casualty risk is inherently complex. Few insurers and reinsurers manage the accumulation risk in their casualty portfolios. The right tools simply have not been available to identify and analyze this unique peril. Innovation is catching up with the dangers that carriers face, though. New solutions are making the prospect of a casualty catastrophe—and the estimation of realistic disaster scenario costs—a bit less daunting.

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