Posts Tagged ‘Month in Review’



April 7th, 2014

GC Capital Ideas Top Stories: March 2014

Posted at 1:00 AM ET

1. 2013 Closes with Near Record Catastrophe Bond Issuance According to GC Securities*: GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member of FINRA/SIPC, released an analysis of activity and trends within the catastrophe risk market from the fourth quarter of 2013, also including the outlook for 2014. According to the report, influence from direct capital markets’ participation in reinsurance programs, coupled with catastrophic insured losses well below historical averages in 2013, put significant pressure on global catastrophic reinsurance pricing. As a result of significantly reduced pricing, relative to recent years, approximately $7.1 billion worth of new property and casualty (P&C) catastrophe bonds were issued in 2013 - the second highest record year for P&C issuance.

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2. Time Off for Certain Behavior: Behavioral economics is a fascinating field and one which actuaries should be aware of in their everyday work. It is the study of inherent biases in human decision-making. Many examples of these biases have been cited in connection with the financial crisis, and increasingly the implications for insurance are being examined. In a speech entitled ‘The Human Face of Regulation’ in April 2013, Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), explained how the FCA is going to use the principles of behavioral economics in the protection of the consumer.

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3. January 2014 Renewal Report: Capacity: Evolution, Innovation and Opportunity: The January 1, 2014 renewal saw rates on line (ROLs) fall significantly in nearly all regions and business segments as relatively low loss experiences, strong balance sheets and an influx of capital spurred competition and innovation in the reinsurance market. This culminated in a marketplace focused on meeting individual client needs as reinsurers reacted to the challenge posed by alternative markets and alternative markets, in turn, sought to deliver unique solutions. Insurers also looked to capitalize by adapting their buying strategies and prioritizing their risk transfer goals.

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4. Cyber Review: As Guy Carpenter launches its new Cyber Solutions Specialty Practice, we review recent GC Capital Ideas stories on cyber.

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5. Chart: Global Property Catastrophe ROL Index: The Guy Carpenter Global Property Catastrophe Rate on Line index is presented for 1990 through 2014.  The index fell by 11 percent at January 1, 2014.

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6. Increasing External Demands Compel Companies to Improve Risk Management Disclosures: Guy Carpenter released its latest Enterprise Risk Management (ERM) Benchmark Review that provides an in-depth analysis of risk management practices and policies of 67 insurance and reinsurance companies located in Europe, United States, Bermuda, and Asia-Pacific. Based on publicly-available data from financial and risk reports, Guy Carpenter’s ERM Benchmark Review reveals that most (re)insurers are managing capital with metric-based frameworks and are publishing more about their risk management targets than seen in Guy Carpenter’s 2009 analysis. Capital market, legislative, and regulatory influences, such as the approaching implementation of Solvency II, are expected to further compel company managements to better recognize and analyze the risks of their enterprises.

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7. Guy Carpenter Makes Senior Promotions: Guy Carpenter announced that Massimo Reina was promoted to the position of CEO of Continental Europe and MENA, with immediate effect. He succeeded Peter Stubbings, who took up the position of Chairman of the firm’s Bermuda operations.

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8. Global Catastrophe Review, 2013: The year provided a respite for the (re)insurance industry following above-average losses in 2011 and 2012, with insured losses from natural catastrophes and man-made disasters estimated at around USD40 billion, according to Guy Carpenter & Company. This is considerably less than the ten-year average loss of approximately USD60 billion and well below the most significant years of 2005 and 2011. This can be partly attributed to the unusually quiet 2013 Atlantic tropical season. About 47 percent of insured losses in 2013 were reported in the Americas, 31 percent in Europe and 20 percent in Asia and Australasia.

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9. Chart: Rate Movements by Business Segment: Reports rate movements at January 1, 2014.

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10. What is Food Security? : Food security exists when all people, at all times, have physical, social and economic access to sufficient safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life. Fundamentally food has to be safe, nutritious and available in sufficient quantity. On a global scale these are always achievable. It is at a country or smaller geographic territory-level where problems often arise.

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*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/NFA/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. (MMCSEL), which is authorized and regulated by the Financial Conduct Authority, main office 25 The North Colonnade, Canary Wharf, London E14 5HS. 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 any offer to buy any security, financial instrument, reinsurance or insurance product. **GC Analytics is a registered mark with the U.S. Patent and Trademark Office.

March 6th, 2014

GC Capital Ideas Top Stories: February 2014

Posted at 1:00 AM ET

1. Chart: Rate Movements by Business Segment: Report on rate movements at January 1, 2014.

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2. Chart: Top Ten Catastrophe Bond Transactions: The chart ranks deals in 2013, as compiled by GC Securities*, a division of MMC Securities Corporation.

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3. Global Catastrophe Review, 2013: 2013 provided a respite for the (re)insurance industry following above-average losses in 2011 and 2012, with insured losses from natural catastrophes and man-made disasters estimated at around USD40 billion, according to Guy Carpenter & Company. This is considerably less than the ten-year average loss of approximately USD60 billion and well below the most significant years of 2005 and 2011. This can be partly attributed to the unusually quiet 2013 Atlantic tropical season.

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4. January 2014 Renewal Report: Capacity: Evolution, Innovation and Opportunity: The January 1, 2014 renewal saw rates on line fall significantly in nearly all regions and business segments as relatively low loss experiences, strong balance sheets and an influx of capital spurred competition and innovation in the reinsurance market. This culminated in a marketplace focused on meeting individual client needs as reinsurers reacted to the challenge posed by alternative markets and alternative markets, in turn, sought to deliver unique solutions. Insurers also looked to capitalize by adapting their buying strategies and prioritizing their risk transfer goals.

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5. Guy Carpenter’s and Oliver Wyman’s Risk Benchmark Report: Guy Carpenter and its sister company, Oliver Wyman, the international management consulting firm,  published the third annual Insurance Risk Benchmarks.

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6. Chart: Global Property Catastrophe ROL Index: The Guy Carpenter Global Property Catastrophe Rate on Line index is presented for 1990 through 2014.  The index fell by 11 percent at January 1, 2014.

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7. Climate Change Review: Here we review recent GC Capital Ideas stories that have focused on climate change.

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8. Chart: Prevalence of Annuity Settlements in Europe: For bodily injury claim settlements in Europe, the trend is shifting away from lump sums and towards annuity-type settlements, which come with risks related to longevity, inflation and hedging.

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9. Americas Catastrophe Review, 2013: As with Europe, 2013 was a year of flood in the Americas, with notable events in Alberta, Toronto and Colorado. The flood event in the Calgary, Alberta area of Canada resulted in estimated insured losses of around USD2 billion, with economic losses of USD4.8 billion.  This event, combined with flash-flooding in Toronto, Ontario in July, meant Canada experienced its most expensive insured catastrophe loss year on record.

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10. Deployment of Collateralized Property Catastrophe Capacity: The impact the capital markets have had on the property catastrophe reinsurance space is undeniable. Analyzing 2013 market activity, it is also undeniable that much of the movement the market witnessed is as much driven by traditional reinsurers’ changing behaviors. While companies buying catastrophe coverage benefitted, across product type and geography, from collateralized capacity in the market, deployment of this capacity has been targeted.

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*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/NFA/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. (MMCSEL), which is authorized and regulated by the Financial Conduct Authority, main office 25 The North Colonnade, Canary Wharf, London E14 5HS. 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 any offer to buy any security, financial instrument, reinsurance or insurance product. **GC Analytics is a registered mark with the U.S. Patent and Trademark Office.

February 3rd, 2014

GC Capital Ideas Top Stories: January 2014

Posted at 1:00 AM ET

1. January 2014 Renewal Report: Capacity: Evolution, Innovation and Opportunity: The January 1, 2014 renewal saw rates on line fall significantly in nearly all regions and business segments as relatively low loss experiences, strong balance sheets and an influx of capital spurred competition and innovation in the reinsurance market. This culminated in a marketplace focused on meeting individual client needs as reinsurers reacted to the challenge posed by alternative markets and alternative markets, in turn, sought to deliver unique solutions. Insurers also looked to capitalize by adapting their buying strategies and prioritizing their risk transfer goals.

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2. Chart: Global Property Catastrophe ROL Index: The Guy Carpenter Global Property Catastrophe Rate on Line index is presented for 1990 through 2014.  The index fell by 11 percent at January 1, 2014.

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3. Chart: Regional Property Catastrophe ROL Index: The chart shows the indexes for United States, United Kingdom, Asia Pacific and Europe.

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4. Chart: Catastrophe Bond Issuance and Capital Outstanding: Issuance reached a record high of USD7.1 billion, surpassing 2007’s total. Risk capital outstanding also reached an all-time high of USD18.6 billion last year.

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5. Chart: Evolution of Dedicated Reinsurance Capital, 2012 - YE 2013: The evolution of dedicated sector capital is presented below. Guy Carpenter estimates this rose marginally in 2013 to USD322 billion at year-end as underwriting profits from low catastrophe claims and convergence capital inflows offset unrealized losses, sustained share buybacks and dividend payments.

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6. Chart: Gap Between Economic and Insured Losses: Approximately 70 percent of global economic losses from natural catastrophes were uninsured between 1980 and 2013

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7. Chart: U.S. Property Catastrophe Reinsurance Quoting Behavior: The January 1, 2014 average quote across all programs is represented by the line at 0 percent, while the red dots indicate reinsurers’ distances from the mean across all the programs that they quoted. The size of the line represents the variability from the average for all quotes provided by the reinsurer. Each reinsurer is represented across the bottom of the chart by its A.M. Best rating. Quotes representing non-concurrent terms were excluded.

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8. Chart: Significant Insured Losses, 2011 to YE 2013: Insured losses in 2013 were significantly down on those recorded in 2011 and 2012. They were also considerably lower than the ten-year average loss of approximately USD60 billion.

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9. Chart: Return on Equity for Guy Carpenter Reinsurance Composite: Chart presents return on equity for the Guy Carpenter Global Reinsurance Composite, 2004 through 3rd Quarter 2013.

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10. Chart: Pension Fund Capital Under Management and Allocations into Reinsurance: As illustrated, pension funds alone are worth around USD30 trillion. Based on Guy Carpenter’s analysis of possible capital allocation percentages to the (re)insurance space in consultation with sector experts, a maximum of USD900 billion of this amount could potentially be available for insurance-linked investments. This figure is, of course, much greater than currently needed, demonstrating the existing convergence-driven supply excess. Given Guy Carpenter estimates global property catastrophe limit is currently in excess of USD300 billion, and the insurance linked securities market only accounts for around 15 percent of this amount, pension funds have so far made very small investments in reinsurance relative to their overall size.

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January 7th, 2014

GC Capital Ideas Top Stories: December 2013

Posted at 1:00 AM ET

1.  January 1, 2014 Renewals Bring Downward Pressure on Pricing: Guy Carpenter reports that reinsurance rates-on-line (ROLs) fell at the January 1, 2014 renewal in nearly all classes and regions. According to Guy Carpenter’s 2014 global renewal report, strong balance sheets, relatively low loss experiences and an unprecedented influx of convergence capital spurred competition and innovation at renewal. These factors led in turn to surplus capacity across most business segments as competition spilled beyond property catastrophe lines.

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2. Review of 2013 Reinsurance Renewals: As we anticipate the January 1, 2014, reinsurance renewal, we review here the major renewals that occurred in 2013 as reported in GC Capital Ideas.

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3. Windstorm Xaver: A powerful storm named Xaver battered Northern Europe with hurricane-force wind gusts and massive storm surges on December 6, causing widespread property damage and severely disrupting transport networks. The most severe damage was reported in the United Kingdom, Germany and the Netherlands. Around 1,400 properties were flooded in the United Kingdom alone after eastern coastal regions experienced the most severe storm surge since 1953.

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4. Chart: Catastrophe Bond Issuance and Capital Outstanding - 1997 to July 31, 2013: Issuance reached USD4.8 billion in the first seven months of 2013. Risk capital outstanding also reached an all-time high of around USD16.6 billion during the same period.

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5. Chart: Combined Ratio, Guy Carpenter Global Composite: Chart presents the combined ratio for the Guy Carpenter Global Reinsurance Composite, 2004 through third quarter, 2013.

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6. Solar Weather: Historical Events: The severity of space weather varies as the Sun follows a consistent 11-year cycle of changing solar activity. The next cycle peak is expected between 2013 and 2015. Extreme geomagnetic events are nevertheless relatively rare, with return period estimates ranging from between 100 and 200 years to up to 500 year.  Less severe events are more frequent and often occur on an annual basis. The cumulative impact of milder disturbances should not be underestimated, however, particularly as our dependency on power increases and power infrastructure in some countries fatigues with age.

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7. Chart: Guy Carpenter Global Rate on Line Index, January 2013: The Guy Carpenter Global Property Catastrophe Reinsurance 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.

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8. July 1 Renewals Indicate Downward Pressure on Reinsurance Rates Likely to Continue through 2013: Guy Carpenter reports that reinsurance market ROLs continued to be driven by an influx of capital from third-party investors at the July 1 renewals, in spite of catastrophe losses reaching approximately USD20 billion during the first six months of 2013 (above the ten-year average for the period). In a briefing released today, Guy Carpenter comments that robust catastrophe bond, sidecar and collateralized reinsurance activity throughout the year has for the first time pushed pricing in the capital markets to “decouple” or breakaway from levels set by the traditional market. This has in turn prompted downward pressure on overall traditional market pricing.

Read the article >>

 

9. Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of enterprise risk management to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

Read the article >>

 

10. Indexation Clauses in Liability Reinsurance Treaties:  A Comparison Across Europe: The Indexation Clause - otherwise referred to as the stability clause, inflation clause, or severe inflation clause - is designed to maintain the real monetary value of the retention and (where applicable) the limit under a long-tail excess of loss reinsurance treaty over the duration of the claims payout pattern. The clause is only relevant to losses that are of a long-tail nature (that take a long time to become paid) and is commonly found in the terms and conditions of motor liability, general liability and professional liability excess of loss reinsurance contracts of European cedents.

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*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/NFA/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. (MMCSEL), which is authorized and regulated by the Financial Conduct Authority, main office 25 The North Colonnade, Canary Wharf, London E14 5HS. 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 any offer to buy any security, financial instrument, reinsurance or insurance product. **GC Analytics is a registered mark with the U.S. Patent and Trademark Office.

December 2nd, 2013

GC Capital Ideas Top Stories: November 2013

Posted at 1:00 AM ET

1. Super Typhoon Haiyan: Super Typhoon Haiyan meets or surpasses the record of the strongest landfalling tropical cyclone in recorded history, and is among the strongest ever recorded. Haiyan made landfall during the early morning hours of November 8 near Guiuan, with estimated 1-minute wind speeds of 185-195 mph (300-315 km/hr).

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2. Demand for Asia Pacific Catastrophe Reinsurance at a Record High in 2013: Total Asia Pacific catastrophe limit purchased in 2013 increased for the tenth year in a row, but once again failed to keep pace with strong gross domestic product growth in the region, according to a new report released today by Guy Carpenter.

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3. The Reality of Global Warming: The increase in the global mean air temperature, as compared to the 1951-1980 average, is depicted in Figure F-2, and the surge in average oceanic heat content for the 0-700 meter layer is depicted in Figure F-3. The increase in oceanic heat content in particular is notable as it takes a very large amount of energy to heat such a volume of water.

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4. Cyber Risk and its Impact on Supply Chains: Cyber risks are not isolated and are usually connected to other risks. Many companies that are exposed to cyber risks are, for example, also exposed in turn to risks to their supply chain. Due to technological innovation and advances, many parts of a company’s or industry’s supply chain have become interconnected and automated. Technology is indeed a critical enabler of a supply chain’s operations. Therefore a cyber attack has the potential to put an entire company’s supply chain at risk. Cyber security and supply chain risk management must therefore be considered in conjunction with one another.

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5. Guy Carpenter Extends Coverage of Industrial Park Database to Include Vietnam, Malaysia and South Korea:  In 2011, Thailand experienced its worst flooding in years with insured losses estimated at around USD15 billion, of which the Thai General Insurance Association attributed more than 90 percent arising from commercial risks located within industrial parks. As industrial parks are common in several countries in the region, Guy Carpenter developed a database of digitized boundaries of these parks to support its clients’ ability to analyze the potential for catastrophic losses arising from exposures located within park boundaries.

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6. New Geographic Markets to Drive Profitable Growth in 2014, According to Second Annual Guy Carpenter Survey:  Expansion into new geographic markets, new products and access to new distribution channels will be the primary drivers of profitable growth in 2014, according to a new survey released today by Guy Carpenter.

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7. Indexation Clauses in Liability Reinsurance Treaties:  A Comparison Across Europe: The Indexation Clause - otherwise referred to as the Stability Clause, Inflation Clause or Severe Inflation Clause - is designed to maintain the real monetary value of the retention and (where applicable) the limit under a long-tail excess of loss reinsurance treaty over the duration of the claims payout pattern.

Read the article >>

 

8. Risk Profile, Appetite and Tolerance:  Fundamental Concepts in Risk Management and Reinsurance Effectiveness:  Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of enterprise risk management to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

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9. Uncertainty in Catastrophe Models: How Much of it is Reasonable?  It seems reasonable to expect a degree of uncertainty in catastrophe model results.  It is not uncommon, however, for models to produce results that differ by several factors.  In order to assess how much of this uncertainty is epistemic, due to our incomplete knowledge of the physical phenomena involved, this existing uncertainty needs to be quantified.

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10. Chart: Guy Carpenter Global Rate on Line Index, January 2013: The Guy Carpenter Global Property Catastrophe Reinsurance Rate on Line 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.

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October 7th, 2013

GC Capital Ideas Top Stories: September 2013

Posted at 1:00 AM ET

1. Rising Sea Levels Ranked as the Greatest Climate Change Threat: Guy Carpenter released today an analysis of the evolving risk landscape spurred by global warming. Climate change, global warming and the resulting landscape shift for risk management is a growing area of concern among governments, the general public, the private sector and the (re)insurance industry at large. According to the report, global warming is an established scientific fact that cannot be explained by natural variability alone.

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2. Guy Carpenter Mid-Year Report Highlights Catalysts for Growth in (Re)insurance Industry: Guy Carpenter released its mid-year market report, highlighting a time of dynamic capital growth in the reinsurance industry. As investors supply capacity through a convergence of alternative and traditional vehicles, the report details the ways in which this new supply of capital and excess capacity has changed the nature of the sector’s capital structure.

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3. Effective Enterprise Risk Management: With Solvency II and similar regimes in place and still on the horizon in some countries, and the continuing evolution of rating agency requirements, the last decade has seen the (re)insurance industry fully embrace the practice of enterprise risk management (ERM). As a trusted advisor to (re)insurers globally, Guy Carpenter has observed firsthand what it takes to implement ERM successfully. An ERM program’s effectiveness may be enhanced with the benefit of adherence to a set of simple tenets.

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4. Cyber, Climate Change and Space Highlighted as Critical Emerging Risks in Guy Carpenter Report: Guy Carpenter published a new report highlighting emerging risks facing the (re)insurance sector, including cyber risk, climate change and space risk. The report seeks to identify pressing emerging risks confronting the sector, as well as analyze their implications on businesses and (re)insurers.

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5. Guy Carpenter and Oliver Wyman Publish Third Annual Insurance Risk Benchmarks Report: Guy Carpenter and its sister company, Oliver Wyman, the international management consulting firm, have published the third annual Insurance Risk Benchmarks. With greater regulatory supervision over the enterprise risks of insurance companies looming worldwide, economic capital modeling has become increasingly essential to executives. This report provides metrics and insights to allow clients to answer a key question: How do you know whether you are quantifying your risks reasonably?

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6. July 1 Renewals Indicate Downward Pressure on Reinsurance Rates Likely to Continue through 2013: Guy Carpenter reports that reinsurance market rates on line (ROLs) continued to be driven by an influx of capital from third-party investors at the July 1 renewals, in spite of catastrophe losses reaching approximately USD20 billion during the first six months of 2013 (above the ten-year average for the period). In a briefing released today, Guy Carpenter comments that robust catastrophe bond, sidecar and collateralized reinsurance activity throughout the year has for the first time pushed pricing in the capital markets to “decouple” or breakaway from levels set by the traditional market. This has in turn prompted downward pressure on overall traditional market pricing.

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7. Guy Carpenter Addresses Market Impact of New Capacity: In its sixth annual press briefing held at the Reinsurance Rendez-Vous 2013 in Monte Carlo, Guy Carpenter considered the impact of new capacity on current market conditions and explored where the opportunities exist for profitable growth in such an environment.

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8. Opportunities in Latin America: A Microscopic Look:  While markets in some developed countries are demonstrating signs of recovery from the economic uncertainty of the last few years, and the growth in some developing markets is slowing, emerging countries remain attractive for insurance companies seeking opportunities for profitable growth. Latin America is an especially significant emerging region - it is rich in natural resources, geographically close to the United States and all of its governments are democratic. Before entering and engaging in business in this region, it is necessary for companies to be familiar with the economic environment, political situation, regulations, trends and risks that may be encountered. In Guy Carpenter’s forthcoming study, 2013 Emerging Market Overview Report on Latin America, key trends are reviewed that validate healthy competitive markets and improving macroeconomic and sovereign credit scenarios.

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9. Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of enterprise risk management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

Read the article >>

 

10. Emerging Markets Review: Here we bring together recent GC Capital Ideas stories focused on the growth opportunities afforded by emerging markets.

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*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/NFA/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. (MMCSEL), which is authorized and regulated by the Financial Conduct Authority, main office 25 The North Colonnade, Canary Wharf, London E14 5HS. 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 any offer to buy any security, financial instrument, reinsurance or insurance product. **GC Analytics is a registered mark with the U.S. Patent and Trademark Office.

September 4th, 2013

GC Capital Ideas Top Stories: August 2013

Posted at 1:00 AM ET

1. July 1 Renewals Indicate Downward Pressure on Reinsurance Rates Likely to Continue through 2013: Guy Carpenter reports that reinsurance market rates on line (ROLs) continued to be driven by an influx of capital from third-party investors at the July 1 renewals, in spite of catastrophe losses reaching approximately USD20 billion during the first six months of 2013 (above the ten-year average for the period). In a briefing released today, Guy Carpenter comments that robust catastrophe bond, sidecar and collateralized reinsurance activity throughout the year has for the first time pushed pricing in the capital markets to “decouple” or breakaway from levels set by the traditional market. This has in turn prompted downward pressure on overall traditional market pricing.

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2. Chart: Return on Equity Guy Carpenter Reinsurance Composite, H1 2013: Presents return on equity for the Global, European and Bermuda Guy Carpenter Reinsurance Composites.

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3. Chart: Alternative Capacity as a Percentage of Global Property Catastrophe Reinsurance Limit: The increasing influence of alternative capacity is demonstrated by the chart below, which shows the growth of convergence capacity as a percentage of global property catastrophe limit from 2008 to 2013 (projected).

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4. Chart: Combined Ratio, Guy Carpenter Reinsurance Composite, H1 2013: Presents combined ratio for the Global, European and Bermuda Guy Carpenter Global Reinsurance Composites.

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5. Influx of Convergence Capital Triggers Downward Pressure on Pricing at June 1 Renewals: Guy Carpenter reports that the reinsurance sector has witnessed dynamic capital growth in 2012 and 2013, spurred by an influx of capital from alternative sources. In its June 2013 renewal briefing, Guy Carpenter finds that this surge in alternative or “convergence” capital has changed the nature of the sector’s capital structure, as investors grow increasingly comfortable with supplying capacity through a convergence of both traditional and alternative vehicles. This market dynamic has also begun to impact significantly reinsurance pricing for peak property catastrophe risks in the U.S., with surplus capacity and lower target returns driving downward pressure on pricing for June 1 renewals and likely through the remainder of 2013.

Read the article >>

 

6. Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of enterprise risk management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

Read the article >>

 

7. Chart: MGA Market Challenges: Results of Guy Carpenter’s annual survey of the PA/MGA market indicate balancing profitability with market share continues to challenge.

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8. April 1 Renewals See Reinsurance Pricing Stabilize Amid Dynamic Capital Growth: Guy Carpenter reports that dynamic capital growth and ample reinsurance capacity resulted in a relatively stable renewal at April 1, 2013. In a briefing released today, Guy Carpenter comments that the convergence of traditional and alternative capital sources is changing the marketplace, with non-traditional capacity now making up an estimated 14 percent of global property catastrophe limit.

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9. Chart: Source of Earnings, Guy Carpenter Composite, H1 2013: The chart below tracks source of earnings from first half 2012 to first half 2013 of the Guy Carpenter Global Reinsurance Composite.

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10. 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.

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August 1st, 2013

GC Capital Ideas Top Stories: July 2013

Posted at 1:00 AM ET

1. July 1 Renewals Indicate Downward Pressure on Reinsurance Rates Likely to Continue through 2013: Guy Carpenter reports that reinsurance market rates on line (ROLs) continued to be driven by an influx of capital from third-party investors at the July 1 renewals, in spite of catastrophe losses reaching approximately USD20 billion during the first six months of 2013 (above the ten-year average for the period). In a briefing released today, Guy Carpenter comments that robust catastrophe bond, sidecar and collateralized reinsurance activity throughout the year has for the first time pushed pricing in the capital markets to “decouple” or breakaway from levels set by the traditional market. This has in turn prompted downward pressure on overall traditional market pricing.

Read the article >>

 

2. Influx of Convergence Capital Triggers Downward Pressure on Pricing at June 1 Renewals: Guy Carpenter reports that the reinsurance sector has witnessed dynamic capital growth in 2012 and 2013, spurred by an influx of capital from alternative sources. In its June 2013 renewal briefing, Guy Carpenter finds that this surge in alternative or “convergence” capital has changed the nature of the sector’s capital structure, as investors grow increasingly comfortable with supplying capacity through a convergence of both traditional and alternative vehicles. This market dynamic has also begun to impact significantly reinsurance pricing for peak property catastrophe risks in the United States, with surplus capacity and lower target returns driving downward pressure on pricing for June 1 renewals and likely through the remainder of 2013.

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3. The Total Value of Reinsurance for Long-Tail Business: Can we learn from Solvency II to unlock the hidden value of reinsurance for long-tail business? Reinsurance on a long-tail business such as casualty provides lasting capital benefits until the complete run off of the underlying business. It not only reduces underwriting risk, but also the future reserve risk for that book of business.

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4. Chart: Alternative Capacity as a Percentage of Global Property Catastrophe Reinsurance Limit: The increasing influence of alternative capacity is demonstrated by the chart below, which shows the growth of convergence capacity as a percentage of global property catastrophe limit from 2008 to 2013 (projected).

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5. Guy Carpenter’s 8th Annual Specialty Insurance Program Issuing Carrier Survey: Guy Carpenter continues to provide the industry with our annual survey analysis of the current program marketplace from the program issuing carriers’ perspective.

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6. Chart: Combined Ratio, Guy Carpenter Reinsurance Composite, Q1 2013: Presents combined ratio for the Global, European and Bermuda Guy Carpenter Global Reinsurance Composites.

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7. April 1 Renewals See Reinsurance Pricing Stabilize Amid Dynamic Capital Growth: Guy Carpenter reports that dynamic capital growth and ample reinsurance capacity resulted in a relatively stable renewal at April 1, 2013. In a briefing, Guy Carpenter comments that the convergence of traditional and alternative capital sources is changing the marketplace, with non-traditional capacity now making up an estimated 14 percent of global property catastrophe limit.

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8. GC Securities* Completes Catastrophe Bond Queen Street Re VIII Limited for Munich Re: GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/SIPC, today announced the placement of the Principal At-Risk Notes, with notional principal of $75,000,000, through a newly formed catastrophe bond, Queen Street Re VIII Limited, to benefit Munich Re. This is the eighth Queen Street cat bond to benefit Munich Re and the seventh overall cat bond issuance benefitting Munich Re since 2011.

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9. Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of enterprise risk management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

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10. 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.

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* Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US 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, Inc. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.

July 1st, 2013

GC Capital Ideas Top Stories: June 2013

Posted at 1:00 AM ET

1. Influx of Convergence Capital Triggers Downward Pressure on Pricing at June 1 Renewals: Guy Carpenter & Company reports that the reinsurance sector has witnessed dynamic capital growth in 2012 and 2013, spurred by an influx of capital from alternative sources. In its June 2013 renewal briefing, Guy Carpenter finds that this surge in alternative or “convergence” capital has changed the nature of the sector’s capital structure, as investors grow increasingly comfortable with supplying capacity through a convergence of both traditional and alternative vehicles. This market dynamic has also begun to impact significantly reinsurance pricing for peak property catastrophe risks in the U.S., with surplus capacity and lower target returns driving downward pressure on pricing for June 1 renewals and likely through the remainder of 2013.

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2. Chart: Alternative Capacity as a Percentage of Global Property Catastrophe Reinsurance Limit: The increasing influence of alternative capacity is demonstrated by the chart below, which shows the growth of convergence capacity as a percentage of global property catastrophe limit from 2008 to 2013 (projected).

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3. Specialty Insurance Program Market Poised for Growth Opportunities in 2013: Guy Carpenter & Company today released the findings of its eighth annual Specialty Insurance Program Issuing Carrier Survey. The survey, which analyzes trends and benchmarks movement in the Program Administrator and Managing General Agency (PA/MGA) market, reveals that the PA/MGA market continues to thrive and is well-positioned for growth in the year ahead.

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4. Chart: RBC Ratio to BCAR: In Figure 1, RBC Ratio is defined as the ratio of aggregate Total Adjusted Capital to Authorized Control Level RBC for each of 111 combined insurance groups. Plotted against BCAR, there is clearly a strong correlation between the measures, though the relationship is not perfect.

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5. 2013 Atlantic Hurricane Activity: Guy Carpenter has published a new briefing: 2013 Atlantic Hurricane Activity to Reach or Exceed 1995-2012 Average. The 2013 Atlantic hurricane season is expected to be a busy one, carrying at least average activity with respect to the 1995-2012 “active” period. Seasonal outlook providers consistently emphasize two factors: the absence of El Niño, which implicates average activity, and higher tropical Atlantic sea-surface temperatures (SSTs), which implicate higher activity.

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6. Chart: Evolution of Shareholders’ Funds for the Guy Carpenter Global Reinsurance Composite: The growth in the Guy Carpenter Global Reinsurance Composite is illustrated below, covering 2011 to first quarter 2013.

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7. A.M. Best BCAR Updates: A briefing prepared by Guy Carpenter’s Ratings Advisory Team outlines important changes to the BCAR methodology and their implications.

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8. April 1 Renewals See Reinsurance Pricing Stabilize Amid Dynamic Capital Growth: Guy Carpenter reports that dynamic capital growth and ample reinsurance capacity resulted in a relatively stable renewal at April 1, 2013. In a briefing released today, Guy Carpenter comments that the convergence of traditional and alternative capital sources is changing the marketplace, with non-traditional capacity now making up an estimated 14 percent of global property catastrophe limit.

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9. Catastrophe Bond Activity: Here we review recent GC Capital Ideas stories that have reported catastrophe bond transactions in which GC Securities was involved.

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10. Tokio Solution Management and GC Securities Create Private Catastrophe Bond Platform: Tokio Solution Management Ltd. (”Tokio Solution”) and GC Securities*, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/SIPC, are pleased to announce the creation and launch of a private catastrophe bond platform called the Tokio Tensai(TM) Platform.

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* Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US 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, Inc. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.

June 6th, 2013

GC Capital Ideas Top Stories: May 2013

Posted at 1:00 AM ET

 1. GC Securities*: First Quarter Cat Bond Activity Signals Robust Issuance Ahead: GC Securities released an analysis of first quarter activity and trends within the catastrophe risk market for 2013. Two natural peril-exposed catastrophe bond transactions closed during the first quarter of 2013, for a total of USD520 million of issuance. This seemingly low level of primary issuance activity is deceiving, however, as activity in the capital markets and the influence of “non-traditional” capacity - a term that is rapidly approaching obsolescence - has never been higher.

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2. Chart: Global Natural Catastrophe Losses: The extent of rising insured losses from global natural catastrophes over the last 40 years is illustrated below.

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3. April 1 Renewals See Reinsurance Pricing Stabilize Amid Dynamic Capital Growth: Guy Carpenter reports that dynamic capital growth and ample reinsurance capacity resulted in a relatively stable renewal at April 1, 2013. In a briefing released today, Guy Carpenter comments that the convergence of traditional and alternative capital sources is changing the marketplace, with non-traditional capacity now making up an estimated 14 percent of global property catastrophe limit.

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4. Chart: 2013 144A Catastrophe Bond Issuance: Details on each transaction completed during 2013 year to date are presented.

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5. Guy Carpenter Asia-Pacific Climate Impact Centre Publishes Fourth Annual Report on Climate Issues: The Guy Carpenter Asia-Pacific Climate Impact Centre (GCACIC), a joint initiative of Guy Carpenter and City University of Hong Kong, today released its fourth annual report presenting the findings of the GCACIC’s research activities from the past year. The report details the findings of 22 projects conducted by the GCACIC, which focus on climate problems in the Asia-Pacific region as well as on a global scale.

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6. Chart: Catastrophe Bond Issuance by Quarter: During the first quarter of 2013 two natural peril-exposed catastrophe bond transactions closed, for a total of USD520 million of issuance.

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7. Recent Terrorism Stories on GC Capital Ideas: Here we review recent GC Capital Ideas stories that cover terrorism.

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8. Chart: Estimated Reinsurance Premium (Including Life) Growth by Region: While reinsurance premiums remained broadly stable in the established markets of the United States, Canada and Western Europe between 2007 and 2011, strong growth has been recorded in emerging market regions, particularly China, India and other countries in South and East Asia.

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9. 2013 Reinsurance Renewals: As we look toward the June 1 reinsurance renewal next week, here we review the key GC Capital Ideas stories that have covered the prior renewals this year.

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10. Microinsurance on GC Capital Ideas: Here we review recent stories on GC Capital Ideas that covered microinsurance.

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* Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US 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, Inc. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.