Posts Tagged ‘Month in Review’



July 1st, 2015

GC Capital Ideas Top Stories: June, 2015

Posted at 1:00 AM ET

1. June 1, 2015 Renewals Show Rate of Price Declines Moderating: Guy Carpenter & Company, LLC, a leading global risk and reinsurance specialist and a wholly owned subsidiary of Marsh & McLennan Companies (NYSE:MMC), reports that after two years of  price decreases averaging 15 percent on U.S. property catastrophe placements, risk-adjusted pricing moderated at the most recent June renewals.

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2. Chart: Global Property Catastrophe ROL Index 1990 to 2015: The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) index is presented for 1990 through 2015.

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3. Guy Carpenter Launches CAT Risk Studio to Enhance Catastrophe Risk Analysis Capabilities: Guy Carpenter launched CAT Risk Studio (CRS), a new division that will support Guy Carpenter’s Model Suitability Analysis (MSA)® initiative and will work closely with GC Securities* on the development of parametric products for catastrophe risk transfer. CRS establishes Guy Carpenter’s presence at the Marsh & McLennan Innovation Centre in Dublin, Ireland.

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4. Microinsurance Consortium and Venture Incubator Announces New Name: The Microinsurance Consortium, led by a group of leading companies in the insurance industry, announced a new name for their microinsurance venture incubator (MVI) - Blue Marble Microinsurance. The consortium consists of American International Group, Inc., Aspen Insurance Holdings Limited, Guy Carpenter & Company, LLC together with Marsh & McLennan Companies, Inc., Hamilton Insurance Group, Ltd., Old Mutual plc, Transatlantic Reinsurance Company, XL Catlin, and Zurich Insurance Group.

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5. Chart: Significant Insured Losses - 2011 to YE 2014: Reports losses by quarter.

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6. Evolving Role of Reinsurance in Public Sector Risk: Here we review the evolving role of reinsurance in mitigating public sector risk through the expanding deployment of reinsurance and capital market solutions.

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7. Guy Carpenter Launches the Financial Institutions and Cyber Components of the GC ForCas℠ Casualty Catastrophe Modeling Platform: Guy Carpenter announced the launch of the Financial Institutions and Cyber components of the GC ForCas℠ casualty catastrophe modeling platform. GC ForCas is a stochastic modeling platform developed to help insurance carriers better understand their exposure to casualty catastrophe losses resulting from the accumulation of U.S. Commercial Lines insurance policies.  

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8. Cyber-attacks: Mounting Concerns: Here we review recent GC Capital Ideas stories on mounting concerns over cyber-attacks.

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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. Cat Bond Update: Q1 2015 - Issuance Reaches Historic Volume: GC Securities’* briefing, “Catastrophe Bond Update: First Quarter 2015″ is now available.

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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.

June 1st, 2015

GC Capital Ideas Top Stories: May, 2015

Posted at 1:00 AM ET

1. Chart: Global Property Catastrophe ROL Index 1990 to 2015: The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) index is presented for 1990 through 2015.

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2. Impact of Insurance Market Cycles on Insurers’ Reserves: Here we review GC Capital Ideas stories on the impact of insurance market cycles on insurers’ reserves.

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3. Reinsurance Versus Subordinate Debt: Which is Best for Solvency Capital?: Here we review how a holistic approach to managing solvency capital requirements can benefit insurers’ bottom line.

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4. Emerging Risk Challenges And Opportunities: A cursory reading of just a few of the publications on the topic of emerging risks quickly resembles a crash-course in risk aversion therapy. We have been subjected to a bewildering and ever lengthening series of lists of emerging risks. Swiss Re recently identified 26 such risks, Hannover Re has an ongoing list of 14 while the World Economic Forum in its Global Risks 2014 lists 31 global risks.

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5. 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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6. 7.8Mw Earthquake - Lamjung, Nepal: Nepal experienced a magnitude 7.8 earthquake on April 25, followed by two major aftershocks on April 25 and 26 of magnitude 6.6 and 6.7, respectively, according to the U.S. Geological Survey (USGS). Media reports indicate at least 5,582 fatalities, 11,200 injuries, and at least eight million people affected. Infrastructure and transportation routes have been severely disrupted and food and water shortages are of great concern. The USGS PAGER service estimates most probable economic losses between USD1 and USD10 billion. It is clear from media reports that impacts have been widespread and of excessive severity and our first thoughts and concerns are with the millions affected by this tragic event.

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7. New Solutions Help Mutual Insurers Face Market Challenges: Mutual insurance companies of all sizes currently face challenging market conditions where success requires not only focused distribution and operational excellence, but also access to increasingly sophisticated analytics services and products. How these firms use their resources and advanced technology to respond to these issues will separate market outperformers from underperformers.

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8. Guy Carpenter Appoints Former New York State Superintendent of Insurance James Wrynn as Vice Chairman of US Strategic Advisory: Guy Carpenter announced the appointment of former New York State Superintendent of Insurance James J. Wrynn as Vice Chairman of US Strategic Advisory and a Managing Director.

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9. Approach of Atlantic Hurricane Season: As we approach the beginning of the 2015 Atlantic Hurricane Season, we review CAT-i stories covering the major storms from 2014.

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10. Chart: Combined Ratio For Guy Carpenter Composite, YE 2014: Chart presents combined ratio for the Guy Carpenter Global Reinsurance Composite, 2004 through year end 2014.

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May 4th, 2015

GC Capital Ideas Top Stories: April, 2015

Posted at 1:00 AM ET

1. Chart: Global Property Catastrophe ROL Index 1990 to 2015: The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) index is presented for 1990 through 2015.

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2. Reinsurance Versus Subordinate Debt: Which Is Best for Solvency Capital?: In recent months a number of market commentators have opined on the merits of proportional reinsurance versus subordinated debt (sub debt), some favoring reinsurance solutions and some favoring sub debt, but generally finding results in line with the products their companies offered. Guy Carpenter feels reinsurance or sub debt alone is unlikely to provide the best solution to meet solvency capital requirements. Instead, a blended approach should be considered.

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3. 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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4. Guy Carpenter Launches New Public Sector Specialty Practice: Guy Carpenter announced the launch of the Public Sector Specialty Practice. This global team is focused exclusively on the unique risk management needs of governmental agencies and entities.

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5. Chart: Return On Equity For Guy Carpenter Reinsurance Composite, YE 2014: Chart presents return on equity for the Guy Carpenter Global Reinsurance Composite, 2004 through year end 2014.

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6. Chart: Source Of Earnings For Guy Carpenter Reinsurance Composite, YE 2014: Chart presents source of earnings for the Guy Carpenter Global Reinsurance Composite for the year end, 2014 compared to year end, 2013.

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7. January 1, 2015 Renewals See Lower Pricing and Broader Coverage for Clients: Guy Carpenter reports reinsurance pricing fell at the January 1, 2015 renewals in many segments, affecting almost all lines of business and geographies, continuing recent renewal trends.

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8. Chart: Regional Property Catastrophe ROL Index, 1990 to 2015: The chart shows the indexes for United States, United Kingdom, Asia Pacific and Europe.

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9. Chart: Combined Ratio For Guy Carpenter Composite, YE 2014: Chart presents combined ratio for the Guy Carpenter Global Reinsurance Composite, 2004 through year end 2014.

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10. Evolving Role of Reinsurance in Public Sector Risk: Here we review the evolving role of reinsurance in mitigating public sector risk through the expanding deployment of reinsurance and capital market solutions.

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April 6th, 2015

GC Capital Ideas Top Stories: March, 2015

Posted at 1:00 AM ET

1. 2015 Rate on Line Index Highlights: Here we highlight recent GC Capital Ideas Chart Room entries highlighting Guy Carpenter’s Rate on Line (ROL) Index at the 2015 renewal.

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2. Reinsurance Sector Capital Position: Here we highlight recent GC Capital Ideas Chart Room entries highlighting the capital position of the reinsurance sector.

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3. Guy Carpenter Launches its Innovative Casualty Catastrophe Model: GC ForCas℠: Guy Carpenter announced the launch of GC ForCas℠, its new data-driven casualty catastrophe model.

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4. Chart: P&C M&A Activity 2006 to 2015: Chart presents property/casualty (P&C) merger and acquisition (M&A) activity primarily for United States and Bermuda-based companies over the past 10 years. The chart illustrates the number of deals and deal volume over that period.

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5. Reinsurers’ Capital Strategies: Here we review recent GC Capital Ideas stories focusing on (re)insurers’ capital strategies.

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6. Centralization of Reinsurance Buying: It should come as no surprise that there is a general trend among larger cedents to centralize reinsurance buying decisions and retentions and to bundle homogeneous products. This has become possible with the improvement of available portfolio data. This practice has some obvious advantages for buyers, such as reduced spend, reduced administration, improved control over counter-party credit risks and, possibly, retention of additional profits that would otherwise be ceded to reinsurers.

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7. January 1, 2015 Renewals See Lower Pricing and Broader Coverage for Clients: Guy Carpenter reports reinsurance pricing fell at the January 1, 2015 renewals in many segments, affecting almost all lines of business and geographies, continuing recent renewal trends.

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8. GC Strategic Advisory Update: Reinsurers Ratings Challenged with Negative Sector Outlook: The major rating agencies covering the reinsurance sector (A.M. Best, S&P, Moody’s, Fitch) have all voiced concerns with the industry’s ability to adjust to the seemingly overwhelming headwinds currently facing the sector. With A.M. Best recently changing its outlook, the view of the reinsurance sector across the rating agencies is now unanimously negative.

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9. Cyber-attacks: Mounting Concerns: Here we review recent GC Capital Ideas stories on mounting concerns over cyber-attacks.

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10. Modeling Beyond Property CAT Risk: Here we review recent GC Capital Idea stories on catastrophe models that focus on exposures beyond catastrophe property risk.

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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 2nd, 2015

GC Capital Ideas Top Stories: February, 2015

Posted at 1:00 AM ET

1. 2014 Catastrophe Bond Activity Ends on Record Note with More Innovative Bonds Expected in 2015, According to GC Securities* Report: GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/NFA/SIPC, today released a briefing and analysis of the record catastrophe bond activity for 2014 and expectations for the market in 2015.

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2. January 1, 2015 Renewals See Lower Pricing and Broader Coverage for Clients: Guy Carpenter reports reinsurance pricing fell at the January 1, 2015 renewals in many segments, affecting almost all lines of business and geographies, continuing recent renewal trends.

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3. Chart: Top Ten Catastrophe Bond Transactions for 2014: The table lists the top ten catastrophe bond transactions that were completed in 2014.

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4. 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>>

 

5. Guy Carpenter Appoints Matthew Eagle as Head of International Analytics: Guy Carpenter today announced the appointment of Matthew Eagle as Managing Director and Head of International Analytics for Guy Carpenter.

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6. Features of Collateral Structures: A collateralized reinsurance transaction is one in which a market creates a trust account at the inception of the contract term and funds the account in an amount equal to the contract limit (less certain deductions). This funding mechanism provides the client with readily accessible funds in the event of a loss that are segregated from the other assets of the market and remains available even if the market becomes insolvent. A collateralized reinsurance transaction also requires a pre-negotiated release of assets in the trust fund back to the market if there are no losses or if loss development is less than the contract limit.

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7. GC Videocast - Reinsurance Solutions: Andrew Cox, Capital Optimization, Guy Carpenter, and Niall Clifford, Financial Strategy Group, Mercer, explore a number of reinsurance solutions available to insurance companies in the fourth video installment of the Holistic Balance Sheet Management series.

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8. 2014 Insured Losses Hit Lowest Level in Five Years: Guy Carpenter today released its annual Global Catastrophe Review, which reports that insured losses in 2014 were at the lowest level seen since 2009. According to the report, significant insured losses in 2014 totaled approximately USD33 billion, a dramatic drop when compared to the historic insured losses seen in 2011, which totaled approximately USD126 billion.

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9. Chart: Global Property Catastrophe ROL Index 1990 to 2015: The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) index is presented for 1990 through 2015.

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10. Cyber-attacks and Terrorism Revealed as Top Emerging Risks for 2015, According to Annual Guy Carpenter Survey: Cyber-attacks and terrorism are ranked among the top emerging risks concerning the (re)insurance industry in the year ahead, according to a survey released today by Guy Carpenter. According to the findings, new products, expansion into new geographic markets and access to new distribution channels will be the primary drivers of profitable growth in 2015.

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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 2nd, 2015

GC Capital Ideas Top Stories: January, 2015

Posted at 1:00 AM ET

1. January 1, 2015 Renewals See Lower Pricing and Broader Coverage for Clients: Guy Carpenter reports reinsurance pricing fell at the January 1, 2015 renewals in many segments, affecting almost all lines of business and geographies, continuing recent renewal trends.

Read the article>> 

 

2. Chart: Regional Property Catastrophe ROL Index, 1990 to 2015: The chart shows the indexes for United States, United Kingdom, Asia Pacific and Europe.

Read the article>> 

 

3. Chart: Global Property Catastrophe ROL Index 1990 to 2015: The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) index is presented for 1990 through 2015.

Read the article>> 

 

4. Comparison of Federal Terrorism Insurance Backstop Legislation: This two part table compares the expired Terrorism Risk Insurance Program Reauthorization Act of 2007 with the 2015 TRIPRA legislation that was signed into law on Monday, January 12, 2015.

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5. Chart: Source Of Earnings For Guy Carpenter Reinsurance Composite, Q3 2014: Chart presents source of earnings for the Guy Carpenter Global Reinsurance Composite for the third quarter, 2014 compared to third quarter, 2013.

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6. Cyber-attacks and Terrorism Revealed as Top Emerging Risks for 2015, According to Annual Guy Carpenter Survey: Cyber-attacks and terrorism are ranked among the top emerging risks concerning the (re)insurance industry in the year ahead, according to a survey released by Guy Carpenter. According to the findings, new products, expansion into new geographic markets and access to new distribution channels will be the primary drivers of profitable growth in 2015.

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7. Chart: Return On Equity For Guy Carpenter Reinsurance Composite, Q3 2014: Chart presents return on equity for the Guy Carpenter Global Reinsurance Composite, 2004 through third quarter, 2014.

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8. The Reinsurance Evolution Continues: Executive Summary: During the past twelve months, capital has continued to flow into the reinsurance markets in the form of both insurance-linked securities (ILS) and collateralized reinsurance transactions. This report examines the growth in the ILS market during the past year and some of the important evolutionary elements of catastrophe bond structure and risk transfer. We also explore how the use of capital markets-based capacity provides cost savings for public entities by helping them build surplus, reduce public debt and limit the risk that natural perils can pose to the state’s balance sheet. As collateralized markets continue to increase in importance as an alternative to both traditional reinsurance and ILS, Guy Carpenter has taken an active role in analyzing counterparty risk and developing specific structures and strategies to manage this risk. This report also provides an overview of the manner in which Guy Carpenter assists its clients in managing counterparty risk and limiting credit exposure.

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9. Public Entities, Insurers of Last Resort and Compulsory Cat Pools and Disaster Facilities: The use of capital markets-based risk transfer capacity by public entities, insurers of last resort, and compulsory catastrophe pools and disaster facilities continues to expand. These deals included Turkey’s Turkish Catastrophe Insurance Pool, Mexico’s FONDEN and New Zealand’s EQC. Most large U.S. insurers of last resort, such as CEA, Citizens (FL), Citizens (LA), North Carolina Joint Underwriting Association and the North Carolina Insurance Underwriting Association (NCJUA/NCIUA), and Texas Windstorm Insurance Association, are utilizing capital markets capacity including collateralized reinsurance and catastrophe bonds.

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10. Chart: Alternative Capacity as a Percentage of Catastrophe Reinsurance Limit: The chart presents alternative capital capacity as a percentage of global property catastrophe reinsurance limit from 2008 to year-end 2014.

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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.

January 5th, 2015

GC Capital Ideas Top Stories: December, 2014

Posted at 1:00 AM ET

1. Casualty Catastrophe Risk Modeling: Casualty (or liability based) catastrophes have become increasingly frequent and severe over the past decade, exposing (re)insurers to much more risk than they may have realized and reserved for. One root cause can trigger a chain reaction that can bleed balance sheets and even imperil solvency. Until recently, casualty carriers had little choice but to accept this risk as losses emerged.

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2. The Reinsurance Evolution Continues: Executive Summary: During the past twelve months, capital has continued to flow into the reinsurance markets in the form of both insurance-linked securities (ILS) and collateralized reinsurance transactions. This report examines the growth in the ILS market during the past year and some of the important evolutionary elements of catastrophe bond structure and risk transfer. We also explore how the use of capital markets-based capacity provides cost savings for public entities by helping them build surplus, reduce public debt and limit the risk that natural perils can pose to the state’s balance sheet. As collateralized markets continue to increase in importance as an alternative to both traditional reinsurance and ILS, Guy Carpenter has taken an active role in analyzing counterparty risk and developing specific structures and strategies to manage this risk. This report also provides an overview of the manner in which Guy Carpenter assists its clients in managing counterparty risk and limiting credit exposure.

Read the article>>

 

3. Cyber-attacks and Terrorism Revealed as Top Emerging Risks for 2015, According to Annual Guy Carpenter Survey: Cyber-attacks and terrorism are ranked among the top emerging risks concerning the (re)insurance industry in the year ahead, according to a survey released by Guy Carpenter. According to the findings, new products, expansion into new geographic markets and access to new distribution channels will be the primary drivers of profitable growth in 2015.

Read the article>>

 

4. 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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5. Reserving Risks: The previous sections suggested how “dark matter” can be lurking on an insurer’s balance sheets in the form of a casualty catastrophe or an emerging and not as yet fully understood risk such as cyber. While there have been significant advances in quantifying the uncertainty pertaining to these risks, it is worth considering how they may manifest themselves in the future and what can be done about them now to protect from the “dark matter” downside.

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6. Understanding Emerging Risks: Imperative for the Future: The downside focus of risk measures highlights what could be a key problem with the debate around emerging risks - when people think about risk they only consider the downside. Cars, penicillin, fossil fuels, the internet - all of these were once emerging risks, and they have caused global destruction through car accidents, antibiotic resistance, climate change, and now, possibly through cyber risk. But they have also brought far better travel, longer and much healthier lives for almost everyone, affordable electricity for people in their own homes, and an explosion of information on a scale never seen before available freely at the click of a button.

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7. 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>>

 

8. Impact on Results: To consider the impact that these cycles may have on the financial statements and solvency positions of insurers there has to be an understanding of the magnitude of any change in ultimate loss and the likely timing of the recognition of that change. The profit or loss in any financial year is a combination of the profit and loss from that accident year and also any recognized changes in the reserves from prior years.

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9. Private Catastrophe Bonds: The growth in the utilization of private catastrophe bonds continues at similar rates. Private catastrophe bonds provide the same benefits as 144A catastrophe bonds, including fully collateralized, multi-year protection, but private bonds are more cost-effective and allow for more streamlined documentation given the typically smaller limit size of each transaction. The chart shows the evolution of private catastrophe bonds based both on deal count and total aggregate limit placed. In an environment of growing demand for capital markets capacity, GC Securities*, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/NFA/SIPC, formulized its private catastrophe bond approach in June 2013 with development of the Tensai private catastrophe bond program in conjunction with Tokio Millenium Solutions’ Shima Re Ltd. facility.

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10. Capital Markets Capacity: Growth Dominates in 2014: The influx of new capital into the reinsurance industry constitutes the largest change to the sector’s capital structure in recent memory. Over the past 24 months, approximately USD20 billion of new capital has entered the market through investments in insurance linked securities (ILS), funds and sidecars as well as the formation of hedge fund-related reinsurance companies and collateralized reinsurance vehicles.

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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 1st, 2014

GC Capital Ideas Top Stories: November, 2014

Posted at 1:00 AM ET

1. Cyber-attacks and Terrorism Revealed as Top Emerging Risks for 2015, According to Annual Guy Carpenter Survey: Cyber-attacks and terrorism are ranked among the top emerging risks concerning the (re)insurance industry in the year ahead, according to a survey released by Guy Carpenter. According to the findings, new products, expansion into new geographic markets and access to new distribution channels will be the primary drivers of profitable growth in 2015.

Read the article>> 

 

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.

Read the article>> 

 

3. Demand for Asia Pacific Catastrophe Reinsurance Remains High in 2014: Guy Carpenter published a new report highlighting the continued increase in 2014 of total Asia Pacific catastrophe limit purchased. However, a confluence of factors, including the weakening of some key zone currencies has meant that reinsurance premium spend in the region has declined significantly.

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4. Cyber Coverage: Directors & Officers (D&O) Liability: Cyber coverage is also having an effect on directors and officers (D&O) liability in the United States. Oversight and increased requirements for disclosure on cybersecurity are making D&O coverage more important than ever. With the rise of data breaches and other cyber-attacks, directors and officers are responsible for making sure that they are taking sufficient steps to protect their company’s digital assets. In the case of a data breach, directors can be hit with shareholder suits and shareholder derivative actions claiming that the directors breached their fiduciary duty to the company for failing to put adequate cyber security measures in place.

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5. Terror Developments: Overview of TRIPRA: Some may question why terrorism risk has a place in a document dedicated to emerging risk. Terrorism as a form of violence to promote cause or promote change is one of the original human conflicts. The wind blows and the earth shakes much the same way now as it has for hundreds, thousands of years. However, terrorism as a risk and a peril has evolved over the years and is a current concern in all parts of the world. Given the growing population, regional conflicts producing a broad list of potential instigators, the expansive reach of social media for extremists spreading their messages and recruiting and the diversity of possible attack modes to cause human and economic loss, terrorism does qualify as an emerging risk.

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6. Guy Carpenter and Oliver Wyman Publish Annual Insurance Risk Benchmarks Research: Guy Carpenter and Oliver Wyman, both wholly owned subsidiaries of Marsh & McLennan Companies, released the 2014 Insurance Risk Benchmarks Research: Annual Statistical Review, the first in a two-part series detailing research executed in collaboration with Columbia University. This, the fourth annual report, provides detailed analysis and insight on the property/casualty industry to help insurers strategically evaluate and benchmark inputs to economic capital models.

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7. Regional Variations in Cyber Cover: Here we examine the variations in the regulation of data protection and privacy between the United States and Europe.

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8. Modeling Terrorism: Modeling methodologies for terrorism have been continually refined and updated since the three major modeling companies - AIR Worldwide (AIR), EQECAT and Risk Management Solutions (RMS) - released their first terrorism models in 2002. Quantifying the economic, insured and human losses from a terrorist attack continues to pose major challenges for (re)insurers and alternative capacity providers. There are three main techniques to model terrorism risk.

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9. Emerging Risk: Periodic Payment Orders: For a number of reasons the United Kingdom represents an extreme example of the impact of annuity compensation structures. For severe bodily injury cases it is now highly likely that the claimant will opt for an annuity structure (known as a periodic payment order, or PPO) rather than a lump-sum. These are often indexed accordingly to the Annual Survey of Hours and Earnings (ASHE). As a consequence, the uncertainties that had previously been transferred to the claimant are now retained by the insurer (and to a certain extent, its reinsurers). Unlike an individual claimant, the insurer needs to articulate these risks in its capital modeling.

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10. Chart: Combined Ratio for Guy Carpenter Composite, H1 2014: Chart presents combined ratio for the Guy Carpenter Global Reinsurance Composite, 2004 through first half, 2014.

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November 3rd, 2014

GC Capital Ideas Top Stories: October, 2014

Posted at 1:00 AM ET

1. 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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2. Guy Carpenter Announces New Cyber Product Launch: Guy Carpenter today announced the launch of a new cyber privacy and network protection solution designed to meet the unique cyber challenges faced by small- and medium-sized companies.

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3. Guy Carpenter and Oliver Wyman Publish Annual Insurance Risk Benchmarks Research: Guy Carpenter and Oliver Wyman, both wholly owned subsidiaries of Marsh & McLennan Companies, released the 2014 Insurance Risk Benchmarks Research: Annual Statistical Review, the first in a two-part series detailing research executed in collaboration with Columbia University. This, the fourth annual report, provides detailed analysis and insight on the property/casualty industry to help insurers strategically evaluate and benchmark inputs to economic capital models.

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4. Understanding Emerging Risks: Executive Summary: (Re)insurers today face a degree of change and uncertainty that appears to be evolving at an ever quickening pace. Guy Carpenter has published a report, Ahead of the Curve: Understanding Emerging Risks, highlighting emerging risks facing the (re)insurance sector, including cyber-attacks, terrorism and new compensation structures for long-term bodily injuries. The report seeks to identify and categorize these risks that are now confronting the sector, as well as analyze their implications on businesses and (re)insurers.

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5. Chart: Catastrophe Bonds Versus Various Other Capital Market Assets Classes: Chart shows the cumulative return profile of 144A catastrophe bonds (as a proxy for all capital markets-based risk transfer capacity) versus various other capital market asset classes through mid-year 2014.

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6. Centralization of Reinsurance Buying: It should come as no surprise that there is a general trend among larger cedents to centralize reinsurance buying decisions and retentions and to bundle homogeneous products. This has become possible with the improvement of available portfolio data. This practice has some obvious advantages for buyers, such as reduced spend, reduced administration, improved control over counter-party credit risks and, possibly, retention of additional profits that would otherwise be ceded to reinsurers.

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7. Historical Development of Cyber (Re)Insurance: Companies are uncertain of how much coverage to acquire and whether their current policies provide them with protection. One of the roots of the uncertainty stems from the difficulty in quantifying potential losses because of the dearth of historical data for actuaries and underwriters to model cyber-related losses. Furthermore, traditional general liability policies do not always cover cyber risk. In the United States, ISO’s revisions to its general liability policy form consist primarily of a mandatory exclusion of coverage for personal and advertising injury claims arising from the access or disclosure of confidential information.

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8. A.M. Best’s New Analytics Will Broaden and Improve P&C Industry Capital Modeling and Benchmarking of Tolerances: A.M. Best’s rating analytics continue to evolve and the pace of change is accelerating as the industry embraces more analytical tools, emerging best practices, and peer benchmarking.

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9. Chart: Private Catastrophe Bonds Mid-Year 2014: Chart shows the evolution of private catastrophe bonds through mid-year 2014 based on deal count and total aggregate limit placed.

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10. Baden-Baden Reinsurance Symposium Assesses Future Impact of Current Market Conditions: Guy Carpenter hosted “The Reinsurance Industry of the Future,” the Reinsurance Symposium held in Baden-Baden, Germany on October 19. A distinguished line-up of industry luminaries expressed their views on whether the current changes impacting the reinsurance sector are permanent and structural in nature, are a tactical response to short-term conditions, or are part of the normal evolutionary process.

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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.

October 1st, 2014

GC Capital Ideas Top Stories: September, 2014

Posted at 1:00 AM ET

1. Cyber, Terrorism and New Compensation Structures Highlighted as Critical Emerging Risks: Guy Carpenter published a new report highlighting emerging risks facing the (re)insurance sector, including cyber-attacks, terrorism and new compensation structures for long-term bodily injuries. The report seeks to identify and categorize these risks that are now confronting the sector, as well as analyze their implications on businesses and (re)insurers.

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2. Influx of New Capital Continues to Reshape the Reinsurance Market: Guy Carpenter published a new report focusing on the growth in the insurance-linked securities (ILS) market during the past year and some of the recent developments in catastrophe bond structure and risk transfer.

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3. July 1 Renewals Reveal Continued Double Digit Price Decreases Across Many Lines and Geographies: Guy Carpenter reports that market pressures at July 1 renewals continued to drive price decreases across virtually all geographies and lines of business, many in the double digit range. As loss activity remained minimal, reinsurers added to surplus capacity and additional capital continued to come into the market via alternative sources.

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4. 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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5. Capital Optimization: Using Internal Reinsurance for Group Capital Management: Increased capital efficiency remains at the forefront of (re)insurers’ strategies - owing largely to the pending introduction of the Solvency II regime, rating agency capital requirements and the continued pressure around shareholder expectations.

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6. Guy Carpenter Explores Wider Impact of Market Conditions: The growing presence of the capital markets, over capacity in most lines and territories, and the ongoing rationalization of buying strategies are not only influencing market dynamics, but also the continuing evolution of the broker into a capital and risk advisor. This is according to the panel of speakers at the seventh annual press briefing held at the Reinsurance Rendez-Vous 2014 in Monte Carlo by Guy Carpenter & Company, the leading global risk and reinsurance specialist.

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7. Private Market Involvement In US Terror Risk Market: Prior to September 11, 2001, coverage for terrorism-related losses was generally included in standard catastrophe reinsurance agreements without specific charges. However, the USD20 billion loss that reinsurers paid out following the September 11, 2001 attacks prompted companies to quickly exclude terror coverage in standard agreements for most lines of business. Terrorism exclusions therefore became standard in catastrophe reinsurance programs at the January 1, 2002 renewal, seriously diminishing the availability of terrorism reinsurance capacity. Concerned that the lack of terrorism coverage would hit the American economy, the US Congress passed the Terrorism Risk Insurance Act (TRIA) into law in November 2002.

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8. Guy Carpenter Launches Probabilistic European Hail Model: Guy Carpenter launched its new leading-edge probabilistic hail model for Europe. The G-CAT® Hail Model features a unique approach to producing historic hail tracks using a lightning detection system developed for Guy Carpenter by atmospheric research firm nowcast GmbH.

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9. Guy Carpenter Series Details Impact Of 2004 & 2005 Hurricane Seasons: Guy Carpenter released Part One of a two-part series report detailing a ten-year retrospective on the 2004 and 2005 Atlantic Hurricane Seasons - two landmark years that were not only significant for their weather events, but for their lasting effects on the (re)insurance industry. The report examines the meteorological conditions that contributed to the weather activity characterizing both hurricane seasons, as well as the impact on underwriting and claims adjusting practices, cat modeling, and the Florida Hurricane Catastrophe Fund (FHCF).

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10. 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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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.