Posts Tagged ‘Reins Markets’



April 24th, 2014

Capital Stewardship Options

Posted at 1:00 AM ET

Here we bring together recent GC Capital Ideas stories that have presented options that good capital stewards in the reinsurance industry are currently considering for deployment of excess capital. 

Maintaining the Status Quo: One of the biggest challenges facing reinsurers is deciding how to deploy excess capital to generate a return that meets or exceeds the expectation of investors or shareholders.

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Return to Shareholders:  As a principle, excess capital should be returned to shareholders in periods of low return opportunity (particularly below cost of capital) while more capital should be retained/deployed during periods that offer higher returns. The chart here on the Global Reinsurance Composite Return of capital shows that reinsurers have been relatively disciplined over the last eight years, with carriers returning more capital when the pricing environment has softened.

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Organic Growth: With an abundance of excess capital, negligible growth in global reinsurance spend and the pricing outlook continuing to soften, one of the biggest challenges facing reinsurers is deciding how to deploy this excess capital to generate a return that meets or exceeds the expectation of investors or shareholders. Here we consider the option of organic growth.

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M&A - Grow/Diversify by Product Line: As carriers explore M&A opportunities to grow in the current environment, there is strong interest from potential buyers looking for bolt-on opportunities rather than transformational transactions. Although this demand has not to-date triggered a significant increase in M&A transactions, the ingredients for more activity are now in place.

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M&A - Grow/Diversify by Territory: With growth opportunities limited in mature markets, many insurers are looking to emerging markets for future expansion, in particular China, Southeast Asia and Central and Latin America. The chart here highlights gross written premium growth in emerging markets compared to developed markets from a 2003 base.

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M&A: Achieve Meaningful Scale in Reinsurance: In a reinsurance market with abundant excess capital and where most reinsurance programs are oversubscribed, the need for a meaningful line size or differentiated underwriting contribution has never been more relevant.

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M&A: The Evolving Legacy (Run-Off) Market: The recent completion by legacy solution specialists of a number of acquisitions in the live insurance space could be a watershed moment for the standalone run-off market. The original business concept of a run-off manager was a pure focus on legacy business - to achieve finality in legacy claims and manage the outstanding book of legacy business in the same cost efficient way that an insurer would manage a renewal book of business.

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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.

April 22nd, 2014

GC Capital Ideas Review of Terrorism’s Impact on Insurance and Technology

Posted at 1:00 AM ET

Here we review some recent GC Capital Ideas stories related to the issue of terrorism, addressing the impact on both the insurance industry and technology:

Chart: Countries Operating Compulsory or Optional Terrorism Pools:  A summary of the compulsory and optional terrorism pools that operate around the globe. 

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Guy Carpenter Insights on A.M. Best’s 2013 Updates: A.M. Best has recently issued several insurance ratings updates. Among them, insurers that are overly dependent on the Terrorism Risk Insurance Authorization Act (TRIPRA) may face negative rating pressure when the act expires at the end of 2014. A.M. Best continues to assess the impact of terrorism risk exposure relative to BCAR levels in its discussions with carriers.

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Range of Cyber Risks: Cyber risks range from legal liability and computer security breaches to privacy breaches of confidential information. Data breaches typically involve the intent to either copy, extract or destroy data. However, the risks that companies face transcend simple data incidents and often include the broader range of perils associated with the structural vulnerability of our economy to failures of technology generally. Further risks include cyber extortion, cyber terrorism, loss of revenue due to a computer attack, recovery costs, reputational damage and supply chain disruption.

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April 16th, 2014

Reinsurance Renewals in 2014

Posted at 1:00 AM ET

As we complete the April 1, 2014 reinsurance renewal, we review the GC Capital Ideas renewal stories of 2014. 

January 1, 2014 Renewals Bring Downward Pressure on Pricing: Guy Carpenter reports that reinsurance rates-on-line 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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April Renewals Bring Price Reductions & Focus on Tailored Coverage: Guy Carpenter reports that the April 1, 2014 renewal was marked by price reductions and more tailored reinsurance coverage. Strong balance sheets, an abundance of capacity and a consolidation of buying led to lower reinsurance pricing across most territories and business segments at the renewal.

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April 9th, 2014

April Renewals Bring Price Reductions & Focus on Tailored Coverage

Posted at 11:30 PM ET

Guy Carpenter  reports that the April 1, 2014 renewal was marked by price reductions and more tailored reinsurance coverage. Strong balance sheets, an abundance of capacity and a consolidation of buying led to lower reinsurance pricing across most territories and business segments at the renewal.

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January 5th, 2014

January 2014 Renewal Report: Capacity: Evolution, Innovation and Opportunity

Posted at 11:45 PM ET

354_354-renewal-2The 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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October 23rd, 2013

Guy Carpenter Insights on A.M. Best’s 2013 Updates

Posted at 1:00 AM ET

snyder_jack_bioJack Snyder, Managing Director

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A.M. Best has recently issued several insurance ratings updates. Guy Carpenter has reviewed those updates and has key insights to help companies better understand their potential impact.

 

 

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October 22nd, 2013

Deployment of Collateralized Property Catastrophe Capacity

Posted at 1:00 AM ET

mowery_lara_bioLara Mowery, Global Head of Property

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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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October 21st, 2013

When Contract Certainty Isn’t So Certain

Posted at 1:00 AM ET

Richard Banyard, Senior Vice President, Lance Finley, Managing Director, Jane Furnas, Senior Vice President and Scott VanKoughnett, Senior Vice President

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Insurance policies are carefully drafted to outline coverage that is needed by policyholders while also specifying those areas where coverage is not expected to apply - the goal is to provide contract certainty, not in the usual sense of timeliness of contract signing, but from the perspective of specific policy language.  Sometimes, however, contract certainty is not so certain.  Recent examples have shown that insurers are increasingly facing reinterpretations of their policies by the judicial system, regulators, politicians and even the public via social media, all exerting pressure on insurers to provide coverage not previously anticipated by the drafters and underwriters of those policies.  As these claims are presented to the reinsurance market, pressure is also put on reinsurers to provide coverage that they may not have originally contemplated.  Insurers need to know that their reinsurers partner with them in such situations, and that reinsurance contracts provide appropriate flexibility to help ensure the reinsurers’ promise to pay.  The comments made in this article are intended solely to foster discussion on this topic.

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October 21st, 2013

Baden-Baden Reinsurance Symposium Calls On Industry To Do More To Meet Client Needs

Posted at 12:10 AM ET

Guy Carpenter hosted “Transferring Risk - Is the Insurance and Reinsurance Industry Adequately Serving its Clients?” the Reinsurance Symposium held in Baden-Baden on October 20, 2013. The event explored a range of topics including: the gap between economic and insured losses; how new capital entering the market can move beyond property catastrophe; and measures to provide coverage for new and emerging risks.

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October 20th, 2013

Risk Transfer Demand

Posted at 1:00 AM ET

frankland_nick_bioNick Frankland, Chief Executive Officer, EMEA

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Are the insurance and reinsurance industries adequately serving their clients in the transfer of risk? The question is a timely one because much recent discussion has focused on the entry of new capital into the industries and its effect on capacity and pricing. Regulatory and economic conditions have also concentrated minds on capital optimization with reinsurance playing an increased role in risk finance that may have deflected attention from the fundamental business of protecting against risk.

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