Global Reinsurance Review January 2009

Reinsurance rate increases were moderate on average at the January 1, 2009 renewal. The Guy Carpenter World Rate on Line (ROL) Index rose 8 percent, in response to the dual pressures of a financial catastrophe and the second most expensive property catastrophe year on record. The degree to which prices increased was tempered by large capital positions at the beginning of 2008, enabling carriers to absorb the year’s losses, but this is where the generalizations end. Loss history, geography, and line of business led to wide differences in pricing. Expectations of another above-average storm year and the uncertainty surrounding the credit crisis underscore the need for continued capital management discipline in the coming year.

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Book values ticked higher last week, as both the Guy Carpenter Global Composite and the S&P Banks Index showed signs of renewed hope. Gains were slight, but they emphasize the trend toward stability.

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As third quarter results become available, Guy Carpenter will continue to update the GC Reinsurance Composite Earnings Sources chart. With the latest information, the conclusions have not changed, indicating that the latest results are consistent with early insights.

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

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

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

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

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

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

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Check out the following articles, which were published today:

Reinsurer Diversification: A Risk Metric Approach to Diversification >>

Chart: European (Re)insurers: Earnings Sources at Nine Months >>

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Check out the following articles, which were published today:

Book Value Update, Nov 17, 2008 >>

Chart: GC Reinsurance Composite: Earnings Sources at Nine Months >>

Reinsurer Diversification: Roots and Benefits >>

With the majority of Guy Carpenter Reinsurance Composite members’ third quarter results now reported, some clear trends have emerged. Aggregate net earnings continue to slide year-over year (on an IFRS basis) for the first nine moths of 2008 (relative to the first nine months of 2007). The continued erosion of both realized and unrealized investment gains is primarily responsible for this trend, though a reversal of negative life underwriting results (excluding investment income) mitigated the effect for the composite.

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