In the second video in the Holistic Balance Sheet Management series, Andrew Cox, Capital Optimization, Guy Carpenter and Niall Clifford, Financial Strategy Group, Mercer, explore how companies should approach investment risk and the link between investment strategy, risk appetite and reinsurance strategy. A key focus for insurance companies should be to link their investment strategy with their risk appetite metrics. While any increase in return on capital may seem very attractive, it is important that companies ensure that the risks they are taking are in line with their risk appetite and that they are aware of their constraints, allowing them to take risks in a measured way. Investment strategy should be considered alongside regulatory requirements, as a key aspect of Solvency II relates to how well each company understands the risks in its portfolio.
Posts Tagged ‘Reinsurance’
A holistic approach that optimizes the use of the two traditionally separate areas of balance sheet management (reinsurance and investment strategy) can make a significant difference to (re)insurers’ financial results. (Re)insurers should seek to address both the asset and liability sides of the balance sheet in an integrated manner.
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.
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.
From one of GC Capital Ideas’ more popular categories, we highlight the top ten Chart Room stories viewed during the fourth quarter of 2014:
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.
2. 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.
3. Chart: Rate Movements by Business Segment: Reports rate movements at January 1, 2014.
4. 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.
5. Chart: Catastrophe Bond Capital Growth Mid-Year 2014: Chart shows the growth in 144A catastrophe bonds through mid-year 2014 with capital outstanding reaching a record high.
6. Chart: Regional Property Catastrophe ROL Index: The chart shows the indexes for United States, United Kingdom, Asia Pacific and Europe.
7. 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.
8. Chart: Return On Equity For Guy Carpenter Reinsurance Composite, H1 2014: Chart presents return on equity for the Guy Carpenter Global Reinsurance Composite, 2004 through first half, 2014.
9. Chart: Evolution of Shareholders’ Funds For Guy Carpenter Reinsurance Composite, H1 2014: Chart presents the evolution of shareholders’ funds for the Guy Carpenter Global Reinsurance Composite, 2012 through first half, 2014.
10. Chart: Source Of Earnings For Guy Carpenter Reinsurance Composite, H1 2014: Chart presents source of earnings for the Guy Carpenter Global Reinsurance Composite for the first half, 2014 compared to first half, 2013.
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The evolution of dedicated sector capital is presented below. Guy Carpenter estimates dedicated sector capital remained at near record levels having risen to approximately USD400 billion at year-end 2014 from traditional rated markets and all sources of alternative capital including sidecars, collateralized reinsurance vehicles and catastrophe bonds.
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.
GC Securities* Completes First Ever Swiss Franc-Denominated Private Catastrophe Bond (“Gurten”) Benefitting Gebäudeversicherung Bern
GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/NFA/SIPC, today announced the Regulation S placement of Principal At-Risk Variable Rate Notes (”Notes”) due January 15, 2016, with notional principal at CHF70,000,000 through Kaith Re Ltd., to benefit Gebäudeversicherung Bern (”GVB”). This is the first ever Swiss franc-denominated catastrophe bond and the first time that GVB has utilized the cat bond market to manage its risks.
New cedents continued to enter the catastrophe bond space in 2014. Seven new sponsors (American Strategic Insurance Group, Everest Re, Generali, Great American, Heritage, Sompo Japan Nipponkoa and Texas Windstorm Insurance Association) utilized the 144A catastrophe bond market for the first time in the first half of 2014. Additionally, several new sponsors entered the private catastrophe bond market. They included, but were not limited to, the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and Achmea.