Donald Mango, Chief Actuary, and Susan Witcraft, Managing Director
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In choosing a capital allocation method, firms must balance the sophistication of the method with calculation time and resource commitment. One approach, co-xTVaR, strikes a balance between theoretical soundness and efficiency. In a capital-constrained environment, using co-xTVaR to allocate the cost of capital can provide a clear competitive advantage.

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Frank Achtert, Managing Director, and Eddy Vanbeneden, Managing Director
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Lately, discussion about the use of capital models in Europe has been driven by Solvency II. A major regulation is on the horizon and is progressively introducing considerable change in the how the insurance industry will manage risk. Important investment has already begun and will continue, as companies have to integrate this new regulatory regime in their management approaches. With Solvency II compliance driving the adoption of economic capital models, though, many (re)insurers could miss an opportunity to secure a competitive advantage. Instead of using compliance as the impetus for capital modeling, strategy should come first.

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John Tedeschi, ACAS, MAAA, Chief of Catastrophe Modeling
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A week after Rendez-Vous ended last year, Hurricane Ike ripped through the Gulf of Mexico, devastated Galveston, Texas, and even caused considerable inland damage. Immediately, (re)insurers noted that losses would be high … but they did not expect to spend more than half a year continually revising their estimates upward. Many carriers began to look back on the storm and question their catastrophe models, wondering how a storm of much magnitude (at least from a financial perspective) could be missed. While the models themselves do bear some responsibility, the enduring lesson is likely to be the role of the risk manager in using them. After all, people — not technology - make decisions about risk and capital.

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David Priebe, Chairman of Global Client Development
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The role of capital markets in the (re)insurance industry was uncertain a year ago. The eruption of the financial catastrophe within weeks of last year’s Rendez-Vous caused credit markets to seize and wreaked havoc on equities. Access to capital not in the reinsurance system already effectively closed. Today, however, the situation is vastly different. Financial markets are thawing, and equity values are coming back. Investors are showing more confidence in insurance risks — both directly, through catastrophe bonds, and indirectly, via equity markets. Mergers and acquisitions (M&A) are gaining momentum, as well. We’ve pierced last year’s cloud of pessimism, and the opportunities ahead are quite clear.

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A briefing published today by Guy Carpenter & Company, LLC looks ahead to the possible effects of inflation on long-tail reinsurance, as well as the impact of the credit crunch on reinsurers in the wake of the subprime mortgage crisis. The briefing, Casualty Specialty Update, examines the twin pressures that inflation and the global credit crunch are exerting on the global casualty reinsurance industry.

Click here to download the briefing >>

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Peter Zaffino, President and CEO
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Last year the conversations at Monte Carlo were driven by a mixture of factors. Reinsurance pricing was decreasing in response to the reduced loss activity. Capital was being returned to shareholders as reinsurers withdrew capacity rather than accept terms that did not meet their own internal hurdle rates. Concerns were growing about the implications of the unfolding global financial crisis and whether the problems that had affected the banks would have a material impact on the insurance and reinsurance industry.

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Christopher Klein, Global Head of Business Intelligence
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A strong financial performance for the first half of 2009 sets the stage for the January 1, 2010 renewal. Investment assets produced gains for reinsurers relative to the first half of 2008, and underwriting earnings approached double-digit growth. A rebound in shareholders’ equity is evident as well, suggesting that last year’s capital woes have given way to recovery. Calmer financial markets have stripped away the primary factor in this year’s reinsurance rate increases, indicating a smooth renewal at the start of next year in the absence of shock losses.

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As Industry Rebounds from Financial Crisis, Disciplined Capital Management and Decision-Making Remain Paramount

Contents

• Press Release
• Audio Replays/Podcasts
• Photo Gallery

Guy Carpenter & Company, LLC hosted a press briefing at Rendez-Vous in Monte-Carlo on September 5, 2009, focusing on the return of capital to the reinsurance market.

Brian Duperreault, President and Chief Executive Officer of Marsh & McLennan Companies, Inc., opened the briefing. Peter Zaffino, President and CEO of Guy Carpenter, then led a panel of Guy Carpenter executives that included Vice Chairman Richard Booth, Henry Keeling, President and CEO of International Operations, Chris Klein, Global Head of Business Intelligence and David Priebe, Chairman of Global Client Development.

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Peter Zaffino, President and CEO, Guy Carpenter, and Brian Duperreault, President and CEO of Marsh & McLennan Companies, Inc., introduce the Guy Carpenter press briefing at Monte Carlo Rendez-Vous in this GC Capital Ideas podcast. Click the audio player below to listen to the interview, or download the interview in a file that will work with your iPod.

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Click here to download an iPod-compatible version of the press briefing introduction >>

Click here to view the press release, photo gallery and list of related podcasts >>

Richard Booth, Vice Chairman, Guy Carpenter, and discusses reinsurance rates in 2009 and the upcoming January 1, 2010 reinsurance renewal at Monte Carlo Rendez-Vous in this GC Capital Ideas podcast. Click the audio player below to listen to the interview, or download the interview in a file that will work with your iPod.

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Click here to download an iPod-compatible version of Richard Booth’s press briefing remarks >>

Click here to download the slides that accompany this presentation >>