The Florida peninsula is the most important market for property reinsurance in the world. Each summer, the third most populous state in the union braces itself for another Atlantic hurricane season. In Florida’s esoteric insurance market, insurers buy reinsurance protection at the beginning of June each year.
Guy Carpenter & Company today launched GC Asia Pacific Retro, a new unit offering dedicated retrocession services to clients in the Asia Pacific region.
Guy Carpenter & Company today announced that Peter Stubbings has been promoted to CEO of the firm’s Bermuda operations, with immediate effect. In addition, Richard Keegan is to join the Bermuda team as Senior Vice President in May.
Eva Zheng and Graham Jones
It is anticipated that the China Insurance Regulatory Commission (CIRC) will recognize cash deposits (including premiums withheld), letters of credit (LOC) and certain other forms of collateral. LOCs must be issued by domestic banks with a capital adequacy ratio of no less than 11 percent or by overseas financial institutions with credit ratings equal to or higher than AA-. Cedents will be required to report and re-value their counterparty risk on a quarterly basis and adjust collateral positions accordingly.
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.
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.
Despite the recent spike in terrorist-related activity, evolving capacity and the absence of a major terrorism loss for reinsurers have resulted in a softening terrorism reinsurance market in areas with less perceived risk. Although localized terrorism and political violence activity has impacted certain facultative programs and affected pricing and capacity at the local level, adequate terrorism capacity continues to be available in the reinsurance treaty marketplace for certain countries and territories.
Guy Carpenter reports that downward pressure on reinsurance pricing has increased since the June 1, 2013 renewal due to continued competitive pressure from alternative markets, strong reinsurer balance sheets and low loss experiences. In its June 2014 renewal briefing, Guy Carpenter reports that competition increased as markets offered abundant capacity at reduced pricing. Terms and conditions also came under pressure and multi-year transactions continued to be an area of investigation. Traditional reinsurers sought to protect their market share and alternative providers looked to utilize growing funds.
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. In the next series of GCCI posts, we consider four options good capital stewards in the reinsurance sector are currently considering: maintaining the status quo, returning capital to shareholders, pursuing organic growth or seeking M&A opportunities. The decision is not an easy one, with the best stewards employing a strategy encompassing all four options, depending upon their judgment of the market outlook and opportunities for growth.
Des Potter, Head of GC Securities (EMEA)
Faced with an abundance of excess capital, negligible growth in global reinsurance spend and the pricing outlook continuing to soften, one of the biggest challenges for reinsurers is deciding how to deploy excess capital to generate a return that meets or exceeds the expectations of shareholders.
