Consistent with Guy Carpenter’s post-January 1, 2015 renewal report, the U.S. casualty reinsurance market continued to soften on both quota share and excess of loss reinsurance programs. This trend continues to be driven by the reduction in property catastrophe premiums, causing reinsurers to further diversify their overall premium writings into casualty lines and by the improved loss ratios among these underlying lines of business. As a result, reinsurance pricing continued to soften via ceding commissions increases on quota share placements (albeit at a slower pace than in 2014 and earlier in 2015) and rate decreases on excess of loss placements (subject to stable loss experience).
Posts Tagged ‘US’
The trends outlined in Guy Carpenter’s January 1 renewal report continued through the first six months of 2015. Guy Carpenter’s observation that buyers were purchasing more catastrophe limit to take advantage of lower costs, continued to be borne out and even accelerated. The increased demand for reinsurance and expansion of tailored coverage persisted through the April, June and July renewals.
Here we review the 2015 seasonal predictions for tropical cyclone activity in the Western North Pacific and Atlantic Basins.
Any hurricane can produce wind, surge and inland flood impacts. The severity and scope of impacts is not always consistent with rating on the Saffir-Simpson scale, particularly for surge as we have seen with Katrina (2005) and Sandy (2012).
Hurricane Betsy made landfall on Key Largo with estimated winds of 125 mph (Category 3 hurricane) before entering the Gulf of Mexico in 1965.
Hurricane Audrey made landfall as a Category 4 hurricane on the Saffir-Simpson Scale in 1957.
Seasonal outlook providers note the cooler than average sea-surface temperatures (SSTs) in the tropical Atlantic as a key factor for a quiet season.
The El Niño Southern Oscillation (ENSO) phenomenon is signaled by sea-surface temperatures (SSTs) in the tropical East Pacific, with warm “El Niño” phases and cold “La Niña” phases. The large-scale circulations associated with El Niño enhance wind shear (changing wind speed with height) in the tropical Atlantic. The enhanced wind shear disrupts tropical cyclone development, generally resulting in fewer tropical cyclones in the Atlantic Basin. The suppressing effects of El Niño are found to be strongest in the deep tropics (1) and for African “Cape Verde” type storms.
As illustrated in the figure below, the historical proportion between basin counts and landfalls has been very volatile on an annual basis. There is only a weak correlation between hurricane counts in the Atlantic Basin and the number of U.S. landfalls. The statistical significance is a subject of some debate in the scientific community. (1)