Medical Professional Liability Renewals Update:     Insurers continued to post favorable results, with the medical malpractice class generating the highest return on equity for all commercial lines. The record industry profitability was fueled by historically low claims frequency, moderate claims severity and the release of loss reserve redundancies.

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Casualty 1/1 Renewals in Key Regions: Part I, Overview and United Kingdom:    Casualty insurers, not immune to declining exposure on which their rates are based, saw declines in premium income. The leading concerns for motor and employers liability insurers were rises in frequency and severity of bodily injury awards and a reduced ability to bolster results with prior year reserve releases or investment returns. In addition, the recessionary environment resulted in more fraudulent claims. The pricing outlook for 2010 is more positive, but threats continue to loom on the horizon. Capacity remained abundant and the Internet promises to keep motor insurance competition sharp as price comparison websites become more prevalent. Motor reinsurance rates varied widely depending on country experience.

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Risk Management Lessons from the Olympics: Guy Carpenter’s Chief Actuary Offers Some Observations:     Winter sports are known for their inherent high levels of riskiness, so it should not be too surprising that some valuable lessons related to “personal risk management behavior” can be drawn from the way the athletes make decisions and how the competitions are conducted and judged. As risk professionals, when we watch the action on the snowy mountains and icy rinks, we can get another view on the choices made in the taking of risk or in mitigating risk. Here are just a few lessons that offer additional insights.

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Aviation Market Struggling to Rebound: Part I, Disastrous 2009 and New Capacity: Despite the slight rate increases that aviation underwriters experienced in the final quarter of 2008, as 2009 began they could foresee another difficult year ahead. The events of September 11, 2001 left the insurance and reinsurance markets reeling. Immediate rate rises enabled the market to rebound. However, an improvement in aviation operational safety standards and a lack of major liability losses in the intervening years created an environment where premium levels fell, year on year. Aviation insurers had cause for concern.

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1/1 Renewal: Personal Accident:    On the primary side, the personal accident market continued to attract new entrants globally. Despite material personal accident losses from the Colgan Air and Air France air crashes, direct rates continued to see downward pressure along with demands for larger limits. Reinsurance capacity in the personal accident segment continued to grow as a function of the new entrants in the Life/PA catastrophe space. New markets willing to write catastrophe risk were also willing to entertain per person risk.

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Lloyd’s: A Resurgent Market, Part I: Overview, Underwriting and Operating Performance:    Lloyd’s, poised to strongly capitalize on opportunities as 2009 began, saw its competitive position continue to strengthen during the year. The resilience of operating performance and capitalization to the very challenging economic environment of the past 18 months, coupled with a continued reduction in the number of legacy issues, has been rewarded. Market share gains, rating affirmations and continued strong investor interest prevailed.

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Risk Management Lessons from the Olympics: Guy Carpenter’s Chief Actuary Offers Some Observations:   Winter sports are known for their inherent high levels of riskiness, so it should not be too surprising that some valuable lessons related to “personal risk management behavior” can be drawn from the way the athletes make decisions and how the competitions are conducted and judged. As risk professionals, when we watch the action on the snowy mountains and icy rinks, we can get another view on the choices made in the taking of risk or in mitigating risk. Here are just a few lessons that offer additional insights.

Read the article »

Severe Weather in Melbourne, Australia: A super cell thunderstorm battered Melbourne and its suburbs on March 6, causing severe damage to homes, businesses and vehicles from Flemington to Ferntree Gully. The storm system brought winds of up to 100 kmph (60 mph) to the region and dumped hailstones that measured around 100 mm (4 inches) in diameter, according to the Australian Bureau of Meteorology. Flash flooding was also reported as up to 45 mm (1.8 inches) of rain fell in around 30 minutes. Reports said Melbourne’s entire metropolitan area was hit by the severe weather, with officials saying the city’s eastern and southeastern areas were particularly badly affected.

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Workers Compensation Jan 1 Renewal:  With both the indemnity and medical severity components continuing to rise, the cost of workers compensation insurance remains a top concern for all employers, despite favorable trends in reduced claim frequency. The recession has further put pressure on wages that are being outpaced by indemnity inflation. Workers compensation medical inflation also continues to grow faster than the Medical Consumer Price Index. Despite these trends, primary workers compensation writers remained competitive by either keeping rates flat or granting reductions up to 5 percent on premium rates. Insurers attempted to write new business to offset lost premium caused by exposure decreases across their portfolios.

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Update 2: Windstorm Xynthia:   A powerful Atlantic storm named Xynthia battered western Europe with hurricane-force winds, surging seas and driving rain on February 27 and 28, causing widespread property damage and severely disrupting transport networks and infrastructure. The most severe damage was predominantly seen in western France, though disruption was reported across several countries in western Europe. Reports said at least 64 people were killed across France, Germany, Spain, Portugal and Belgium, and more than 1 million households lost power at the height of the storm. At least 53 of the fatalities occurred in France, which was the country worst-affected by the windstorm.

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Construction & Engineering Renewals at 1/1:    The 2008-2009 global financial crisis had a significant impact on insurers in the engineering and construction sector. Many large and small Contractors All Risk (CAR)/Erection All Risk (EAR) single projects around the world were either cancelled or suspended due to lack of available financing. These developments have caused insurers’ income from construction projects to shrink. Insurers see a need to expand into other classes, such as annuals, power and breakdown.

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Lloyd’s: A Resurgent Market, Part I: Overview, Underwriting and Operating Performance: Lloyd’s, poised to strongly capitalize on opportunities as 2009 began, saw its competitive position continue to strengthen during the year. The resilience of operating performance and capitalization to the very challenging economic environment of the past 18 months, coupled with a continued reduction in the number of legacy issues, has been rewarded. Market share gains, rating affirmations and continued strong investor interest prevailed.

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Windstorm Xynthia: A powerful Atlantic storm named Xynthia battered Western Europe with hurricane-force winds, surging seas and driving rain on February 27 and 28, causing widespread property damage and disrupting transport networks. According to recent estimates, the storm has left at least 56 people dead across France, Germany, Spain, Portugal and Belgium, and more than 1 million households have been left without power. At least 47 of the fatalities have occurred in France, which has been the country worst-affected by the windstorm.

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Directors and Officers Renewals - Stabilization in Pricing: In general, Directors & Officers insurers continued to experience some stabilization in pricing and a normalization of exposure in both the Commercial and Financial Institutions segment. For commercial risks with attractive risk profiles, the market remained competitive with average primary rate changes ranging from flat to a decline of 8 percent. After two years of dramatic rate increases, the financial institution segment showed signs of moderation as rate increases slowed.

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8.8 Mw Earthquake in Chile: A massive earthquake struck off the coast of Maule in Chile at 6:34 UTC on February 27, causing severe damage across of the country and claiming more than 700 lives in Chile’s biggest earthquake for around 50 years. The earthquake, measuring 8.8 Mw, was located 60 miles (100 kilometers) north-northwest of Chillan and 200 miles (325 kilometers) southwest of Santiago, according to the US Geological Survey (USGS). The USGS added that the quake was centered about 21.7 miles (35 kilometers) underground and was felt in Argentina. This is the joint fifth largest earthquake ever to be recorded, according to the USGS. Around 150 aftershocks have hit the region since the main earthquake, the most powerful at 6.9 Mw.

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Errors & Omissions Insurance at the January Renewals: Anticipating that the recent economic downturn, as it had in prior occurrences, would result in increased claims activity, primary insurers sought rate increases. The highly competitive market environment prevented them from realizing the increases. Primary E&O rate reductions continued downward in 2009, averaging declines between 5 percent and 10 percent for insureds exhibiting no material change in exposure and loss activity. Certain sub-segments, such as small to mid-sized law firm business, are indicative of the highly competitive landscape of the E&O segment.

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UK Property Jan 1 Renewals: UK average rate changes ranged from declines of 15 percent to flat. Excess of loss cat rates declined by 5 percent to 10 percent. Property Fire Risk rate changes ranged from declines of 15 percent to flat, with variations determined by loss experience. Risk pricing will continue to be under pressure and the market competitive as long as the primary market continues to see depressed rating levels. The Reinsurance Property lines have been profitable over time, but because the UK falls into reinsurers’ peak Northern European Cat zone, capacity is usually finite.

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Indexation Clauses in Liability Reinsurance Treaties: A Comparison Across Europe: The Indexation Clause - otherwise referred to as the Stability Clause, Inflation Clause, or Severe Inflation Clause (SIC) - is designed to maintain the real monetary value of the retention and (where applicable) the limit under a long-tail excess of loss (XOL) reinsurance treaty over the duration of the claims payout pattern. The clause is only relevant to losses that are of a long-tail nature (i.e., that take a long time to become paid) and is commonly found in the terms and conditions of Motor Liability (MTPL), General Liability (GTPL), and Professional Liability TPL XOL reinsurance contracts of European cedents.

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Higher Pressure on Cat Risk Under Solvency II, Part II: (Partial) Internal Model Approach and Conclusion:   The objective of these articles is to provide, based on a review of CEIOPS’ recent papers, a summary of how non-life cat risks are likely to be quantitatively assessed under Solvency II. (Re)insurers may develop their own calculation processes within full or partial internal models to derive capital charges for catastrophe risk. The process must be calibrated to return a 99.5% confidence level over a one year period and must be fully transparent, documented and approved by the supervisors. Ideally the process enables reporting of scenarios by country, peril and line, with subsequent aggregation to final capital charge NLCAT.

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Higher Pressure on Cat Risk Under Solvency II, Part I: Standard Formula Approach: The objective of these articles is to provide, based on a review of CEIOPS‘ recent papers, a summary of how non-life cat risks are likely to be quantitatively assessed under Solvency II. (Re)insurers may quantify their individual catastrophe risk charge as part of one of three frameworks: the standard formula; a partial internal model; a full internal model.

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Umbrella & Excess Rate Renewals at Jan 1, 2010: Premium income fell for insurers primarily because the weak economy left customers with smaller businesses and reduced value exposures to insure. Even when rates were flat or slightly higher, some insurers’ premium income on specific placements declined by 10 percent or more.

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Guy Carpenter Sponsors New MicroRisk Publication: As a leader in the micro(re)insurance sector, Guy Carpenter continues to communicate the need for and the opportunities within this innovative and growing arena with its sponsorship of MicroRisk, a new quarterly publication devoted to the market for insurance products aimed at protecting low-income people. In the first issue of MicroRisk, MMC President and CEO Brian Duperreault discusses the viability of and challenges associated with microinsurance in “Big Hitters Eye Micro Opportunities.”

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Catastrophe Bond Market Continues to Improve: Despite the challenging financial conditions of late 2008 and early 2009, the catastrophe bond market continued to play a critical role for both sponsors and investors over the past 12 months. Throughout the year, as financial markets stabilized generally, catastrophe bond issuance conditions continued to improve. In 2009 USD3.4 billion of risk capital was issued through 18 transactions. In terms of risk capital, this is a 25 percent increase over 2008. After declining over the first two quarters of 2009, total catastrophe bond risk principal outstanding increased from USD12.0 billion at year-end 2008 to USD12.2 billion at year-end 2009, reflecting a particularly strong fourth quarter for issuance.

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Property Retrocession Renewals: The property retrocession market renewal customarily closes late and the 2010 season was no exception. Buyers generally prefer to wait to ensure that they have the best possible view of their own inwards portfolio exposures before proceeding to purchase. A late, speedy renewal is possible because of a number of factors including uniformity of required data; the relatively small size of the market; a quick execution period and a reduced number of buyers coming to market at this time of the year.

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Catastrophe Bond Market Continues to Improve:  Despite the challenging financial conditions of late 2008 and early 2009, the catastrophe bond market continued to play a critical role for both sponsors and investors over the past 12 months. Throughout the year, as financial markets stabilized generally, catastrophe bond issuance conditions continued to improve. In 2009 USD3.4 billion of risk capital was issued through 18 transactions. In terms of risk capital, this is a 25 percent increase over 2008. After declining over the first two quarters of 2009, total catastrophe bond risk principal outstanding increased from USD12.0 billion at year-end 2008 to USD12.2 billion at year-end 2009, reflecting a particularly strong fourth quarter for issuance.

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Higher Pressure on Cat Risk Under Solvency II, Part I: Standard Formula Approach:  The objective of these articles is to provide, based on a review of CEIOPS’ recent papers, a summary of how non-life cat risks are likely to be quantitatively assessed under Solvency II. (Re)insurers may quantify their individual catastrophe risk charge as part of one of three frameworks: the standard formula; a partial internal model and a full internal model.

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Solvency II - Rationale for the Capital Requirement Increase for Underwriting Risk:   In its series of Consultation Papers on Level 2 implementation Measures for Solvency II, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) drafted, in Consultation Paper 71, a new proposal for the calibration of non-life underwriting risk. Additionally, CEIOPS published its final and third set of advice to the European Commission (EC) at the end of January 2010. The purpose of this briefing is to outline the rationale provided by CEIOPS behind the proposed increase in the SCR in respect of non-life underwriting risk. 

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Rates Retreat as Capital Rebounds: Global Reinsurance Renewals at January 1, 2010:   Reinsurance rates for most lines of business decreased at the January 1, 2010 renewal. The Guy Carpenter World Catastrophe Rate on Line (ROL) Index decreased by 6 percent in response to a swift and substantial recovery in the capitalization of the reinsurance sector. The combination of the rally in investment markets, much reduced catastrophe loss activity and recessionary effects on demand resulted in an excess of supply and increased competition. This was reflected in a slow renewal in which many contracts closed very late in the season as buyers sought to gain maximum advantage. The overall movements in pricing have also occurred against a complicated background of exposure adjustments, model revisions, program changes and other market noise. 

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Insurers Show Continued Interest in Casualty Clash Cover: Large insurers continue to seek Casualty Clash coverage. They are motivated by the results of the quantification of their tail risk exposure in Enterprise Risk Management initiatives, maintenance of consistent earnings and minimization of shock loss surprises to analysts. Clash protection also offers protection against higher working layer retentions. In addition, insurers are generally concerned about accumulations (stacking) of net loss exposures across a single or multiple lines of business and/or multiple insureds that may leave the insurer vulnerable to a non-industry loss event of unpredictable magnitude. Insurers are operating in a very competitive environment in many (but not all) of the underlying primary casualty covers covered by clash reinsurances.

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Five Ways to Manage Innovation:  To cut through the claims of innovation in the market, you need to know what you’re looking for. There are plenty of capital models, catastrophe models and Enterprise Risk Management (ERM) practices in the (re)insurance industry, but which are the most valuable innovations? The right choices can protect your capital, help you deploy it optimally and ultimately bolster shareholder value … but faux innovation can slow your growth - or leave you exposed to unexpected risk or still leave you exposed when you thought the gap had been filled.

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Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office:  1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC.  MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies.  This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product. 

Update: Explosion at Kleen Power Plant, Middletown, Connecticut:   A massive explosion on February 7 at an under-construction power plant in Middletown, Connecticut, badly damaged the structure and killed five people. Fire officials said the blast occurred during testing at the Kleen Energy Systems facility, which was 95 percent complete and due to come online in the summer as the largest electricity generating plant in the New England region. Reports said the project is covered for property damage and business interruption (BI) losses in a policy shared by several insurers.

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US Property Catastrophe Market January 2010 Renewals:    The US property catastrophe reinsurance renewal at January 2010 demonstrated a measurable decline in pricing overall compared with the renewal at 2009. Analysis of the complete January 2010 renewal dataset indicates the US catastrophe RoL index retreated by an average of 10 percent, allowing for the impact of the major prior adjustments to the catastrophe models. A reduction in the ratio of signed to authorized lines from 94 percent to 85 percent is a further sign that capacity is up and a more competitive market has emerged.

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Property Retrocession Renewals:   The property retrocession market renewal customarily closes late and the 2010 season was no exception. Buyers generally prefer to wait to ensure that they have the best possible view of their own inwards portfolio exposures before proceeding to purchase. A late, speedy renewal is possible because of a number of factors including uniformity of required data; the relatively small size of the market; a quick execution period and a reduced number of buyers coming to market at this time of the year.

Read the article >>

Rates Retreat as Capital Rebounds:   Global Reinsurance Renewals at January 1, 2010: Reinsurance rates for most lines of business decreased at the January 1, 2010 renewal. The Guy Carpenter World Catastrophe Rate on Line (ROL) Index decreased by 6 percent in response to a swift and substantial recovery in the capitalization of the reinsurance sector. The combination of the rally in investment markets, much reduced catastrophe loss activity and recessionary effects on demand resulted in an excess of supply and increased competition. This was reflected in a slow renewal in which many contracts closed very late in the season as buyers sought to gain maximum advantage. The overall movements in pricing have also occurred against a complicated background of exposure adjustments, model revisions, program changes and other market noise.

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Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of Enterprise Risk Management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

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2009 Catastrophe Update: Other Significant Events of 2009: In 2009, there were frequent reminders of the risks posed by earthquakes, and it was Asia again that suffered the most when two massive earthquakes struck Indonesia and the Samoa region in the space of a day. The most deadly earthquake of the year hit southern Sumatra in Indonesia on September 30, killing more than 1,100 people. The earthquake, measuring 7.6Mw, left around 500,000 people homeless after 250,000 homes were damaged, half of them completely destroyed.

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Rates Retreat as Capital Rebounds: Global Reinsurance Renewals at January 1, 2010:  Reinsurance rates for most lines of business decreased at the January 1, 2010 renewal. The Guy Carpenter World Catastrophe Rate on Line (ROL) Index decreased by 6 percent in response to a swift and substantial recovery in the capitalization of the reinsurance sector. The combination of the rally in investment markets, much reduced catastrophe loss activity and recessionary effects on demand resulted in an excess of supply and increased competition. This was reflected in a slow renewal in which many contracts closed very late in the season as buyers sought to gain maximum advantage. The overall movements in pricing have also occurred against a complicated background of exposure adjustments, model revisions, program changes and other market noise.

Read the article »

Lloyd’s: A Resurgent Market, Part I: Overview, Underwriting and Operating Performance:   Lloyd’s, poised to strongly capitalize on opportunities as 2009 began, saw its competitive position continue to strengthen during the year. The resilience of operating performance and capitalization to the very challenging economic environment of the past 18 months, coupled with a continued reduction in the number of legacy issues, has been rewarded. Market share gains, rating affirmations and continued strong investor interest prevailed.

Read the article »

Solvency II:  CEIOPS Third Set of Advice, An Overview:  The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) published its final and third set of advice to the European Commission (EC) at the end of January. The advice notably excluded final advice on non-life underwriting risk.

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Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness:  Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of Enterprise Risk Management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

Read the article »

Solvency II - Gearing Up for Tougher Capital Requirements:  The development of Solvency II continues to be one of the most significant regulatory developments for the insurance industry applicable to both primary carriers and reinsurers. European insurers are starting to focus now on the risk-sensitive regime they will face in 2012, especially on the impact of the risk-based quantitative requirements for measuring financial positions and capital adequacy.

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Nine Months 2009:  Guy Carpenter Global Reinsurance Composite:   The members of the Guy Carpenter Global Reinsurance Composite (GCGRC) saw their total net income more than double to almost $10 billion thanks to strong underwriting results and a substantial recovery in asset values.

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1. Rates Retreat as Capital Rebounds: Global Reinsurance Renewals at January 1, 2010: Reinsurance rates for most lines of business decreased at the January 1, 2010 renewal. The Guy Carpenter World Catastrophe Rate on Line (ROL) Index decreased by 6 percent in response to a swift and substantial recovery in the capitalization of the reinsurance sector. The combination of the rally in investment markets, much reduced catastrophe loss activity and recessionary effects on demand resulted in an excess of supply and increased competition. This was reflected in a slow renewal in which many contracts closed very late in the season as buyers sought to gain maximum advantage. The overall movements in pricing have also occurred against a complicated background of exposure adjustments, model revisions, program changes and other market noise.

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2. 2009 Catastrophe Update: Global Insured Losses in 2009: 2009 has seen an impressive recovery from last year’s financial crisis and the uncertainty caused by losses from Hurricane Gustav and Hurricane Ike. This recovery has been driven by the easing of financial markets and low catastrophe activity. A very quiet hurricane season, coupled with relatively low losses for other weather-related events, meant insured losses reached USD24 billion in 2009(1), the lowest figure since 2006 and a significant fall from USD52.5 billion(2) in 2008.

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3. 2009 Catastrophe Update: Outlook for 2010: Predictions that the El Niño phenomenon is likely to persist through the northern hemisphere winter and into spring could have a significant impact on natural hazards worldwide next year. El Niño events have historically produced floods and drought in the more impoverished regions of the world such as southern Africa and parts of South America. Prolonged dry periods may occur in Southeast Asia, Southern Africa and Northern Australia during an El Niño event, while heavy rainfall and flooding have hit Peru and Ecuador in the past. In the United States, El Niño’s potential impact includes above-average precipitation in the south, with below-average rainfall in the Pacific Northwest and the Ohio and Tennessee Valleys.

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Solvency II - Gearing up for tougher Capital Requirements:  The development of Solvency II continues to be one of the most significant regulatory developments for the insurance industry applicable to both primary carriers and reinsurers. European insurers are starting to focus now on the risk-sensitive regime they will face in 2012, especially on the impact of the risk-based quantitative requirements for measuring financial positions and capital adequacy.

Read the article >>

Rates Retreat as Capital Rebounds: Global Reinsurance Renewals at January 1, 2010:  Reinsurance rates for most lines of business decreased at the January 1, 2010 renewal. The Guy Carpenter World Catastrophe Rate on Line (ROL) Index decreased by 6 percent in response to a swift and substantial recovery in the capitalization of the reinsurance sector. The combination of the rally in investment markets, much reduced catastrophe loss activity and recessionary effects on demand resulted in an excess of supply and increased competition. This was reflected in a slow renewal in which many contracts closed very late in the season as buyers sought to gain maximum advantage. The overall movements in pricing have also occurred against a complicated background of exposure adjustments, model revisions, program changes and other market noise.

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Ratings outlook stable:  Rating activity by Standard & Poor’s and A.M. Best remained low in 2009 as reinsurers rebounded from 2008 losses and pulled in strong results. Two of the four downgrades of leading global reinsurance groups during the year, Swiss Re and Transatlantic Re, were directly related to the prior year’s difficulties. The other two downgrades were reportedly driven by acquisition (IPCRe) and profitability issues (Everest Re).

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Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness:  Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of Enterprise Risk Management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

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Financial Stability Considerations Drive Regulatory Response, Part I: Overview:   Two main themes emerged in the response to the aftermath of the recent financial crisis. Efforts to improve the transparency of accounting and reporting regimes gained ground and debate focused on how best to structure and approach regulation in order to achieve tighter control and reduce market turmoil. Through working parties, the International Association of Insurance Supervisors is tackling these issues: revision of core principles, financial stability and group supervision.

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GC ForeCat^TM Predicts Above-Average Hurricane Landfall Rate in Southeast Region for 2010 Hurricane Season:    GC ForeCat is a product developed by Guy Carpenter in collaboration with WSI Corporation, the world’s leading provider of weather-driven business solutions, that provides pre-season hurricane landfall forecast rates for different regions in the United States. GC ForeCat revolutionises hurricane forecasting by estimating the rate of landfall for regions along the US coastline. Four different regions (Gulf, Florida, Southeast and Northeast - see Figure 1) are derived with associated likelihood of tropical cyclones making landfall in each area. Monthly updates are anticipated up to and including May.

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Rates Retreat as Capital Rebounds:  Global Reinsurance Renewals at January 1, 2010:  Reinsurance rates for most lines of business decreased at the January 1, 2010 renewal. The Guy Carpenter World Catastrophe Rate on Line (ROL) Index decreased by 6 percent in response to a swift and substantial recovery in the capitalization of the reinsurance sector. The combination of the rally in investment markets, much reduced catastrophe loss activity and recessionary effects on demand resulted in an excess of supply and increased competition. This was reflected in a slow renewal in which many contracts closed very late in the season as buyers sought to gain maximum advantage. The overall movements in pricing have also occurred against a complicated background of exposure adjustments, model revisions, program changes and other market noise.

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Wide Range of Rate Changes at German Renewal:  In an environment that was highly competitive, Germany experienced a wide range of average rate changes across lines, from a decline of 5 percent to an increase of 10 percent, with limited capacity in D&O lines pushing rates in those lines up an average of 15 percent. The market overall gained capacity from new and existing reinsurers while retention levels remained stable.

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GC ForeCat^TM Predicts Above-Average Hurricane Landfall Rate in Southeast Region for 2010 Hurricane Season:  GC ForeCat is a product developed by Guy Carpenter in collaboration with WSI Corporation, the world’s leading provider of weather-driven business solutions, that provides pre-season hurricane landfall forecast rates for different regions in the United States. GC ForeCat revolutionises hurricane forecasting by estimating the rate of landfall for regions along the US coastline. Four different regions (Gulf, Florida, Southeast and Northeast - see Figure 1) are derived with associated likelihood of tropical cyclones making landfall in each area. Monthly updates are anticipated up to and including May.

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(Re)Insurance Innovation:  Committing to the Leading Edge, Part V:  The Elements of Innovation:  Innovation requires a dedication to research, creativity, resources and foresight. Above all, however, it takes courage to accept the risks - to strive for success rather than cowering in fear of failure.  In fact, the best companies learn from occasional mistakes. Learning from failure during the development stages of innovation strengthens a company’s capabilities. It creates an understanding of the issue at hand farther reaching and more in depth than that of the competitors which attach to the idea after it has been accepted as a standard. This understanding fosters a more effective use of that innovation as well as a platform from which to generate new ideas with the practical experience of what works and what does not.

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Risk Profile, Appetite, and Tolerance:  Fundamental Concepts in Risk Management and Reinsurance Effectiveness:  Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of Enterprise Risk Management (ERM) to make risk and capital management decisions.  While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

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Cat Bond Update:  Third Quarter 2009:  The third quarter is traditionally quiet for the catastrophe bond market, and 2009 was no exception. Two transactions were closed, resulting in USD412 million in new risk capital.1 Nonetheless, risk capital issued was up by a third relative to the same quarter last year, as both catastrophe bonds issued were upsized considerably. The consensus estimate for the entire year remains USD3 billion to USD4 billion, implying a strong fourth quarter for primary issuance.

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Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies, Inc. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.