With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

Chart: 2009 H1N1 Swine Flu Lethality Rate 1.98 Percent: As of May 6, 2009, there have been 1,516 cases confirmed globally by the World Health Organization (WHO), with 30 fatalities. Consequently, H1N1 has shown a lethality rate of only 1.98 percent. While any loss of life is tragic, the implications of swine flu have not reached pandemic proportions.

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Chart: World ROL Index, Jan 1, 2009: The Guy Carpenter World ROL Index gained 8 percent, after two years of substantial declines. Despite the magnitude of catastrophes and financial losses, the turnaround in pricing was substantially less pronounced than those that followed Hurricane Andrew in 1992, the terror attacks of September 11, 2001, and Hurricanes Katrina, Rita, and Wilma in 2005.

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Global property-catastrophe reinsurance rates increased by 8 percent on average through the 2009 renewal season, according to the Guy Carpenter World ROL Index. This follows declines of 6 percent in 2008 and 10 percent in 2007. In the United States, the world’s largest reinsurance market (geographically), increases were fairly uniform at the January, April, June, and July renewals, moving in a channel of 10 percent to 15 percent, depending on region, exposures, and loss history.

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Christopher Klein, Global Head of Business Intelligence
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Reinsurance rates increased by 8 percent through the 2009 reinsurance renewals, as measured by the Guy Carpenter World Catastrophe Rate on Line (ROL) Index. Upward pressure came largely from the impact of the 2008 financial catastrophe on reinsurers’ balance sheets, which was exacerbated by the effects of Hurricanes Gustav and Ike. At the January 1, 2010 renewal, reinsurance rates are likely to show little movement, unless a major property catastrophe or financial shock occurs.

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Peter Zaffino, President and CEO
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Last year, a financial catastrophe shook major market centers around the world. Several prominent, global banks have all but disappeared. Yet, insurers and reinsurers, in general, have persevered. We have been able to absorb the losses in capital triggered by both economic conditions and the second-busiest catastrophe year in at least four decades. But, these developments have changed our business, from perspective to transaction. This is particularly evident in the market for insurance-linked securities (ILS).*

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GC Securities, a division of MMC Securities Corp.*
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A slow issuance year in 2008 masks a story of resilience and risk management flexibility. After a record-setting year in 2007, catastrophe bond issuances fell 62 percent by issuance volume and 52 percent by transaction count last year. During the first half of the year catastrophe bond issuance was tempered by ample capacity and favorable rates in the traditional reinsurance market, dampening sponsor demand for alternative capacity sources, with the fourth quarter quieter than expected. Overall, however, catastrophe bonds generally withstood the impact of onerous market forces and survived a substantial financial market test of their utility as risk and capital management instruments.

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Global Reinsurance Review January 2009

Reinsurance rate increases were moderate on average at the January 1, 2009 renewal. The Guy Carpenter World Rate on Line (ROL) Index rose 8 percent, in response to the dual pressures of a financial catastrophe and the second most expensive property catastrophe year on record. The degree to which prices increased was tempered by large capital positions at the beginning of 2008, enabling carriers to absorb the year’s losses, but this is where the generalizations end. Loss history, geography, and line of business led to wide differences in pricing. Expectations of another above-average storm year and the uncertainty surrounding the credit crisis underscore the need for continued capital management discipline in the coming year.

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The Guy Carpenter World ROL Index gained 8 percent, after two years of substantial declines. Despite the magnitude of catastrophes and financial losses, the turnaround in pricing was substantially less pronounced than those that followed Hurricane Andrew in 1992, the terror attacks of September 11, 2001, and Hurricanes Katrina, Rita, and Wilma in 2005.

To download this chart, right-click on the image, and select “Save Picture As”. If you have any trouble, please e-mail us.

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We all know that a picture is worth a thousand words. That’s why GC Capital Ideas has the Chart Room. If you want to get a quick sense of important industry trends, the Chart Room provides snapshots of everything from extreme mortality bond issuances to the Guy Carpenter World Rate on Line Index. Each includes a brief summary and simple instructions for downloading the chart. We encourage you to use these charts in your presentations, along with the proper attribution.

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By David Priebe, Chairman, Global Client Development
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The capital models for (re)insurance risks are evolving. Over the past 15 years, alternative sources of capital have become increasingly important, particularly in the capital-constrained environments that follow major catastrophe events. As expected, capital market vehicles such as catastrophe bonds and sidecars have brought additional capacity to risk-bearers when they need it most, alleviating price pressure as a result.*

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North America experienced the most substantial ROL drop, declining by 9 percent in 2007 and 16 percent in 2008. ROL in the Asia/Pacific and European regions declined at a slower pace than in North America. ROL dropped by 5 percent in 2008 in Europe and 6 percent in the Asia/Pacific region.

To download this chart, right-click on the image, and select “Save Picture As”. If you have any trouble, please e-mail us.