David Priebe, Chairman of Global Client Development Contact Earlier this year, the (re)insurance industry celebrated an abundance of capital. Buybacks and dividends were common, as carriers struggled to find productive uses for their extra cash. Only a few months later, we are in the midst of a financial catastrophe that is wreaking havoc on balance sheets and constraining ... Continue Reading »
Capital Markets
Sidecars Have a Specific Role to Play
Christopher Klein, Global Head of Business Intelligence Contact The popularity of sidecars seems to have ended. The availability of traditional capital and access to insurance-linked securities (ILS) and other alternatives simply has made sidecars less attractive. But, reinsurers know that the market can harden at any time, with one mega-catastrophe creating near-immediate ... Continue Reading »
Navigating Pricing Peaks and Valleys
By David Priebe, Chairman, Global Client Development Contact 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 ... Continue Reading »
Push Pandemic out of Insurance
Capital Markets Provide Necessary Depth David Rains, Managing Director Contact Life carriers struggle with the notion of hedging pandemic risk. The probability of an event occurring in any particular year is low. Even if an outbreak does occur, the process for estimating losses and determining reserves is unclear. Capital approaches do not consider probabilistic tail scenario ... Continue Reading »
A Sidecar Comeback?*
David Priebe, Chairman of Global Client Development Contact High-velocity capital was crucial in 2005 and 2006. Hurricanes Katrina, Rita, and Wilma struck with unexpected consequences, and (re)insurers were left with a USD34 billion price tag. Balance sheets were drained, and the hunger for fresh capital was universal. Some replenishment did come from the dedicated capital of ... Continue Reading »
Capital Constraints: The New Reality?
Mark Hewett, Chairman of London Operations Contact For several years, carriers have enjoyed a period of low insured losses, and access to cash has not been a problem. Traditional sources have been bolstered by the largesse of hedge funds, private equity funds, and even the wealth of high-net worth investors through a variety of insurance-linked securities (ILS). But, credit ... Continue Reading »
Looking at a Downturn?
Peter Zaffino, President & CEO Contact All eyes will be on January, 1 2009. As we approach the next renewal season, another round of rate decreases seems likely. The pace should be slower than it was through 2008, thanks to greater underwriter discipline than in previous downturns. Thus, even though the market has not been catastrophe-free, it has been able to absorb the ... Continue Reading »
Bag Profits Early: Investment Gains Under Pressure
Christopher Klein, Global Head of Business Intelligence Contact Asset-driven losses have put pressure on earnings. Investment gains comprise an important part of carriers’ long-term profits, and financial markets have shown just how volatile this source can be. With net income off 60 percent from the first half of 2007 to the first half of 2008, carrier profitability will b ... Continue Reading »
The Catastrophe Bond Market at Year-End: The Market Goes Mainstream*
After a decade of use and refinement, catastrophe bonds (“cat bonds”) have matured substantially. They have become integrated into modern catastrophe risk management practices. Issuance activity rates accelerated dramatically, even in the wake of two consecutive annual new issuance records. With rates softening for traditional reinsurance capacity, a third consecutive rec ... Continue Reading »
2008 Reinsurance Market Review: Near Misses Call for Caution
Cedents took advantage of a buyer’s market. Many 2008 renewals closed late as cedents held out for lower rates in the continuing soft market. Reinsurers were rewarded not only with lower rates, but often smaller lines. The absence of large catastrophe losses was a key factor in the softening of reinsurance markets. Barring large catastrophe losses in 2008, the downward drift in ... Continue Reading »
