Catastrophe losses, credit crisis push Pricing Plus reinsura
Thursday, Mar 05,2009, 2:13:59 PM Click:
Catastrophe losses, credit crisis push Pricing Plus reinsurance, according to Guy Carpenter Review
Business Editors
NEW YORK - (BUSINESS WIRE) - January 5 2009 - Top-disaster and the losses of the international credit crisis has pushed the property catastrophe rates by 8 percent from 1 January 2009 renewal of reinsurance, according to a presentation on market conditions of reinsurance issued by Guy Carpenter & Company, LLC, a leading specialist global risk and reinsurance. Cats and credit Push Up Price: Global Reinsurance Review January 2009, available at www.GCCapitalIdeas.com, Guy Carpenter, the new intellectual capital website, indicates that the property catastrophe reinsurance rate increases have been moderate, on average, according the Guy Carpenter World Rate on Line (ROL) Index rose by 8 percent.
"The price increases on 1 January 2009 renewals were somewhat tempered by large capital positions, which allowed carriers to absorb the losses of the year, but the market remains very volatile," said Chris Klein, Director of Business Intelligence, Guy Carpenter. "We have seen great differences in prices depends on a number of factors, such as loss of history, geography, and the line of the company. At the same time, the expectation of another above-average storm and the current year credit crisis underlined the need for a disciplined capital management in the coming years. "
Among the key findings:
Catastrophe higher rates of ownership: despite the magnitude of disasters and financial loss, 8 per cent increase in house prices was much lower than that which followed the increase in natural disasters such as Hurricane Andrew in 1992, the attacks of 11 September 2001, and Hurricanes Katrina, Rita and Wilma in 2005. For the U.S., rates have increased an average of 11 per cent, but there are wide variations depending on the loss of experience and the area. Continental Europe has remained relatively stable with an increasing rate between 0 percent and 10 percent on a risk-adjusted basis. The rate changes in the UK ranged from -2.5 to 5 percent.
Casualty Capacity Down: damage reinsurance prices rose 5 percent on average in January 2009 renewal, with a notable lack of capacity. A number of programs may not be placed at any reasonable price. As a result of the financial catastrophe, the new insurers were allowed to enter the market, but the reinsurers are generally reluctant to support new capabilities to keep the dropout rate of reinsurance. The lines of business most directly affected by the credit crisis - such as errors and omissions (E & O) and directors and officers (D & O) insurance - have experienced the most difficulties when renewing.
Effects of the financial catastrophe: The Global Composite Guy Carpenter, the carriers have lost 15 percent of their overall value implied in 2008, compared to 32 percent for the S & P Banks Index. The Guy Carpenter Reinsurance Composite, consists of 16 large companies, the loss on equity of 17 billion (16 percent) by the end of the third quarter of 2008.
Retrocession: 2008, later than usual, the renewal of retrocession treaties saw a reduction in capacity and higher prices. The market has been hampered by the inability to replenish the balance in the wake of the financial disaster and the withdrawal of key players in this market. Accordingly, higher prices reaction was more pronounced than in other sectors, and capacity for losses related to Hurricane Ike was rare.
Look to buyers ILWS: A number of purchasers of reinsurance in 2009 asked in the form of loss of warranty in the industry (ILW), from October 2008. Several major purchases have led to higher prices, as carriers increasingly seek to replace bond disaster with the ability to cover ILW. Increased demand and limited capacity ILW are likely to continue in 2009.
Marine, energy, and aviation: the Marine rate rise 10-15 percent on average (risk-adjusted), while energy prices offshore, particularly in the Gulf of Mexico, been significantly higher. The renewal of aviation has shown little change, with price stabilization.
"Although the financial catastrophe has affected prices, it was less extreme than one might have expected," said Klein. "Ultimately, the risks and the management practices of capital have enabled the industry to absorb the shocks of 2008 effectively. "
"For the future," said Klein, "there are a number of unknowns that could have a negative impact on rates, as another above-average year or a financial disaster surprise. On the other hand, a resolution of the credit crisis could restore the value of assets and improve financial conditions of insurers and reinsurers. The first half of 2009 will be a waiting game, with the dramatic events with the potential to either positively or negatively impact on the market and prices. "
Guy Carpenter will publish more detailed reports on specific lines of business, regions and market conditions in the reinsurance industry over the next two weeks. The next articles will be published on GCCapitalIdeas.com and provide a more complete examination.
Guy Carpenter, the new website of intellectual capital, www.GCCapitalIdeas.com operates the technology blog, including Real Simple Syndication (RSS) feeds, and research category tags to provide Guy Carpenter recent searches it is available. In addition, articles can be delivered directly to BlackBerry ® devices and other personal digital assistants (PDAs).
About Guy Carpenter
Guy Carpenter & Company, LLC is a leading specialist global risk and reinsurance and part of the Marsh & McLennan Companies. With 50 offices worldwide, Guy Carpenter creates and executes reinsurance solutions and capital markets offers solutions * for clients across the world. The company the range of services includes line of business expertise in agriculture, aviation, Casualty Clash; construction and engineering; Excess and Umbrella, life, accident and health; Marine medical, and political risk and trade credit, professional liability, property retrocession reinsurance, surety, terrorism and workers' compensation. GCFac ® is dedicated to Guy Carpenter World facultative reinsurance unit that provides placement strategies, market access in a timely and centralized management of optional reinsurance solutions. In addition, Guy Carpenter Instrat ® uses the industry-leading quantitative skills and modeling tools that optimize the reinsurance decision-making process and help make our customers more successful. Guy Carpenter's website address is www.guycarp.com.
* Advice on securities or investments in the European Union is provided through GC Securities Ltd., authorized and regulated in the United Kingdom by the Financial Services Authority. Securities or investments, if any, are offered in the United States through GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA / SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Telephone: (212) 345-5000. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., GC Securities Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication does not offer to sell or a solicitation of an offer to buy any security, financial instrument, reinsurance or insurance product.
Guy Carpenter
Alexis Levenson, 1.917.937.3264
alexis.levenson @ guycarp.com
or
Jennifer Ainslie, 44.20.7357.2058
jennifer.ainslie @ guycarp.com
or
DeMartini Group
Joanne Lessner, 1.203.221.2790
jlessner@demartinegroup.com
State Keywords: New York
Industry Keywords: professional services, banking, finance, insurance
Source: Guy Carpenter & Company, LLC
Copyright © 2009 Business Wire Business Editors NEW YORK - - 5 January 2009 - Top-disaster and the losses of the international credit crisis has pushed the property catastrophe rates by 8 percent from 1 January 2009 renewal of reinsurance, as a meeting of information on world market conditions for reinsurance by Guy Carpenter & Company, LLC,
Business Editors
NEW YORK - (BUSINESS WIRE) - January 5 2009 - Top-disaster and the losses of the international credit crisis has pushed the property catastrophe rates by 8 percent from 1 January 2009 renewal of reinsurance, according to a presentation on market conditions of reinsurance issued by Guy Carpenter & Company, LLC, a leading specialist global risk and reinsurance. Cats and credit Push Up Price: Global Reinsurance Review January 2009, available at www.GCCapitalIdeas.com, Guy Carpenter, the new intellectual capital website, indicates that the property catastrophe reinsurance rate increases have been moderate, on average, according the Guy Carpenter World Rate on Line (ROL) Index rose by 8 percent.
"The price increases on 1 January 2009 renewals were somewhat tempered by large capital positions, which allowed carriers to absorb the losses of the year, but the market remains very volatile," said Chris Klein, Director of Business Intelligence, Guy Carpenter. "We have seen great differences in prices depends on a number of factors, such as loss of history, geography, and the line of the company. At the same time, the expectation of another above-average storm and the current year credit crisis underlined the need for a disciplined capital management in the coming years. "
Among the key findings:
Catastrophe higher rates of ownership: despite the magnitude of disasters and financial loss, 8 per cent increase in house prices was much lower than that which followed the increase in natural disasters such as Hurricane Andrew in 1992, the attacks of 11 September 2001, and Hurricanes Katrina, Rita and Wilma in 2005. For the U.S., rates have increased an average of 11 per cent, but there are wide variations depending on the loss of experience and the area. Continental Europe has remained relatively stable with an increasing rate between 0 percent and 10 percent on a risk-adjusted basis. The rate changes in the UK ranged from -2.5 to 5 percent.
Casualty Capacity Down: damage reinsurance prices rose 5 percent on average in January 2009 renewal, with a notable lack of capacity. A number of programs may not be placed at any reasonable price. As a result of the financial catastrophe, the new insurers were allowed to enter the market, but the reinsurers are generally reluctant to support new capabilities to keep the dropout rate of reinsurance. The lines of business most directly affected by the credit crisis - such as errors and omissions (E & O) and directors and officers (D & O) insurance - have experienced the most difficulties when renewing.
Effects of the financial catastrophe: The Global Composite Guy Carpenter, the carriers have lost 15 percent of their overall value implied in 2008, compared to 32 percent for the S & P Banks Index. The Guy Carpenter Reinsurance Composite, consists of 16 large companies, the loss on equity of 17 billion (16 percent) by the end of the third quarter of 2008.
Retrocession: 2008, later than usual, the renewal of retrocession treaties saw a reduction in capacity and higher prices. The market has been hampered by the inability to replenish the balance in the wake of the financial disaster and the withdrawal of key players in this market. Accordingly, higher prices reaction was more pronounced than in other sectors, and capacity for losses related to Hurricane Ike was rare.
Look to buyers ILWS: A number of purchasers of reinsurance in 2009 asked in the form of loss of warranty in the industry (ILW), from October 2008. Several major purchases have led to higher prices, as carriers increasingly seek to replace bond disaster with the ability to cover ILW. Increased demand and limited capacity ILW are likely to continue in 2009.
Marine, energy, and aviation: the Marine rate rise 10-15 percent on average (risk-adjusted), while energy prices offshore, particularly in the Gulf of Mexico, been significantly higher. The renewal of aviation has shown little change, with price stabilization.
"Although the financial catastrophe has affected prices, it was less extreme than one might have expected," said Klein. "Ultimately, the risks and the management practices of capital have enabled the industry to absorb the shocks of 2008 effectively. "
"For the future," said Klein, "there are a number of unknowns that could have a negative impact on rates, as another above-average year or a financial disaster surprise. On the other hand, a resolution of the credit crisis could restore the value of assets and improve financial conditions of insurers and reinsurers. The first half of 2009 will be a waiting game, with the dramatic events with the potential to either positively or negatively impact on the market and prices. "
Guy Carpenter will publish more detailed reports on specific lines of business, regions and market conditions in the reinsurance industry over the next two weeks. The next articles will be published on GCCapitalIdeas.com and provide a more complete examination.
Guy Carpenter, the new website of intellectual capital, www.GCCapitalIdeas.com operates the technology blog, including Real Simple Syndication (RSS) feeds, and research category tags to provide Guy Carpenter recent searches it is available. In addition, articles can be delivered directly to BlackBerry ® devices and other personal digital assistants (PDAs).
About Guy Carpenter
Guy Carpenter & Company, LLC is a leading specialist global risk and reinsurance and part of the Marsh & McLennan Companies. With 50 offices worldwide, Guy Carpenter creates and executes reinsurance solutions and capital markets offers solutions * for clients across the world. The company the range of services includes line of business expertise in agriculture, aviation, Casualty Clash; construction and engineering; Excess and Umbrella, life, accident and health; Marine medical, and political risk and trade credit, professional liability, property retrocession reinsurance, surety, terrorism and workers' compensation. GCFac ® is dedicated to Guy Carpenter World facultative reinsurance unit that provides placement strategies, market access in a timely and centralized management of optional reinsurance solutions. In addition, Guy Carpenter Instrat ® uses the industry-leading quantitative skills and modeling tools that optimize the reinsurance decision-making process and help make our customers more successful. Guy Carpenter's website address is www.guycarp.com.
* Advice on securities or investments in the European Union is provided through GC Securities Ltd., authorized and regulated in the United Kingdom by the Financial Services Authority. Securities or investments, if any, are offered in the United States through GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA / SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Telephone: (212) 345-5000. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., GC Securities Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication does not offer to sell or a solicitation of an offer to buy any security, financial instrument, reinsurance or insurance product.
Guy Carpenter
Alexis Levenson, 1.917.937.3264
alexis.levenson @ guycarp.com
or
Jennifer Ainslie, 44.20.7357.2058
jennifer.ainslie @ guycarp.com
or
DeMartini Group
Joanne Lessner, 1.203.221.2790
jlessner@demartinegroup.com
State Keywords: New York
Industry Keywords: professional services, banking, finance, insurance
Source: Guy Carpenter & Company, LLC
Copyright © 2009 Business Wire Business Editors NEW YORK - - 5 January 2009 - Top-disaster and the losses of the international credit crisis has pushed the property catastrophe rates by 8 percent from 1 January 2009 renewal of reinsurance, as a meeting of information on world market conditions for reinsurance by Guy Carpenter & Company, LLC,
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