current directions of
DESCRIPTION
CURRENT DIRECTIONS OF. P & C REINSURANCE 2005 REVIEW - 2006 PREVIEW. GORDON CRUTCHER, Sutton Reinsurance. THE REINSURANCE MARKET IS GLOBAL. 3. REINSURANCE MARKET. The reinsurance market is complex and inter-related. One reinsurer can rarely respond to all of a client’s needs. - PowerPoint PPT PresentationTRANSCRIPT
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CURRENT DIRECTIONSCURRENT DIRECTIONS OF OF
P & C REINSURANCEP & C REINSURANCE
2005 REVIEW - 2006 PREVIEW2005 REVIEW - 2006 PREVIEW
GORDON CRUTCHER, Sutton Reinsurance
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THEREINSURANCE
MARKET IS
GLOBAL3
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REINSURANCE MARKETREINSURANCE MARKET
The reinsurance market is complex and inter-related.
One reinsurer can rarely respond to all of a client’s needs.
The reinsurance market is complex and inter-related.
One reinsurer can rarely respond to all of a client’s needs.
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REINSURANCE MARKETREINSURANCE MARKET
Insurers usually prefer to have several reinsurers on their treaties.
Better security; more flexibility.
Insurers usually prefer to have several reinsurers on their treaties.
Better security; more flexibility.
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REINSURANCE MARKETREINSURANCE MARKET
In compiling its 2005 edition of Global Reinsurance Highlights, Standard & Poor’s Ratings Services collected data on approximately 220 reinsurance organizations from 48 countries. (Life + P&C)
In compiling its 2005 edition of Global Reinsurance Highlights, Standard & Poor’s Ratings Services collected data on approximately 220 reinsurance organizations from 48 countries. (Life + P&C)
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REINSURANCE MARKETREINSURANCE MARKET
Estimated Global Reinsurance (in 2004) :
Capital + Shareholders’ Funds: $377 billion
Net Reinsurance Premiums Written: $167 billion
Estimated Global Reinsurance (in 2004) :
Capital + Shareholders’ Funds: $377 billion
Net Reinsurance Premiums Written: $167 billion
S&P: Global Reinsurance Highlights, Sept. 2005 (P&C + Life)
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REINSURANCE MARKETREINSURANCE MARKET
Estimated Net Reinsurance Premiums Written by the top 35 world-wide reinsurance groups:
$146 Billion (87%)
Estimated Net Reinsurance Premiums Written by the top 35 world-wide reinsurance groups:
$146 Billion (87%)A.M. Best: Review/Preview – January 2006 (P&C + Life)
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REINSURANCE MARKETREINSURANCE MARKET
Estimated Global Reinsurance Capacity:
$2 billion
any one program
Estimated Global Reinsurance Capacity:
$2 billion
any one program
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REINSURANCE MARKETREINSURANCE MARKET
Reinsurers usually want to spread their risks geographically, and by class of business – seeking a diverse portfolio of risks.
Diversification helps make underwriting results more predictable – and more profitable.
Reinsurers usually want to spread their risks geographically, and by class of business – seeking a diverse portfolio of risks.
Diversification helps make underwriting results more predictable – and more profitable.
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REINSURANCE MARKETREINSURANCE MARKET
• Canada does NOT have a single independent domestic reinsurance company.
• All reinsurers operating here are ultimately foreign-owned.
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COMPARISON OF ASSUMED COMPARISON OF ASSUMED REINSURANCE PREMIUMSREINSURANCE PREMIUMS
0
20
40
60
80
100
120
140
160
180
World U.S. Europe Canada
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COMPARISON OF ASSUMED COMPARISON OF ASSUMED REINSURANCE PREMIUMSREINSURANCE PREMIUMS
• Source for Gross Reinsurance Premiums ceded by Region:
• International Association of Insurance Supervisors – “Global Reinsurance Market Report 2004”
Published December 2005
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Thus eventsThus eventselsewhereelsewherein the worldin the worldcan impactcan impactCanadian reinsurance Canadian reinsurance ratesrates and and conditionsconditions – as well as – as well as the the security ratingssecurity ratings of of reinsurers doing business in reinsurers doing business in Canada.Canada.
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CURRENT REINSURANCE MARKET• With a few exceptions, the reinsurance
sector’s capital adequacy generally held up in the face of record losses in 2005.
• The global reinsurance sector lost as much as $20 billion of equity in 2005, as a result of record Cat losses.
- Fitch Ratings Special Report: Dec. 7, 2005
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CURRENT REINSURANCE MARKET
• This equates to 5% - 6% of the global reinsurance industry’s year-end 2004 surplus. (Significant but manageable.)
• Expect more than $16 billion of new capital to find its way in the reinsurance sector by April 2006.
• Also expect rates to stay firm.- Fitch Ratings Special Report: Dec. 7, 2005
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NEW CAPITALNEW CAPITALand the “Class of 2005”and the “Class of 2005”
• Some $20 billion of new capital has already been injected into the insurance and reinsurance industry after the 2005 U.S. hurricanes.
• 80% went to Bermuda.• $8 - $12 billion going into 12 new
start-up reinsurers.S&P: “Global Reinsurance 2006 Outlook”, Dec. 2005
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ANNOUNCED INSURER CAPITAL RAISING*
($ Millions, as of December 1, 2005)
$1,500
$38
$400$450$600
$710
$300$100$140
$600
$129$297
$620
$124$202$150$299
$490
$2,800
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$ M
illi
ons
*Existing (re) insurers. Announced amounts may differ from sums actually raised. Sources: Morgan Stanley, Lehman Brothers, Company Reports; Insurance Information Institute.
As of Dec. 1st, 19 insurers announced plans to raise $9.95 billion in new
capital. Twelve start-ups plan to raise as much as $8.65 billion more for a
total of $18.65 billion. Likely at least $20B raised eventually.
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S&P lowered its outlook S&P lowered its outlook for the GLOBAL for the GLOBAL reinsurance sector from reinsurance sector from stable to negative on Sept. stable to negative on Sept. 28, 2005.28, 2005.Outlook remains negative.Outlook remains negative.
S&P downgraded five S&P downgraded five reinsurance groups in reinsurance groups in
November and December. November and December. 19
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S & P’s CONCERNS:• Strains on reinsurers’ capital caused
by largest Cat loss year in history.• Higher than expected volatility.• Will the industry price risk exposures
appropriately and manage its risk aggregation?
• Potential for adverse reserve development from 2005 Cats.
S&P: “Global Reinsurance 2006 Outlook”, Dec. 2005
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REINSURERS’ COMBINED RATIOS
• Canadian Reinsurers• 2001: 119% • 2002: 110%• 2003: 96%• 2004: 92%• 2005 (@ Q3): * 107%
• U.S. Reinsurers• 2001: 143% • 2002: 121%• 2003: 101%• 2004 105%• 2005 (@ Q3) 124%
(* MSA Research)
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COMBINED LOSS & EXPENSE RATIOS OF CANADIAN
REINSURERS
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
1991 1993 1995 1997 1999 2001 2003 Q32005
Source: Annual Statistical Issues of Canadian Underwriter Magazine and MSA Research for Q3 2005
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NET PREMIUMS WRITTEN BY CANADIAN REINSURERS
$0
$1
$1
$2
$2
$3
Billions
1991 1993 1995 1997 1999 2001 2003 Q32005
Source: Annual Statistical Issues of Canadian Underwriter Magazine and MSA Research for Q3 2005
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TOTAL REINSURANCE CEDED (Domestic & Foreign Companies)
$4
$5
$6
$7
$8
$9
Billions
1999 2000 2001 2002 2003 2004 Q3 05
Source: OSFI Financial Data
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LESS BUSINESS AVAILABLE FOR
REINSURERS
• Insurer retentions continuing to gradually increase.
• Mergers and acquisitions.• Reinsurance “pie” in Canada is
shrinking.
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LESS BUSINESS AVAILABLE FOR REINSURERS
• Insurance company mergers and acquisitions are NOT good news for reinsurers.
• e.g. Allianz Canada no longer buys an independent treaty program. Neither will Citadel next year.
• SUPPLY of reinsurance has increased but the DEMAND has been declining.
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CEDED REINSURANCE PREMIUMS AS % OF TOTAL INS. PREMIUMS
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 Q3 2005
Total Insurance Premiums Reinsurance Ceded
24%30%31%30%27%
Source: OSFI @ Q4 each year – but Q3 for 2005
24%
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RELATIVE IMPORTANCE OF REINSURANCE TO CANADIAN
INSURERS Ratios of “Reinsurance Ceded” to “Net Premiums Written”
• Wawanesa Mutual Insurance: 2%• Dominion of Canada General: 4%• Aviva Insurance Co. of Canada: 17%• Economical Mutual 28%• Zurich Insurance Company: 28%• R & SA Insurance Co. of Canada: 33%• ING Insurance Co. of Canada: 45%• Commonwealth Insurance Company: 79%
Source: OSFI Data as of Q3 2005
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QUESTION ?
• If an insurer’s reinsurance premiums are only 2% - 20% of its total original premium income, what impact would a 10% increase in reinsurance costs have on the premiums that insurer charges the public?
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REINSURANCE CEDED TO PREMIUMS WRITTEN
0%
10%
20%
30%
40%
50%
60%
70%
80%
WAW DOC AVI ECO ZUR RSA ING COM
Source: OSFI @ Q3 2005
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IT’S GETTING LONELY OUT THERE!
• Fewer licensed reinsurers.
• If Swiss Re buys ERC, willbe only 18 active markets
left in Canada.
Used to be 41 in 1991.
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ACTIVE FEDERALLY – LICENCED
INDEPENDENT REINSURERS
1. Aspen Re2. AXA Re3. CCR4. Endurance Re5. Everest Re6. Folksamerica7. GE/ERC8. General Re9. Hannover Re10. Lloyd’s11. Mapfre Re12. Munich Re13. Odyssey Re14. Partner Re15. SCOR Re16. Swiss Re17. Toa Re18. Transatlantic Re19. XL Re
NEW IN 2005:- None
LOST IN 2006:- GE/ERC ?
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UNLIKELY THAT MORE M&A ACTIVTY JUST AHEAD FOR
REINSURERS• Fitch does not view GE’s sale of E.R.C.
to Swiss Re as the beginning of a trend.
• GE had indicated for some time that its reinsurance operations were not a strategic fit with the rest of its operations.
- Fitch Ratings Special Report: Dec. 7, 2005
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REVIEW OF 2005REVIEW OF 2005 - THE BIG - THE BIG STORY WAS STORY WAS THE WEATHERTHE WEATHER• 2005 was the year Mother Nature
showed it was mad at the world.• Relentless, unstoppable weather
extremes wreaked havoc around the world.
• The driest year in decades across the Amazon rainforest.
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REVIEW OF 2005REVIEW OF 2005 -- THE BIG THE BIG STORY WAS STORY WAS THE WEATHERTHE WEATHER
• A record drought in south-eastern A record drought in south-eastern Australia;Australia;• Weather striking Europe with a Weather striking Europe with a biblical biblical vengeance (flooding, vengeance (flooding, searing heat, wildfires);searing heat, wildfires);• Weeks of torrential rains and floods Weeks of torrential rains and floods
in south China.in south China.
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REVIEW OF 2005 - THE BIG STORY WAS THE WEATHER• More than 112,000 people died More than 112,000 people died around the world from natural around the world from natural and and man-made catastrophes.man-made catastrophes.• Total financial losses of someTotal financial losses of some
US US $225 billion.$225 billion.• Estimated US $80 - $100 billion of Estimated US $80 - $100 billion of
these losses (36%) were insured. these losses (36%) were insured.
Source: Swiss Re Sigma36
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REVIEW OF 2005 REVIEW OF 2005 - THE - THE BIG STORY WAS BIG STORY WAS THE WEATHERTHE WEATHER
• It was the “worst-ever” Atlantic It was the “worst-ever” Atlantic hurricane season. Unprecedented.hurricane season. Unprecedented.• The most active – and destructive.The most active – and destructive. • 27 named tropical storms 27 named tropical storms (average: 10)(average: 10)• 13 of these became hurricanes 13 of these became hurricanes (ave: 6)(ave: 6)• 7 of the hurricanes were major 7 of the hurricanes were major (ave: 2)(ave: 2)
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REVIEW OF 2005 - THEBIG STORY WAS THE WEATHER
• One hurricane in particular, One hurricane in particular, Katrina, pounded Florida, the Gulf Katrina, pounded Florida, the Gulf Coast, and the City of New Coast, and the City of New Orleans.Orleans.
• The worst natural disaster in The worst natural disaster in American history.American history.
• Then came Rita . . . and Wilma . . . Then came Rita . . . and Wilma . . . and Alpha . . . and Zeta.and Alpha . . . and Zeta.
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WEATHER EXTREMESWEATHER EXTREMES – MORE TO COME ? – MORE TO COME ?
• There is increasing evidence Katrina and Rita were not freak events.
• The noticeable increase in storm activity in recent years is part of an emerging trend over the past 25 years of:
- greater frequency of storms; and
- increasing destructive capacity.Nature magazine: August 2005, quoting Kerry Emanuel of the Massachusetts Institute of Technology
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REVIEW OF 2005 LOSSES- IN NORTH AMERICA
• A year of record losses. A year of record losses. • Earliest start of hurricane Earliest start of hurricane
season in 45 years.season in 45 years.• First time in 89 years that two First time in 89 years that two
major hurricanes occurred major hurricanes occurred before August 1st.before August 1st.
• The last hurricane in 2005 The last hurricane in 2005 formed on December 30th.formed on December 30th.
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KATRINAKATRINA• The largest insured loss in history.• Estimated loss: $40 - $60 billion.• 1.6 million claims.• Some 10,000 adjusters at work.• Mississippi lawsuit to recover flood
claims from insurance policies.
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MAJOR 2005 HURRICANESMAJOR 2005 HURRICANES• August 28: Hurricane Katrina (Cat 3)• Sept 24: Hurricane Rita (Cat 5)• Oct 24: Hurricane Wilma (Cat 3)
• Total deaths (U.S.): 1,777 confirmed
• These hurricanes alone may cost the insurance industry as much as $90 billion.
• Global reinsurers will absorb a substantial portion of this amount.
S&P: “Global Reinsurance 2006 Outlook”, Dec. 2005
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IMPACT ON LOUISIANA ALONEIMPACT ON LOUISIANA ALONE
• “It would take all the Homeowners insurance premiums paid in Louisiana over the past 25 years to cover the total Homeowners claims resulting from the 2005 hurricanes in the state.”
- Insurance Information Institute
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U.S. INSUREDCATASTROPHE LOSSES
$7.5
$2.7
$4.7
$22.
9
$5.5 $1
6.9
$8.3
$7.4
$2.6 $1
0.1
$8.3
$4.6
$26.
5
$5.9 $1
2.9 $2
7.5
$57.
7
$100
$0
$20
$40
$60
$80
$100
$120
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05*
20??
*Includes $53.7 billion per ISO/PCS plus $4B offshore energy losses from Hurricanes Katrina & Rita.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B.Source: Property Claims Service/ISO; Insurance Information Institute
$ Billions
2005 will be by far the worst year ever for insured
catastrophe losses in the US, but the worst has yet to come.
$100 Billion CAT year is coming soon
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CAT MODELS SHOWN NOT CAT MODELS SHOWN NOT PERFECT AFTER ALL PERFECT AFTER ALL
2005 hurricanes turned an intense spotlight on exposure management - and on Cat models.
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INSURERS RELIED ONMODELS WHICH INDICATED
THE PROBABILITY OF A KATRINA EVENT WAS ONE
IN 500 YEARS = 0.20%
Which insurer or reinsurer Which insurer or reinsurer do you think incurred the do you think incurred the largest loss from Katrina?largest loss from Katrina?
. . . And also from Rita?. . . And also from Rita?
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IMPACT ON ALLSTATEIMPACT ON ALLSTATE
• Allstate’s net loss from Katrina: $3.68 billion. (Rita was $850 M.)
• Effective June 1, 2006, Allstate is buying additional Catastrophe reinsurance for 95% of $2 billion excess of $2 billion of aggregate losses.
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CATASTROPHE MODELS ARE CATASTROPHE MODELS ARE BEING RECALIBRATEDBEING RECALIBRATED
• Models built partly on science;Models built partly on science;
• And partly on historical data;And partly on historical data;
•And partly onAnd partly onprofessional judgement.professional judgement.
•They weren’t programmed for a Katrina.They weren’t programmed for a Katrina.48
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SOURCE OF FUNDS FOR SOURCE OF FUNDS FOR 2005 HURRICANE LOSSES2005 HURRICANE LOSSES
• How was the insurance How was the insurance industry able to absorb the industry able to absorb the 2005 Catastrophe losses?2005 Catastrophe losses?
• High profitability of insurance industry during Q1 and Q2 of 2005;
• Record policyholder surpluses; • Investment income and new capital;• Significant risk transfer to reinsurers.
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SOURCE OF FUNDS FOR SOURCE OF FUNDS FOR 2005 HURRICANE LOSSES2005 HURRICANE LOSSES
• Reinsurers are expected to absorb at least 50% of the 2005 hurricane losses – & possibly as much as 60%.
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SOURCE OF FUNDS FOR SOURCE OF FUNDS FOR 2005 HURRICANE LOSSES2005 HURRICANE LOSSES
• The financial performance of the U.S. P & C insurance industry during the first six months of 2005 was nothing short of spectacular.
• The average return on surplus was 15.3%
• It appeared the industry was heading for its highest level of profitability since 1987.
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SOURCE OF FUNDS FOR SOURCE OF FUNDS FOR 2005 HURRICANE LOSSES2005 HURRICANE LOSSES
• Net profits of $31 billion at Q2 2005 • Which included $25 billion of
investment income – up 25% over 2004
• Policyholder surplus reached a record $412.5 billion by Q2 2005.
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SOURCE OF FUNDS FOR SOURCE OF FUNDS FOR 2005 HURRICANE LOSSES2005 HURRICANE LOSSES
• The Catastrophes of 2005 were an “earnings” event – not a “capital” event.
• The losses were basically paid out of 2005 earnings, rather than the industry’s capital base.
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LET’S NOT FORGET LET’S NOT FORGET CANADIAN CAT CANADIAN CAT LOSSES IN 2005LOSSES IN 2005
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2005 began with an immense insurance loss in Fort McMurray, Alberta –
Suncor Energy. A $1 billion loss. 55
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REVIEW OF 2005 LOSSES- IN CANADA
• Then during 2005 Canadian P & C insurers (and reinsurers) made disaster payments exceeding ANOTHER $1 billion.
• Major catastrophe losses included:
- Southern Ontario wind and rain storm on August 19th: $500 million
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REVIEW OF 2005 LOSSES- IN CANADA
- Alberta floods in June: $275 million
- Summer floods in Manitoba
- Quebec rainstorms: $57 million
- Summer rainstorms in Saskatchewan (flooding)
- Spring flooding and winter snowstorms in Atlantic Canada
- Jane Voll, Chief Economist, IBC
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• August 19, 2005 GTA rainstorm:August 19, 2005 GTA rainstorm:103 millimetres of rain = 4.1 inches103 millimetres of rain = 4.1 inches
(One month of average rainfall)(One month of average rainfall)
• July 2004 Peterborough rainstorm:July 2004 Peterborough rainstorm:150150 millimetres of rain = 5.9 inches millimetres of rain = 5.9 inches
• Oct 1954 Hurricane HazelOct 1954 Hurricane Hazel53 millimetres of rain = 2.1 inches53 millimetres of rain = 2.1 inches
RAINFALL PER HOURRAINFALL PER HOUR
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GLOBAL CAT LOSS TREND BEEN STEADILY RISING
Source: Swiss Re Sigma
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GLOBAL CAT LOSS TRENDInsured Natural Cat Loss Development
Source: Swiss Re Sigma
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CAT EXPOSURE IN NORTH AMERICA IS ABSOLUTELY
ENORMOUS
(Originals of this map can be ordered from Risk Management Solutions)
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CANADIAN REINSURANCE MARKET – 2006 RENEWALS
• Reinsurance renewalpricing for treaties renewing on January 1stincreased – but much lessthan originallyexpected.
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EVERYONE WAS HAPPY!EVERYONE WAS HAPPY!
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CANADIAN REINSURANCE MARKET – 2006 RENEWALS• It was a late but “civilized” renewal
season.• Increased retentions were
common.• Several insurers absorbed their
lower layers (i.e. they disappeared from the reinsurance market).
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CANADIAN REINSURANCE CANADIAN REINSURANCE MARKET – 2006 RENEWALSMARKET – 2006 RENEWALS
• Pricing continued to be based on Pricing continued to be based on modeling results → less modeling results → less
volatility volatility and variance in rates.and variance in rates.• Final underwriting decision on Final underwriting decision on many treaties made in London, many treaties made in London, Europe, Bermuda, or the U.S.Europe, Bermuda, or the U.S.• No significant changes in treaty No significant changes in treaty conditions for 2006.conditions for 2006.
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INSURERS’ CONCERNSWHEN BUYING REINSURANCE
1. Price
2. Terms and conditions3. Security
Benfield Report: “Reinsurance Market and Renewals Review – January 2006”
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INSURERS’ CONCERNS
• Insurers no longer consider relationships a key factor when buying reinsurance.
• It’s price, terms and conditions.
• Followed by reinsurer security.
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CANADIAN REINSURANCE MARKET – 2006 RENEWALS
• Canadian Cat rates increased 5% - 20%. • Property “Per Risk” covers: 5% - 10%.• Little change in proportional
commissions.• Casualty rates generally held firm, except
for lower layers, where rates increased about 2% - 10%.
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AVERAGE TREATY RATE CHANGES IN CANADA
-10
0
10
20
30
40
50
%
Cat Auto GL
2002 2003 2004 2005 2006
Source: Various Reinsurers
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AUTO IS NOT A POPULAR LINE WITH
REINSURERS
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REINSURERS CONTINUE TO REINSURERS CONTINUE TO SEE LARGE AUTO CLAIMSSEE LARGE AUTO CLAIMS
.
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AND SOME FUNNY ONES . . .
At least
it wasn’t
far to go
to the
graveyard.
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DRINKING? NOT ME!DRINKING? NOT ME!
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CANADIAN REINSURANCE MARKET – 2006 RENEWALS
• While public is not reporting small collision & comprehensive losses to private insurers (frequency is down) – “fear induced frequency suppression” – reinsurers are seeing higher severity for A.B. and liability losses.
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CANADIAN REINSURANCE MARKET – 2006 RENEWALS
HIGHER SEVERITY• e.g. Laura Browne claim (1997)• $13 million settlement in 2005.• Passenger in a leased car.• $3 M from State Farm; $10 M from
AIG.• Vicarious liability involved.
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CHARACTERISTICS OF TODAY’S INSURERS
• They are retaining a lot more risk.• Common to see $2 to $10 million retentions.• They don’t buy as much reinsurance.• Sophisticated analytical tools help to
increase insurers’ comfort level in retaining higher levels of risk.
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CHARACTERISTICS OF TODAY’S REINSURERS
• Also retaining more risk. Getting larger.
• Top 20 markets write 80% of business.
• Retro market capacity is very limited and expensive.
• Disciplined underwriting.• Focused on bottom-line results.
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CHARACTERISTICS OF TODAY’S REINSURERS
• Require considerably more underwriting information.
• Pricing is still heavily influenced by risk modeling.
• Little room for rate negotiation.
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CHARACTERISTICS OF TODAY’S REINSURERS
• Their expenses and costs of doing business are increasing.
• Retrocessional costs up 50% - 100% for 2006.
• Reinsurers fully aware the world-wide demand for their product is currently declining. Some are diversifying.
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CHARACTERISTICS OF TODAY’S REINSURERS
• As cedents merge, or increase their retentions and/or move from Quota Share/Surplus treaties to Excess of Loss covers, this reduces the amount of premium in the reinsurance marketplace.
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WHAT DOES 2006 HOLD FOR REINSURERS?
• The biggest risk is the most predictable:
- competition and the cyclical nature of the market!
• The new reinsurers in Bermuda (“Class of 2005”) have yet to make their influence felt on the market. (The key word is “YET”.)
• Will aggressive weather patterns continue:- i.e. Cat frequency and severity?
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WHAT DOES 2006 HOLD FOR REINSURERS?
• Expect reinsurance rates to remain firm in 2006 – and likely increase further.
• When less new capital becomes available to reinsurers, this will increase rates.
• Large losses destruction of capital replenishment of capital unavoidable rate increases.
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WHAT DOES 2006 HOLD FOR INSURANCE INDUSTRY?
• Profitability should be good – unless catastrophe activity sets new records.
• Investment income will decrease.• R.O.E. will be less than 10%.• Don’t expect many M & A’s. (One big one?)
• Bigger companies expected to grow their market share organically – not by acquisition.
Source: I.I.I. – January 10, 2006
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TIME TO RE-EVALUATE TIME TO RE-EVALUATE THIS DIVERSIFICATION THIS DIVERSIFICATION
STRATEGY?STRATEGY?• WHOOPS!• One year ago A.M. Best reported:
“The business mix is changing. Reinsurers are seeking more life business to offset the impact of the P&C cycle.”
Source: Best Week of June 20, 2005
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BACK TO THEBACK TO THE DRAWING BOARD? DRAWING BOARD?
• In January, 2006, A.M. Best noted:
“The I.I.I. envisions global life insurance losses of as much as $133 billion from a avian flu pandemic.”
Source: Best Week of January 23, 2006
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“Financially weak life insurance companies wouldn’t survive a severe avian flu outbreak.”
“ . . . the life business suddenly seems a lot less secure.”
Source: Best Week of January 23, 2006
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