Author Archives: Emily Holbrook

About Emily Holbrook

Emily Holbrook is a former editor of the Risk Management Monitor and Risk Management magazine. You can read more of her writing at EmilyHolbrook.com.
Игроки всегда ценят удобный и стабильный доступ к играм. Для этого идеально подходит зеркало Вавады, которое позволяет обходить любые ограничения, обеспечивая доступ ко всем бонусам и слотам.

Risk Management’s April Issue is Online

Posted on by

APRIL COVER

The April issue of Risk Management magazine is now available online.

This issue contains in-depth features covering:

  • The broken banking system — can it be fixed?
  • Finding and fixing corporate misconduct
  • Product safety
  • Nanotechnology — its potential and its hazards
  • Supply chain risks
  • RIMS 2010 Boston preview

There are also several columns in this issue that examine:

  • The Toyota recall
  • Risk management within the energy industry
  • Financial risks for insurers
  • A timeline of deadly earthquakes throughout history
  • A risk atlas illustrating pollution enforcement in the UK

The magazine is best viewed in its digital format, available by clicking here or by visiting Risk Management magazine’s homepage.

Reinsurance Rates on the Decline . . . Still

Posted on by

We heard it in January — reinsurance rates across most lines of the property/casualty business around the world was declining, and according to Guy Carpenter & Company, that decline is continuing.

In the report, “April 1 Reinsurance Renewals: Rates Lower; Returns Under Pressure,” the risk and reinsurance company covers regional developments as well as key issues and trends, which includes:

JAPAN
•    Rates at the April 1 renewal showed a declining trend in most classes.  Specific changes varied by line of business, and there were occasional exceptions on problematic lines, such as marine hull proportional treaties.
•    Total capacity sought by buyers for their major catastrophe exposures was similar to the expiring year, with reductions by some cedents and increases by others.
•    The effect of the Chilean earthquake was limited, though it is possible that timing may have played a part, as many of the major placements were quoted, priced and, in some cases, completed before the effects of this loss could be fully realized.
•    Overall, the renewal in Japan was smooth and perhaps easier for buyers than in many previous years, reflecting a generally softer market.  With few major issues or changes to terms and conditions, renewals were completed within similar timetables as compared to prior years.
US PROPERTY CATASTROPHE
•    Pricing for U.S. property catastrophe reinsurance at April 1 saw the continuation of the decreasing pricing trend in evidence at January 1.  Capacity continued to be plentiful – a critical element in companies’ ability to secure favorable terms and conditions.  Individual renewals vary significantly, based on each company’s own experience and positioning.
•    U.S. catastrophe pricing for nationwide companies decreased 8 percent when not factoring in the impact of the catastrophe model changes, and by 13 percent on average when adjusted for these changes.
LATIN AMERICA
•    Although not a significant source of April 1 renewals, the Latin American region provides an early indication of the implications of the Chilean earthquake for pricing and terms and conditions.  Preliminary estimates of the aggregate loss arising from the earthquake vary widely. The market may continue to evolve going into the July 1 renewals.  Overall terms and conditions in the region as a whole appear to be only modestly affected and, in some cases, unchanged by the earthquake. However, pricing varies by country.
REPUBLIC OF KOREA
•    In the property catastrophe segment, price changes ranged from decreases of 7.5 percent to increases of 2.5 percent, reflecting the variety of changes and experiences that included increased aggregates, deductibles and, in some cases, limits.
•    Korea’s property risk segment was affected by the Samsung loss of late March 2009, which occurred too late to be reflected in the April 1, 2009 renewal.  There was a second large loss in November 2009. Both losses were factored into the April 1, 2010 renewal, and loss affected treaties sustained increases of 10 to 15 percent. For loss-free treaties, rates were down by 5 to 10 percent.
•    Pricing was down by 10 to 20 percent in the liability market.  Loss experience has been light, making the business more attractive to underwriters.

JAPAN

  • Rates at the April 1 renewal showed a declining trend in most classes.  Specific changes varied by line of business, and there were occasional exceptions on problematic lines, such as marine hull proportional treaties.
  • Total capacity sought by buyers for their major catastrophe exposures was similar to the expiring year, with reductions by some cedents and increases by others.
  • The effect of the Chilean earthquake was limited, though it is possible that timing may have played a part, as many of the major placements were quoted, priced and, in some cases, completed before the effects of this loss could be fully realized.

US PROPERTY CATASTROPHE

  • Pricing for U.S. property catastrophe reinsurance at April 1 saw the continuation of the decreasing pricing trend in evidence at January 1.  Capacity continued to be plentiful – a critical element in companies’ ability to secure favorable terms and conditions.  Individual renewals vary significantly, based on each company’s own experience and positioning.
  • U.S. catastrophe pricing for nationwide companies decreased 8 percent when not factoring in the impact of the catastrophe model changes, and by 13 percent on average when adjusted for these changes.

LATIN AMERICA

  • Although not a significant source of April 1 renewals, the Latin American region provides an early indication of the implications of the Chilean earthquake for pricing and terms and conditions.  Preliminary estimates of the aggregate loss arising from the earthquake vary widely. The market may continue to evolve going into the July 1 renewals.  Overall terms and conditions in the region as a whole appear to be only modestly affected and, in some cases, unchanged by the earthquake. However, pricing varies by country.

REPUBLIC OF KOREA

  • In the property catastrophe segment, price changes ranged from decreases of 7.5 percent to increases of 2.5 percent, reflecting the variety of changes and experiences that included increased aggregates, deductibles and, in some cases, limits.
  • Korea’s property risk segment was affected by the Samsung loss of late March 2009, which occurred too late to be reflected in the April 1, 2009 renewal.  There was a second large loss in November 2009. Both losses were factored into the April 1, 2010 renewal, and loss affected treaties sustained increases of 10 to 15 percent. For loss-free treaties, rates were down by 5 to 10 percent.
  • Pricing was down by 10 to 20 percent in the liability market.  Loss experience has been light, making the business more attractive to underwriters.

As Chris Klein, global head of business intelligence at Guy Carpenter said, “There are several significant renewals at April 1 in the U.S. that did not show signs of impact from the recent global loss activity. There was some evidence of price tightening in parts of Latin America. The Chile situation remains uncertain, and earthquake losses generally develop more slowly than wind events.  Up to half of catastrophe loss ratio budgets were consumed, causing reduced headroom for a larger catastrophe later in the year.  This scenario, along with buoyant balance sheets, lower investment yields and thinner reserve releases, will put pressure on returns — sustaining active capital management and perhaps, in time, stabilizing the market.”

We will keep an eye on this potential stabilizing of reinsurance rates for the P/C market — stay tuned.

Grasshoppers a Major Risk for Western Farmers

Posted on by

grasshopper

Officials throughout the West are claiming that grasshoppers will likely hatch in bigger numbers than any year since 1985 — a year that saw “hundreds of millions of dollars in damage when [the grasshoppers] devoured corn, barley, alfalfa, beets — even fence posts and the paint off the sides of barns.”

The article in the Wall Street Journal cites a federal survey of 17 states taken last fall that found dangerously high numbers of adult grasshoppers in farming states throughout the West. Taking into account the fact that the female grasshopper lays hundreds of eggs — the spawning of these insects could be catastrophic.

A rancher near Buffalo, Wyo., Mr. Fieldgrove was enjoying a banner year last summer when, seemingly out of nowhere, crawling carpets of hoppers marched onto his rangeland — a harbinger of this year’s infestation. In three weeks, they had eaten every blade of tender, nutritious grass on his 10,000 acres. They also ate his wife’s lilac bushes. “They took it all,” Mr. Fieldgrove said.
Unable to find enough grass, Mr. Fieldgrove’s 200 young calves began to lose weight. He ended up selling them at auction several weeks earlier — and 60 pounds per calf lighter — than planned. And he had to import hay to feed the mother cows he kept on his ranch for the winter.
The grasshoppers cost Mr. Fieldgrove about $30,000 in profit, he said — and local agricultural officials are warning him it could be worse this year.

A rancher near Buffalo, Wyo., Mr. Fieldgrove was enjoying a banner year last summer when, seemingly out of nowhere, crawling carpets of hoppers marched onto his rangeland — a harbinger of this year’s infestation. In three weeks, they had eaten every blade of tender, nutritious grass on his 10,000 acres. They also ate his wife’s lilac bushes. “They took it all,” Mr. Fieldgrove said.

Unable to find enough grass, Mr. Fieldgrove’s 200 young calves began to lose weight. He ended up selling them at auction several weeks earlier — and 60 pounds per calf lighter — than planned. And he had to import hay to feed the mother cows he kept on his ranch for the winter.

The grasshoppers cost Mr. Fieldgrove about $30,000 in profit, he said — and local agricultural officials are warning him it could be worse this year.

Wyoming is one state that refuses to lay in wait for the pesky critters. The cowboy state has allocated $2.7 million towards suppression efforts, including aerial spraying of pesticides. But if Wyoming, along with other western states such as Idaho, Montana, Nebraska and South Dakota, do not receive additional funding for grasshopper suppression, results could be disastrous.

Picture 4 2010 may, unfortunately, become the year of the grasshopper, just as 2005 was the year of the locust. In that year, locusts devastated farms and agricultural businesses from western Africa to eastern Australia, a topic Risk Management covered with an in-depth feature.

We’ll be keeping an eye on this potential agricultural catastrophe — check back for updates.

Insurers Turning to Outside Help for Investments

Posted on by

It seems more and more insurers are choosing to stick with writing policies and collecting premiums while leaving the management of their assets to others.

This is good news for Wall Street since its money managers have watched their asset bases dwindle during the downturn. According to industry estimates stated in The Wall Street Journal, insurers last year outsourced management of more than $1.1 trillion, up from about $980 billion in 2008.

Last year, the company chose BlackRock Inc. to look after $23 billion of bond securities of its nearly $160 billion portfolio. Allstate Corp. got out of the stock-picking business by hiring Goldman Sachs Group Inc. to manage a $5 billion equity portfolio out of its overall $100 billion investment pool.
Other big winners include Conning & Co., of Hartford, Conn.; State Street Global Advisors, part of State Street Corp.; and General Re-New England Asset Management, owned by Warren Buffett’s Berkshire Hathaway Inc.
Deutsche Bank AG and BlackRock are the two biggest money managers for insurers, controlling about $200 billion in insurance assets each, according to data from the money-management firms and Patpatia & Associates, a Berkeley, Calif., consulting firm that tracks insurers’ outside investments and advises them on outsourcing

Last year, the company chose BlackRock Inc. to look after $23 billion of bond securities of its nearly $160 billion portfolio. Allstate Corp. got out of the stock-picking business by hiring Goldman Sachs Group Inc. to manage a $5 billion equity portfolio out of its overall $100 billion investment pool.

Other big winners include Conning & Co., of Hartford, Conn.; State Street Global Advisors, part of State Street Corp.; and General Re-New England Asset Management, owned by Warren Buffett’s Berkshire Hathaway Inc.

Deutsche Bank AG and BlackRock are the two biggest money managers for insurers, controlling about $200 billion in insurance assets each, according to data from the money-management firms and Patpatia & Associates, a Berkeley, Calif., consulting firm that tracks insurers’ outside investments and advises them on outsourcing.

Both Deutsche Bank and BlackRock claim that 2009 was a record year for them in terms of new insurer assets. Goldman Sachs has seen their asset base increase 50% in just a few years. In 2007 Goldman had “five people on the team managing $32 billion of assets; it now has a staff of 38 managing $66 billion.” We can clearly see the increase in insurer assets under management with the following chart:

Picture 3

But not all insurers feel the need to outsource their asset management. Prudential Financial is one example. The company employes a staff of 3,000 to manage it’s $260 billion investment portfolio, along with billions of dollars in assets from other companies. Prudential is a unique exception however, as it considers asset management one of its core business units.

It remains to be seen if 2010 will surpass last year in terms of insurers turning to others to manage their investment portfolio, but all signs are point to yes as most insurers realize outsourcing is more economical.