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The Insurance Market 2002 Hedley French

The Insurance Market 2002 Hedley French. Evidence of Market “Hardening”. Rate increases Restrictions in terms and conditions. Driving factor behind Market “Hardening”. Inadequate pricing Surplus capacity Low premium investment returns Adverse development of reserves

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The Insurance Market 2002 Hedley French

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  1. The Insurance Market 2002Hedley French

  2. Evidence of Market “Hardening” • Rate increases • Restrictions in terms and conditions

  3. Driving factor behind Market “Hardening” • Inadequate pricing • Surplus capacity • Low premium investment returns • Adverse development of reserves • Underwriting for market share

  4. Market Conditions HARD 11 September 2001 SOFT TIME

  5. Post 11th September 2001…

  6. Loss Breakdown Perspective US$bn - Current Day Value EuropeanWindstorm US Terrorism CaliforniaEarthquake NY Hurricane Betsy Agnes Hugo Daria Vivian Murielle Andrew Northridge Georges Lothar Bart Note: Based on the recent estimate of the total loss,by the New York City Partnership and Chamber of Commerce of US$52bn.

  7. Loss Estimates • New York City Partnership & Chamber of Commerce estimate the loss at US$52bn • Range of loss estimates between US$30bn up to US$100bn

  8. Loss Breakdown Perspective US$ 52bn US$bn - Current Day Value EuropeanWindstorm US Terrorism CaliforniaEarthquake NY Hurricane Betsy Agnes Hugo Daria Vivian Murielle Andrew Northridge Georges Lothar Bart

  9. Insurer Loss Estimates (US$ Net Loss) Insurer Early Estimate Latest Estimate % Change of Loss ACE 400m 637m 59% AIG 500m 820m 64% Allianz 635m 1,323m 108% Berkshire Hathaway 2,200m 2,400m 9% Chubb 150m 645m 330% Hannover Re 363m 363m Unchanged Lloyd’s 1,908m 2,486m 30% Munich Re 908m 1,468m 62% Partner Re 375m 400m 7% Royal & SunAlliance 217m 340m 57% SCOR 175m 200m 14% Swiss Re 1,200m 1,607m 34% XL 650m 750m 15% Note: Where the Early Estimate was a range of figures the mid point has been taken.

  10. US Terrorism Incident Reported Losses US$52bn Unreported US$18bn Reinsurers US$23bn US$34bn Primary Insurers US$11bn

  11. Market Cycle - Post 11 September 2001 HARD 11 September 2001 SOFT Jan 2001 Jan 2002 Jan2003 Jan 2004

  12. New Capital entering the Market • Approx $30bn raised since the US Terrorism Incidents • US$11 into Bermuda (US$9.6bn to finance start-up operations.)

  13. New Ventures in Bermuda • AXIS Specialty • AWAC • Endurance Specialty • Da Vinci Re • Arch Reinsurance • Montpellier Re • GoshawK

  14. Other Long Term Consequences • Insurer Insolvencies • Reinsurer Failures • Exhaustion of Reinsurance Programmes • Coverage for Sabotage & Terrorism • “Distressed Business” • Non-concurrency • Coverage • Limits

  15. Sabotage and Terrorism coverage non-concurrency Original Placement IncludesSabotage & Terrorism Exposure Coverage Gap Treaty Reinsurance IncludesSabotage & Terrorism Exposure Treaty Reinsurance ExcludesSabotage & Terrorism Exposure 1st Jan 2001 1st Jan 2002 1st Jan 2003

  16. The Insurance Market 2002 Conclusion

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