The reinsurance industry this past year weathered near-record catastrophe losses, catastrophe-model changes and the pressures of a challenging macroeconomic environment—but unlike 2005, reinsurers were prepared in 2011, according to a report by Guy Carpenter.
Despite challenging conditions, the reinsurance sector remains fully functional and adequately capitalized, Alex Moczarski, Guy Carpenter's president & CEO, notes in his foreword to the global-reinsurance intermediary's Jan. 2012 Reinsurance Renewal Report.
Moczarski notes that reinsurers' performance in the year is a testament to the resiliency of the market, clients' ability to differentiate themselves, and the ability of clients and brokers to match clients' needs with the right reinsurer.
In the Property sector, the events of 2011 had a significant impact on Jan. 1 renewals. The approach to the Property market, particularly Property Catastrophe business, has evolved significantly since Hurricane Andrew with the gradual incorporation of technical and model-based underwriting.
In the United States, while the country did not experience a single large cat event in 2011 as did some other regions, there was a high frequency of events that impacted many companies, the report says.
Moczarski says the positive industry response to the trying events of 2011 was due in part to the strengthening of enterprise risk management practices over the last few years.
The report says the reinsurance sector is increasingly assessing nontraditional reinsurance products, with growing interest in capital-market solutions. This trend is expected to continue in 2012, with significant growth anticipated in the Catastrophe Bond and Industry Loss Warranty markets.
In the current environment, the report says, it is critical to ensure that each company understands how best to navigate this marketplace with a thorough understanding of its own risk, as there is not as consistent an approach to measuring the value of the risk.
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