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23 February 2009
I'm here just for the horses and gin...
Not really, but now that I have your attention: With the end of Q1 being right around the corner, note that 1212 will be traveling to visit with clients through 27/2 (or 2/27 for those of you in the USA)... Our postings about the comings and goings of the reinsurance marketplace will be few and far between during this time, but stay tuned -- we will be back shortly with lots to talk about!
CNBC: AIG to Announce USD 60 Billion Loss; Seek More US Funds
AIG Seeks More US Funds As Record Loss Looms: "American Insurance Group is in discussions with the government to secure additional funds so it can keep operating after next Monday, when it will report the largest loss in U.S. corporate history, CNBC has learned.
Sources close to the company said the loss will be near $60 billion due to writedowns on a variety of assets including commercial real estate.
That massive loss is likely to spur downgrades in its insurance and credit ratings that will force AIG to raise collateral that it doesn't have.
In addition, if AIG's book value falls below a certain level, as it seems certain to do, it will trigger default in certain of its debt instruments, say people familiar with the situation.
All of this adds up to a huge headache for the Federal Reserve and Treasury, which have already provided over $150 billion of assistance to AIG."
Source: CNBC.com
Sources close to the company said the loss will be near $60 billion due to writedowns on a variety of assets including commercial real estate.
That massive loss is likely to spur downgrades in its insurance and credit ratings that will force AIG to raise collateral that it doesn't have.
In addition, if AIG's book value falls below a certain level, as it seems certain to do, it will trigger default in certain of its debt instruments, say people familiar with the situation.
All of this adds up to a huge headache for the Federal Reserve and Treasury, which have already provided over $150 billion of assistance to AIG."
Source: CNBC.com
Moody's downgrades Swiss Re
Moody's downgrades Swiss Re: "Moody's Investors Service has downgraded the insurance financial strength and senior debt ratings of Swiss Re.
The rating agency has downgraded the Swiss reinsurer from Aa3 to A1 as a result of the group’s “weakening profitability, capital adequacy, and financial flexibility metrics”, said a statement.
While Moody's expects the group's core reinsurance activities to continue to perform well, a statement says: “It sees the potential in the short-term for overall profitability to be suppressed by further mark-to-market losses'.
The statement says: 'Moody's also believes that, notwithstanding an excellent market position, the group's business franchise may be weakened to an extent by its year-end 2008 results, although Swiss Re remains in a good position to take advantage of improved market conditions. The negative outlook is principally driven by the challenge of running off the group's legacy portfolios.”
Swiss Re reported a net loss of £509m during 2008, with legacy unit marked losses of £3.5bn."
Source: Money Marketing
The rating agency has downgraded the Swiss reinsurer from Aa3 to A1 as a result of the group’s “weakening profitability, capital adequacy, and financial flexibility metrics”, said a statement.
While Moody's expects the group's core reinsurance activities to continue to perform well, a statement says: “It sees the potential in the short-term for overall profitability to be suppressed by further mark-to-market losses'.
The statement says: 'Moody's also believes that, notwithstanding an excellent market position, the group's business franchise may be weakened to an extent by its year-end 2008 results, although Swiss Re remains in a good position to take advantage of improved market conditions. The negative outlook is principally driven by the challenge of running off the group's legacy portfolios.”
Swiss Re reported a net loss of £509m during 2008, with legacy unit marked losses of £3.5bn."
Source: Money Marketing
Fitch downgrades MAPFRE to A+
Fitch downgrades MAPFRE to A+s: "Fitch Ratings Ltd. has downgraded the insurer financial strength rating of Spanish insurer MAPFRE S.A. ’s operating subsidiaries to A+, from AA-, due in part to its weakened capital adequacy at the end of 2008, the rating agency said Monday.
Fitch also downgraded MAPFRE S.A.'s long-term issuer default rating to A-, from A+. The outlook on both ratings was revised to negative, from stable.
The negative outlook reflects the worsening economic conditions in Spain and Latin America, which are MAPFRE’s main markets. The Madrid-based insurer’s capital adequacy declined last year, due to the acquisition of U.S.-based Commerce Group Inc., Fitch said.
Overall, Fitch noted that MAPFRE has done well to weather the financial market turbulence due to its generally conservative investment portfolio, with only around 8.5% allocated to shares at the start of 2007."
Source: Business Insurance
Fitch also downgraded MAPFRE S.A.'s long-term issuer default rating to A-, from A+. The outlook on both ratings was revised to negative, from stable.
The negative outlook reflects the worsening economic conditions in Spain and Latin America, which are MAPFRE’s main markets. The Madrid-based insurer’s capital adequacy declined last year, due to the acquisition of U.S.-based Commerce Group Inc., Fitch said.
Overall, Fitch noted that MAPFRE has done well to weather the financial market turbulence due to its generally conservative investment portfolio, with only around 8.5% allocated to shares at the start of 2007."
Source: Business Insurance
Excess/Surplus Lines Prices to Rise by as Much as 15 Percent
NAPSLO Preview: Excess/Surplus Lines Prices to Rise by as Much as 15 Percent : "Buyers looking to the excess/surplus markets for coverage that can't be found in or won't be bound by the standard market can expect price increases of up to 15 percent.
Part of the reason for the increase is that carriers are looking to recoup some premium income in the wake of two years of increasing loss ratios, said Curtis Anderson, president-elect of the American Association of Managing General Agents and president of national binding/programs with Itasca, Ill.-based RPS Inc., one of the nation's largest managing general agents.
'The carriers' loss ratios have gone up substantially so they've got to raise rates,' said Anderson, who traveled to London with other AAMGA executives in mid-February for briefings with Lloyd's underwriters.
In 2006, the marketplace posted record profits and combined ratios in the 80s. But in 2007, combined ratios began to move up into the high 90s in some cases. And last year, some ratios exceeded 100 as carriers' investment portfolios tanked along with the stock market.
Anderson also said that several excess/surplus lines underwriters were predicting a hardening of prices in the third or fourth quarter of this year.
'There were a few that said they didn't see any real action occurring until 2010,' said Anderson. 'I prefer not to wait that long. I believe that by the second half of the year we'll start seeing things changing.'"
Source: Risk & Insurance Online
Part of the reason for the increase is that carriers are looking to recoup some premium income in the wake of two years of increasing loss ratios, said Curtis Anderson, president-elect of the American Association of Managing General Agents and president of national binding/programs with Itasca, Ill.-based RPS Inc., one of the nation's largest managing general agents.
'The carriers' loss ratios have gone up substantially so they've got to raise rates,' said Anderson, who traveled to London with other AAMGA executives in mid-February for briefings with Lloyd's underwriters.
In 2006, the marketplace posted record profits and combined ratios in the 80s. But in 2007, combined ratios began to move up into the high 90s in some cases. And last year, some ratios exceeded 100 as carriers' investment portfolios tanked along with the stock market.
Anderson also said that several excess/surplus lines underwriters were predicting a hardening of prices in the third or fourth quarter of this year.
'There were a few that said they didn't see any real action occurring until 2010,' said Anderson. 'I prefer not to wait that long. I believe that by the second half of the year we'll start seeing things changing.'"
Source: Risk & Insurance Online
Renaissance Re extends CEO contract
Renaissance Re extends CEO contract: "RenaissanceRe Holdings, the Bermudian reinsurer, said it has extended its employment agreement with president and chief executive Neill Currie until February 22, 2014.
Mr. Currie's prior employment agreement was scheduled to expire on February 22, 2010, subject to automatic renewals for one-year terms.
Mr. Currie, a co-founder of RenaissanceRe, has served as its CEO since November 2005."
Source: Reinsurance Magazine
Mr. Currie's prior employment agreement was scheduled to expire on February 22, 2010, subject to automatic renewals for one-year terms.
Mr. Currie, a co-founder of RenaissanceRe, has served as its CEO since November 2005."
Source: Reinsurance Magazine
Nigeria: Re-Insurers Walk Away From Debtor Insurers
Nigeria: Re-Insurers Walk Away From Debtor Insurers: "The game is up for insurance companies that have the habit of owing re-insurers, or delay payment of their treaties as re-insurer have decided to walk out and away from such underwriters.
Some insurance companies also known as cedants that are usually in the habit of owing reinsurance companies by not updating their treaty arrangement may no longer find the business attractive as the latter have decided to do the business on a cash-and-carry basis. Reinsurance companies are ready to walk away from such debtors insurance companies henceforth even as underwriters become increasingly concerned with protecting their capital as the effects of the financial turmoil bite harder.
The National Insurance Commission (NAICOM) monitors and selects insurance companies for government accounts including the Nigerian National Petroleum Corporation (NNPC) based on criteria which include evidence of treaty placement by underwriters.
The guidelines for participation of insurance companies stipulate some requirements that must be met before any insurance company can take part in government accounts and other big businesses as follow; that company must be adequately capitalised for the classes of business it registered to transact; must have adequate and valid reinsurance treaty arrangement with premium fully paid, among others. And the law is very clear on that. Mr. Fola Daniel, Commissioner for Insurance does not joke about insurance companies having inadequate reinsurance treaty arrangements."
Source: allAfrica.com
Some insurance companies also known as cedants that are usually in the habit of owing reinsurance companies by not updating their treaty arrangement may no longer find the business attractive as the latter have decided to do the business on a cash-and-carry basis. Reinsurance companies are ready to walk away from such debtors insurance companies henceforth even as underwriters become increasingly concerned with protecting their capital as the effects of the financial turmoil bite harder.
The National Insurance Commission (NAICOM) monitors and selects insurance companies for government accounts including the Nigerian National Petroleum Corporation (NNPC) based on criteria which include evidence of treaty placement by underwriters.
The guidelines for participation of insurance companies stipulate some requirements that must be met before any insurance company can take part in government accounts and other big businesses as follow; that company must be adequately capitalised for the classes of business it registered to transact; must have adequate and valid reinsurance treaty arrangement with premium fully paid, among others. And the law is very clear on that. Mr. Fola Daniel, Commissioner for Insurance does not joke about insurance companies having inadequate reinsurance treaty arrangements."
Source: allAfrica.com
Comp Reinsurance Prices Stabilize
Comp Reinsurance Prices Stabilize: "Prices for workers’ compensation reinsurance at Jan. 1 renewals were relatively unchanged, Guy Carpenter reinsurance brokerage reported.
The firm predicted that the stabilization of pricing seen on Jan. 1 should continue for subsequent renewals throughout the year.
Rates on line (ROL) declined slightly for multiclaimant catastrophe programs, and for single-claimant exposed programs, if rates did change, any reductions were slight, Guy Carpenter said.
Reinsurers, according to the brokerage, had sought to turn the tide of rate and (ROL) decreases of 10 percent or more over the last several renewals, but the goal of ceding companies was to lower (or at most maintain) expiring rates on typically decreasing subject premium volumes for larger programs.
Guy Carpenter said it found that multiclaimant workers’ compensation catastrophe layer ROLs dropped on average by 2.3 percent, but the ratio of ROL increases to ROL decreases was fairly balanced.
Forty-three percent of programs renewed with increasing ROLs, while 46 percent renewed with decreases. Eleven percent renewed as expiring."
Source: Incur Insurance News
The firm predicted that the stabilization of pricing seen on Jan. 1 should continue for subsequent renewals throughout the year.
Rates on line (ROL) declined slightly for multiclaimant catastrophe programs, and for single-claimant exposed programs, if rates did change, any reductions were slight, Guy Carpenter said.
Reinsurers, according to the brokerage, had sought to turn the tide of rate and (ROL) decreases of 10 percent or more over the last several renewals, but the goal of ceding companies was to lower (or at most maintain) expiring rates on typically decreasing subject premium volumes for larger programs.
Guy Carpenter said it found that multiclaimant workers’ compensation catastrophe layer ROLs dropped on average by 2.3 percent, but the ratio of ROL increases to ROL decreases was fairly balanced.
Forty-three percent of programs renewed with increasing ROLs, while 46 percent renewed with decreases. Eleven percent renewed as expiring."
Source: Incur Insurance News
New Resolution Requires That Reinsurance Contracts Conform To Argentinean Law and Jurisdiction
New Resolution Requires That Reinsurance Contracts Conform To Argentinean Law and Jurisdiction: "Recent Resolution 33.320/2008, however, provides that all new reinsurance contracts involving local insurers, whether treaty or facultative, must stipulate that the contract is subject to Argentinean law and jurisdiction. Inclusion of such a choice of law and jurisdiction clause, now mandatory, likely means that any dispute under a reinsurance contract regarding an Argentinean risk will have to be resolved in an Argentinean court or arbitral forum.
In issuing the resolution, the local regulator stated the following principles underlying its position:
* A reinsurance contract is the equivalent of liability insurance to cover a ceding insurer’s risk of debt or damages resulting from its assumed liability under the conditions of an insurance contract;
* The location of the reinsurer’s risk is the reinsured’s place of business because it is the center of the economic activities that may cause damages;
* The judge appointed to oversee any disputes arising between the insurer and the reinsurer should be from the same jurisdiction as the ceding insurer because he will have jurisdiction where the contract was executed and will know the customs and usages of the relevant market;
* The insurer’s business headquarters for these purposes is where payment for credits under the contract are verified, premiums are paid and indemnities are received.
Although the policies underlying the Resolution would seem to equally apply, it should be noted that the Resolution is not clear as to whether it applies to renewals of already-existing reinsurance contracts."
Source: Yeree
In issuing the resolution, the local regulator stated the following principles underlying its position:
* A reinsurance contract is the equivalent of liability insurance to cover a ceding insurer’s risk of debt or damages resulting from its assumed liability under the conditions of an insurance contract;
* The location of the reinsurer’s risk is the reinsured’s place of business because it is the center of the economic activities that may cause damages;
* The judge appointed to oversee any disputes arising between the insurer and the reinsurer should be from the same jurisdiction as the ceding insurer because he will have jurisdiction where the contract was executed and will know the customs and usages of the relevant market;
* The insurer’s business headquarters for these purposes is where payment for credits under the contract are verified, premiums are paid and indemnities are received.
Although the policies underlying the Resolution would seem to equally apply, it should be noted that the Resolution is not clear as to whether it applies to renewals of already-existing reinsurance contracts."
Source: Yeree
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