2011 Catastrophe Loss Activity
Impacts on P/C Insurance Markets
Insurance Federation of New York
Insurance Information Institute
January 20, 2012
Download at www.iii.org/presentations
Robert P. Hartwig, Ph.D., CPCU, President & Economist
Insurance Information Institute  110 William Street  New York, NY 10038
Tel: 212.346.5520  Cell: 917.453.1885  bobh@iii.org  www.iii.org
Global Catastrophe Loss
Developments and Trends
2011 Will Rewrite Catastrophe Loss
and Insurance History
But Will Losses Turn the Market?
2
Global Catastrophe Loss Summary:
2011
 2011 Was the Highest Loss Year on Record for Economic Losses Globally
 Extraordinary accumulation of severe natural catastrophe: Earthquakes, tsunami, floods
and tornadoes are the primary causes of loss
 $380 Billion in Economic Losses Globally (New Record)
 New record, exceeding the previous record of $270B in 2005
 $105 Billion in Insured Losses Globally
 2011 losses were 2.5 times 2010 insured losses of $42B
 Second only to 2005 on an inflation adjusted basis (new record on a unadjusted basis)
 Over 5 times the 30-year average of $19B
 $72.8 Billion in Economic Losses in the US
 Represents a 129% increase over the $11.8 billion amount through the first half of 2010
 $35.9 Billion in Insured Losses in the US Arising from 171 CAT Events
 Fifth highest year on record
 Represents 51% increase over the $23.8 billion total in 2010
Source: Munich Re; Insurance Information Institute.
3
Natural Loss Events, 2011
World Map
Winter Storm Joachim
France, Switzerland,
Germany, 15–17 Dec.
Wildfires
Canada, 14–22 May Severe storms, tornadoes
USA, 20–27 May
Hurricane Irene
USA, Caribbean
22 Aug.–2 Sept.
Floods
USA, April–May
Drought
Severe storms, tornadoes
USA, Oct. 2010–
USA, 22–28 April
ongoing
Flash floods, floods
Italy, France, Spain
4–9 Nov.
Earthquake
Turkey
23 Oct.
Earthquake, tsunami
Japan, 11 March
Wildfires
USA, April/Sept.
Floods
Pakistan
Aug.–Sept.
Floods, flash floods
Australia,
Dec. 2010–Jan. 2011
Landslides, flash floods
Brazil, 12/16 Jan.
Natural catastrophes
Selection of significant
loss events (see table)
Source: MR NatCatSERVICE
Cyclone Yasi
Australia, 2–7 Feb.
Floods
Thailand
Aug.–Nov.
Floods, landslides
Guatemala, El Salvador
11–19 Oct.
Number of Events: 820
Tropical Storm Washi
Philippines, 16–18 Dec.
Drought
Somalia
Oct. 2010–Sept. 2011
Geophysical events
(earthquake, tsunami, volcanic activity)
Meteorological events
(storm)
Earthquake
New Zealand, 22 Feb.
Earthquake
New Zealand, 13 June
Hydrological events
(flood, mass movement)
Climatological events
(extreme temperature, drought, wildfire)
4
Natural Catastrophes Worldwide 2011
Insured losses US$ 105bn - Percentage distribution per continent
2%
44%
In 2011, just 37% of
insured natural
catastrophe losses
were in the
Americas, barely half
the average of 66%
over the prior 30
years (1981-2010)
Continent
America (North and South
America)
Europe
Africa
37%
<1%
17%
Insured losses
US$ m
40,000
2,000
Minor damages
Asia
45,000
Australia/Oceania
18,000
In 2011, 61% of insured
natural catastrophe losses
were in the Asia/Pacific
region, nearly 3.5 times the
average of 13% over the
prior 30 years (1981-2010)
Source: MR NatCatSERVICE
7
Natural Catastrophes Worldwide 1980 – 2011
Insured losses US$ 870bn - Percentage distribution per continent
16%
13%
66%
<1%
5%
Continent
America (North and South
America)
Europe
Africa
Asia
Australia/Oceania
Insured losses
US$ m
566,000
146,000
2,000
115,000
41,000
In 2011, 61% of natural
catastrophe losses were
in the Asia/Pacific region,
nearly 3.5 times the
average of 13% over the
prior 30 years (1981-2010)
Source: MR NatCatSERVICE
8
Top 16 Most Costly World Insurance
Losses, 1970-2011**
(Insured Losses, 2011 Dollars, $ Billions)
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
Taken as a single event, the
Spring 2011 tornado and
thunderstorm season would
likely become the 5th
costliest event in global
insurance history
5 of the top 14 most
expensive
catastrophes in world
history have occurred
within the past 2 years
$47.6
$37.5
$19.1
$11.9
$9.7 $10.0
$9.3
$8.5
$8.3
$8.1
$7.7
Hugo
(1989)
Winter
Storm
Daria
(1991)
Chile
Quake
(2010)
$21.3
$24.0 $25.0
$13.0 $13.1
Ivan
Typhoon Charley Thailand Wilma
New Ike
Northridge Spring WTC
(2004) Mirielle (2004) Floods (2005) Zealand (2008) (1994)Tornadoes/ Terror
(1991)
(2011)
Quake
Storms Attack
(2011)
(2011) (2001)
*Average of range estimates of $35B - $40B as of 1/4/12; Privately insured losses only.
**Figures do not include federally insured flood losses.
Sources: Swiss Re sigma 1/2011; Munich Re; Insurance Information Institute research.
Andrew Japan Katrina
(1992) Quake, (2005)
Tsunami
(2011)*
10
Worldwide Natural Disasters,
1980 – 2011
Number of Events
There were 820
events in 2011
1 200
1 000
800
600
400
200
1980
1982
1984
Geophysical events
(Earthquake, tsunami,
volcanic eruption)
Source: MR NatCatSERVICE
1986
1988
1990
1992
1994
Meteorological events
(Storm)
1996
1998
2000
2002
Hydrological events
(Flood, mass
movement)
2004
2006
2008
2010
Climatological events
(Extreme temperature,
drought, forest fire)
11
U.S. Insured Catastrophe
Loss Update
2011 Was One of the Most Expensive
Years on Record
13
Top 14 Most Costly Disasters
in U.S. History
(Insured Losses, 2011 Dollars, $ Billions)
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
Taken as a single event, the Spring
2011 tornado and storm season are is
the 4th costliest event in US
insurance history
$19.1
$4.3
$4.4
$5.5
$6.5
Irene
(2011)
Jeanne
(2004)
Frances
(2004)
Rita
(2005)
$7.7
$8.5
$9.0
Hugo
(1989)
Ivan
(2004)
Charley
(2004)
Hurricane Irene became
the 11th most expense
hurricane in US history
$21.3
$47.6
$24.0 $25.0
$11.9 $13.1
Wilma
(2005)
Ike
Northridge Spring
9/11
(2008)
(1994) Tornadoes Attack
& Storms* (2001)
(2011)
Andrew
(1992)
Katrina
(2005)
*Losses will actually be broken down into several “events” as determined by PCS. Includes losses for the period April 1 – June 30.
Sources: PCS; Insurance Information Institute inflation adjustments.
14
Natural Disasters in the United States,
1980 – 2011
Number of Events (Annual Totals 1980 – 2011)
300
There were 117 natural
disaster events in 2011
250
Number
200
150
100
37
8
50
51
2
1980
1982
1984
1986
1988
Geophysical
(earthquake, tsunami,
volcanic activity)
Source: MR NatCatSERVICE
1990
1992
1994
1996
1998
Meteorological (storm)
Hydrological
(flood, mass movement)
2000
2002
2004
2006
2008
2010
Climatological
(temperature extremes,
drought, wildfire)
15
Losses Due to Natural Disasters in the US,
1980–2011 (Overall & Insured Losses)
(Overall and Insured Losses)
(2011 Dollars, $ Billions)
2011 was the 5th most
expensive year on
record for insured
catastrophe losses in
the US.
Approximately 50% of
the overall cost of
catastrophes in the
US was covered by
insurance in 2011
2011
Overall Losses: $72.8 Bill
Insured Losses: $35.9 Bill
Insured losses (in 2011 values)
Overall losses (in 2011 values)
Source: MR NatCatSERVICE
© 2011 Munich Re
16
US Insured Catastrophe Losses
($ Billions, 2011 Dollars)
$100
$32.6
$14.1
$28.5
$10.3
$11.2
$71.7
$32.9
$15.9
$7.4
$6.0
$11.3
$14.0
$3.7
$10.7
$12.3
$8.6
$7.8
$4.7
$13.7
$40
$25.8
$36.9
$60
$33.9
$80
$20
Record Tornado
Losses Caused
2011 CAT Losses
to Surge
$7.3
$120
$100.0
$100 Billion CAT Year is
Coming Eventually
$0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11*20??
US CAT Losses in 2011 Were the 5th Highest in US History on An
Inflation Adjusted Basis
*PCS estimate through Sept. 30, 2011.
Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and
personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.)
Sources: Property Claims Service/ISO; Insurance Information Institute.
18
Natural Disaster Losses in the
United States: 2011
Number of
Events
Fatalities
Estimated Overall
Losses (US $m)
Estimated Insured
Losses (US $m)
Severe
Thunderstorm
69
617
46,548
25,813
Winter Storm
9
67
2,708
2,017
Flood
14
20
2,705
535
Earthquake
5
1
257
50
Tropical Cyclone
3
0
10,700
5,510
Wildfire
58
15
1,922
855
Other
2
33
8,000
1,000
As of Jan. 1, 2012
Source: MR NatCatSERVICE
19
2011’s Most Expensive Catastrophes,
Insured Losses
$7,300
Thunderstorms, Apr. 22-26
$6,900
Thunderstorms, May 20-27
$5,000
Hurricane Irene, Aug. 26-28**
$2,000
Thunderstorms, Apr. 3-5
$1,510
Thunderstorms, Apr. 8-11
$1,400
Thunderstorms, Apr. 14-16
$1,200
Thunderstorms, Jun. 16-22
Texas Drought, 2011*
$1,000
Thunderstorms, Jul. 10-14
$980
Winter Storm, Jan. 31-Feb. 3
$975
Thunderstorms, Aug. 18-19
$840
Thunderstorms, Apr. 19-20
$830
Wildfire, Sep. 4-19
$530
Flooding, April*
$500
$0
Includes
approximately
$2B in losses
for May 22
Joplin tornado
$1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000
**Includes $700 million in flood losses insured through the National Flood Insurance Program.
Source: PCS except as noted by “*” which are sourced to Munich Re; Insurance Information Institute.
Includes
$1.65B in AL,
mostly in the
Tuscaloosa
and
Birmingham
areas
8.1
4.4
2010
2008
2006
1.6
2.6
2.7
3.3
3.3
1.6
2002
2004
1.6
2000
1998
1.0
1996
5.0
5.4
3.6
2.9
2.3
2.1
1990
1992
1.2
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1.2
0.4
0.8
1.3
0.3
0.4
0.7
1.5
1.0
0.4
0.4
0.7
1.8
1.1
0.6
1.4
2.0
1.3
2.0
0.5
0.5
0.7
1966
3.0
3.6
0.4
1964
1962
0.8
1.1
1.1
0.1
0.9
1
0
1960
5
4
3
2
5.9
1960s: 1.04
1970s: 0.85
1980s: 1.31
1990s: 3.39
2000s: 3.52
2010s: 6.70*
8
7
6
3.3
2.8
10
9
8.8
Avg. CAT Loss
Component of the
Combined Ratio
by Decade
1994
Combined Ratio Points
9.0
Combined Ratio Points Associated with
Catastrophe Losses: 1960 – 2011*
The Catastrophe Loss Component of Private Insurer Losses Has
Increased Sharply in Recent Decades
*Insurance Information Institute estimates for 2010 and 2011 based on A.M. Best data.
Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for
losses ultimately paid by foreign insurers and reinsurers.
Source: ISO; Insurance Information Institute.
21
U.S. Thunderstorm Loss Trends,
1980 – 2011
Thunderstorm losses in
2011 totaled a record
$25.8 billion
Average
thunderstorm
losses are up more
than 5 fold since
the early 1980s
Source: Property Claims Service, MR NatCatSERVICE
Hurricanes get all the headlines,
but thunderstorms are consistent
producers of large scale loss.
2008-2011 are the most expensive
years on record.
22
U.S. Winter Storm Loss Trends,
1980 – 2011
Insured winter storm losses in 2011
totaled $2.0 billion. Average winter
storm losses have nearly doubled
since the early 1980s
Source: Property Claims Service, MR NatCatSERVICE
23
U.S. Acreage Burned by Wildfires,
1980 – 2011
8.3 millions acres were burned
by wildfires in 2011, one of the
worst years on record, causing
$855 in insured losses
Source: National Forest Service, MR NatCatSERVICE
24
2011: Nowhere to Run,
Nowhere to Hide
Most of the Country East of
the Rockies Suffered Severe
Weather in 2011, Impacting
Most Insurers
28
Number of Federal Disaster
Declarations, 1953-2011*
0
99
81
75
59
63
48
52
56
44
32
36
32
38
43
45
11
31
34
27
28
23
24
21
15
23
22
25
29
17
17
19
11
11
22
20
25
25
12
12
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11*
7
7
13
17
18
16
16
40
30
38
42
48
46
46
60
20
69
65
80
The number of federal
disaster declarations set a
new record in 2011, with 99,
shattering 2010’s record 81
declarations.
50
45
45
49
100
There have been 2,049
federal disaster
declarations since
1953. The average
number of declarations
per year is 34 from
1953-2010, though that
few haven’t been
recorded since 1995.
75
120
The Number of Federal Disaster Declarations Is Rising and Set a New
Record in 2011
*Through December 31, 2011.
Source: Federal Emergency Management Administration: http://www.fema.gov/news/disaster_totals_annual.fema ;
Insurance Information Institute.
SPRING 2011 TORNADO &
SEVERE STORM OUTBREAK
2011 Losses Are Putting Pressure on
US P/C Insurance and Reinsurance Markets
32
Number of Tornadoes and Related
Deaths, 1990 – 2011
800
600
1,894
1,282
1,098
1,103
1,376
1,216
1,148
1,173
1,234
1,082
1,297
1,173
1,071
941
1,000
1,132
1,200
1,133
1,400
552
There were 1,884
tornadoes recorded
in the US in 2011
400
600
500
400
300
200
Number of Deaths
Number of Tornadoes
1,600
1,345
1,424
Number of Deaths
1,800
1,692
1,819
1,156
Number of Tornadoes
1,264
2,000
Tornadoes claimed more than 550
lives in 2011, the most since 1925
100
200
0
0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11P
Insurers Expect to Pay at Least $2 Billion Each for the April 2011
Tornadoes in Alabama and a Similar Amount for the May Storms in Joplin
Source: U.S. Department of Commerce, Storm Prediction Center, National Weather Service.
33
Insurers Making a Difference in
Impacted Communities
Destroyed home in
Tuscaloosa. Insurers
will pay some 165,000
claims totaling $2 billion
in the Tuscaloosa/
Birmingham areas alone.
Presentation of a check
to Tuscaloosa Mayor
Walt Maddox to the
Tuscaloosa Storm
Recovery Fund
Source: Insurance Information Institute
35
Severe Weather Reports, 2011
There were
29,996 severe
weather reports
in 2011;
including 1,894
tornadoes;
9,417 “Large
Hail” reports
and 18,685 high
wind events
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html#
39
The BIG Question:
When Will the Market Turn?
Are Catastrophes and Other Factors
Pressuring Insurance Markets?
41
Criteria Necessary for a “Market Turn”:
All Four Criteria Must Be Met
Criteria
Sustained
Period of
Large
Underwriting
Losses
Material
Decline in
Surplus/
Capacity
Status
Comments
•Apart from 2011 CAT losses, overall p/c underwriting losses
remain modest
•Combined ratios (ex-CATs) still in low 100s (vs. 110+ at
onset of last hard market)
Early Stage, •Prior-year reserve releases continue to reduce u/w losses,
Inevitable boost ROEs, though more modestly
Entered 2011
At Record
High; Since
Fallen
Tight
Reinsurance Somewhat in
Market
Place
Renewed
Underwriting Some Firming
& Pricing
esp. in
Discipline
Property, WC
•Surplus hit a record $565B as of 3/31/11
•Fell by 4.6% through 9/30/11 (latest available)
•Little excess capacity remains in reinsurance markets
•Weak growth in demand for insurance is insufficient to
absorb much excess capacity
•Much of the global “excess capacity” was eroded by cats
•Higher prices in Asia/Pacific
•Modestly higher pricing for US risks
•Commercial lines pricing trends have turned from negative
to flat or up in some lines (property, WC); Casualty is flat.
•Competition remains intense as many seek to maintain
market share
Sources: Barclays Capital; Insurance Information Institute.
42
P/C Insurance Industry
Financial Overview
Profits, Underwriting Were
Significantly Impacted by High
Catastrophe Loss in 2011
44
$3,043
$7,979
$28,672
$34,670
$65,777
$44,155
$38,501
$30,029
$20,559
$20,598
$10,870
$3,046
$10,000
$19,316
$20,000
$5,840
$30,000
$14,178
$40,000
$21,865
$50,000
$30,773
$60,000
2005 ROE*= 9.6%
2006 ROE = 12.7%
2007 ROE = 10.9%
2008 ROE = 0.1%
2009 ROE = 5.0%
2010 ROE = 5.6%
2011:Q3 ROAS1 = 1.9%
P-C Industry 2011:Q3 profits were
down 71% to $8.0B vs. 2010:Q3,
due primarily to high catastrophe
losses and as non-cat
underwriting results deteriorated
$36,819
$70,000







$24,404
$80,000
$62,496
P/C Net Income After Taxes
1991–2011:Q3 ($ Millions)
$0
-$10,000
-$6,970
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
* ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 3.0% ROAS for
2011:Q3, 7.5% for 2010 and 7.4% for 2009.
Sources: A.M. Best, ISO, Insurance Information Institute
10
11*
A 100 Combined Ratio Isn’t What It
Once Was: Investment Impact on ROEs
A combined ratio of about 100
generated ~5.5% ROE in 2009/10,
10% in 2005 and 16% in 1979
Combined Ratio / ROE
15.9%
110
18%
108.2
14.3%
12.7%
105
100.6
100
100.1
15%
10.9%
101.0
100.8
9.6%
97.5
99.3
95.7
95
7.4%
92.7
8.8%
100.8
12%
7.5%
9%
4.4%
6%
90
3.0%
85
3%
80
0%
1978
1979
2003
2005
2006
Combined Ratio
2007
2008
2009
2010
2011:Q3*
ROE*
Combined Ratios Must Be Lower in Today’s Depressed
Investment Environment to Generate Risk Appropriate ROEs
* 2008 -2011 figures are return on average surplus and exclude mortgage and financial guaranty insurers. 2011:Q3 combined ratio
including M&FG insurers is 109.9, ROAS = 1.9%.
Source: Insurance Information Institute from A.M. Best and ISO data.
Profitability Peaks & Troughs in the P/C
Insurance Industry, 1975 – 2011*
ROE
25%
1977:19.0%
1987:17.3%
20%
History suggests next ROE
peak will be in 2016-2017
2006:12.7%
1997:11.6%
15%
9 Years
2011:
3.0%*
10%
5%
0%
1975: 2.4%
1992: 4.5%
2001: -1.2%
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11*
-5%
1984: 1.8%
*Profitability = P/C insurer ROEs are I.I.I. estimates. 2011 figure is an estimate based on annualized ROAS through Q3 data.
Note: Data for 2008-2011 exclude mortgage and financial guaranty insurers. For 2011:Q3 ROAS = 1.9% including M&FG.
Source: Insurance Information Institute; NAIC, ISO, A.M. Best.
P/C Insurance Industry
Combined Ratio, 2001–2011:Q3*
As Recently as 2001,
Insurers Paid Out
Nearly $1.16 for Every
$1 in Earned
Premiums
Heavy Use of
Reinsurance
Lowered Net
Losses
Relatively
Low CAT
Losses,
Reserve
Releases
Relatively
Low CAT
Losses,
Reserve
Releases
120
115.8
110
Cyclical
Deterioration
Best
Combined
Ratio Since
1949 (87.6)
Avg. CAT
Losses,
More
Reserve
Releases
108.2
107.5
100.1
100
Higher
CAT
Losses,
Shrinking
Reserve
Releases,
Toll of Soft
Market
101.0
100.8
98.4
99.3
100.8
95.7
92.6
90
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
* Excludes Mortgage & Financial Guaranty insurers 2008--2011. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=109.9
Sources: A.M. Best, ISO.
48
Underwriting Gain (Loss)
1975–2011*
($ Billions)
$35
$25
Cumulative
underwriting deficit
from 1975 through
2010 is $455B
$15
Underwriting
losses in
2011 at $34.9
through Q3
will be
largest since
2001
$5
-$5
-$15
-$25
-$35
-$45
-$55
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 1011*
Large Underwriting Losses Are NOT Sustainable
in Current Investment Environment
* Includes mortgage and financial guaranty insurers in all years
Sources: A.M. Best, ISO; Insurance Information Institute.
Policyholder Surplus,
2006:Q4–2011:Q3
($ Billions)
2007:Q3
Previous Surplus Peak
$580
$564.7
$556.9
$544.8
$560
$540
$520
$500
$480
$460
$440
$559.1
$540.7
$530.5
$521.8
$517.9$515.6
$512.8
$505.0
$496.6
$487.1
$478.5
The Industry now has $1 of
surplus for every $0.83 of NPW,
close to the strongest claimspaying status in its history.
$538.6
$511.5
$490.8
$463.0
$455.6
$437.1
Surplus as of 9/30/11 was
down 4.6% below its all time
record high of $564.7B set
as of 3/31/11. Further
declines are possible.
$420
06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3
*Includes $22.5B of paid-in
capital from a holding
company parent for one
insurer’s investment in a
non-insurance business in
early 2010.
Sources: ISO, A.M .Best.
Quarterly Surplus Changes Since 2011:Q1 Peak
11:Q2: -$5.6B (-1.0%)
11:Q3: -$26.1B (-4.6%)
50
Soft Market Persisted in 2010 but
Growth Returned: More in 2011?
(Percent)
1975-78
1984-87
2000-03
25%
20%
15%
Net Written Premiums Fell
0.7% in 2007 (First Decline
Since 1943) by 2.0% in 2008,
and 4.2% in 2009, the First 3Year Decline Since 1930-33.
NWP was
up 4.1%
(est.) in
2011
2012
expected
growth is
4.2%
10%
5%
0%
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11*
12
-5%
*2011 and 2012 figures are A.M. Best Estimates
Shaded areas denote “hard market” periods
Sources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.
51
Change in Commercial Rate Renewals,
by Line: 2011:Q3
Percentage Change (%)
4.1%
3.0%
1.9%
Workers
Comp
Commercial
Property
Bus.
Interruption
1.5%
EPL
0.8%
Umbrella
0.8%
D&O
Comml Auto
0.3%
Surety
0.2%
0.6%
Construction
1.3%
General
Liability
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Property lines are showing
larger increases than
casualty lines, with the
exception of workers
compensation
Major Commercial Lines Renewed Uniformly Upward in
Q3:2011 for the First Time Since 2003; Property Lines &
Workers Comp Leading the Way
Source: Council of Insurance Agents and Brokers; Insurance Information Institute.
52
Reinsurer Share of Recent Significant
Market Losses
Billions of 2011
Dollars
$40
$35
$30
$25
$20
$15
$10
$5
$0
$37.5
40% Reinsurance
share of total
insured loss
Reinsurer Share
Primary Insurer Share
$15.0
73%
$13.0
$22.5
60%
$10.0
$9.5
$6.0
$3.5
$4.0
95%
$8.3
$7.9
44%
$5.0
$2.2
$2.8
$0.4
Japan
Earthquake/
Tsunami (Mar
2011)
New Zealand Thailand Floods Chile Earthquake
Australia
Earthquake (Feb (Aug - Nov 2011) (Feb. 2010)
Cyclone/ Floods
2011)
(Jan-Feb 2011)
Reinsurers Paid a High Proportion of Insured Losses Arising from
Major Catastrophic Events Around the World in Recent Years
Source: Insurance Information Institute from reinsurance share percentages provided in RAA,
ABIR and CEA press release, Jan. 13, 2011.
53
Global Property Catastrophe Rate on
Line Index, 1990-2011 YTD (6/1/11)
A modest increase in global property catastrophe
reinsurance pricing was evident in June 1 renewals in
the wake of record global catastrophe losses.
Jan. 1, 2012 renewals were up modestly or flat in the
US but higher in CAT-impacted areas.
Source: Guy Carpenter, GC Capital Ideas.com, September 26, 2011.
Historical Capital Levels of Guy Carpenter
Reinsurance Composite, 1998—2Q11
Most excess
reinsurance capacity
was removed from
the market in 2011,
but there does not
appear to be a
shortage, leading
relatively flat 2012
reinsurance renewals
except in areas hit
hard by CATs.
Source: Guy Carpenter, GC Capital Ideas.com, November 23, 2011.
Insurance Information Institute Online:
www.iii.org
Thank you for your time
and your attention!
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