insurance capital

insurance capital
reinsurance, reinsurance agreement, in particular, is a fundamental part of all insurers' internal risk-management plan.

Protecting the balance sheet and capital base of extremes in the frequency and severity of loss or aggregations is of crucial importance for the profitability of an insurer.

Reinsurance is a global business intertwined with the economy, trade and finance industry, most, if not every nation on earth.

Events of importance, or the impact on the reinsurance affects all insurers, to a certain degree.

Recent events may become a significant influence on the 2009 reinsurance renewals.

Hurricanes Gustav and Ike

You do not have the same profile as the news of Katrina and subsequent flooding of New Orleans, but the recent loss estimates indicate that Gustav and Ike will have a significant exposures to reinsurers. In particular, the oblique angle at which Gustav along the Gulf Coast, as they have a greater than expected impact on the relatively dense concentration of oil and gas in this region.

Recently reported figures show that a combined industry loss from Gustav and Ike in the U.S. $ 20 - $ 25 billion range (A $ 28 - 35bn). Losses of this magnitude, the pressure on many insurers and reinsurers' margins.

Global Credit Crisis

The subprime mortgage problem in the United States has the international banking sector in the spotlight. Some have failed, and many are forced to merge or seek funds from the state budget. The offer of Credit evaporates or is too expensive, such as inter-bank lending ground to a halt. In addition, dive into the world bring stock valuations, valuation and capital adequacy pressure to many other companies in all industries.

Introduction of the immediate concerns of the insurance industry is the potential for capital to back away or disappear from the reinsurance business. In addition, poor investment decisions have a profound impact on other companies to secure and downgrades can lead, if rating agencies are required to more fully in the affected companies.

Impact on the reinsurance

Reinsurance costs by:

• Reinsurers difficulties in obtaining new capital and / or an increase in capital costs.

• Capital Market requirements for higher returns.

• capacity limitations.

• A flight to quality (safety) - ceding to reinsurers, and vice versa.

• reducing the return on investments.P

• Depreciation in value of investments.

Recent comments from reinsurers suggests an upward pressure on prices for the contract in December 2008 renewal season with the flow on the impact on insurance contracts during 2009.

Disclaimer: This bulletin is for information purposes only and is not legal advice.