GC Capital Ideas Top Stories: Second Quarter 2021 – GC Capital Ideas

1. April 2021 Reinsurance Renewals, Japan: At the April 1 reinsurance renewals, property catastrophe pricing increased for the third year in a row. Following the first loss-free year since 2018, there was some consolation for buyers in that the average increase was the lowest of the past three years. Rates moved up on average by a small percentage for mutual buyers.  

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2. 2021 Tropical Season Forecasts:  

  • Active Atlantic anticipated: Across all forecast entities spanning academia, government and private sector, there is unanimous consent the 2021 Atlantic hurricane season will feature average to above average named storms, hurricanes, major hurricanes and storm days. 
  • Factors driving active Atlantic forecast include above-average sea-surface temperatures in the Atlantic and west Pacific regions, as well as a forecasted transition from La Niña to ENSO-Neutral conditions. 
  • Ramifications for Atlantic basin landfalls: The ratio of hurricane landfalls to basin activity varies considerably from year to year, and depends strongly on steering currents. Weather prediction for any event generally loses skill beyond a 7-10 day forecast lead. 
  • West Pacific typhoon expectations: Through the Guy Carpenter Asia-Pacific Climate Impact Centre relationship with the City University of Hong Kong, the 2021 West Pacific forecast indicates above average activity. However, the landfalling numbers across the region vary, with above average activity most likely for South Mainland China and Vietnam. 

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3. Chart: Guy Carpenter Global Property Catastrophe Rate-On-Line (ROL) Index – 1990 to 2021: The Guy Carpenter Global Property Catastrophe ROL index was up 4.5 percent year on year, at January 1. The index is a measure of the change in dollars paid for coverage on a consistent program basis and reflects the pricing impact of a growing (or shrinking) exposure base, evolving methods of measuring risk and changes in buying habits, as well as changes in market conditions. 

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4. Guy Carpenter Releases the 2021 Western North Pacific Basin Tropical Cyclone Briefing: Guy Carpenter published the annual briefing on the 2021 Western North Pacific Basin Tropical Cyclone season. According to the briefing, the number of tropical cyclones forecast to form between April 1 and September 30 is above normal. Near- to above-normal activity is consistent with the El Niño–Southern Oscillation (ENSO) neutral conditions which follow a weak to moderate La Niña year. 

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5. OmniCAT® Risk Score: Severe Thunderstorm Risk Magnitude Index (SToRMi): Over the last decade, a noteworthy increase in the frequency and severity of severe thunderstorm losses across the central and eastern United States has created a lack of profitability for carriers exposed to these perils. The impact has been amplified by outdated and antiquated catastrophe models lacking the ability to properly assess the current risk. Guy Carpenter’s Severe Thunderstorm Risk Magnitude index (SToRMi) provides a transparent approach to severe thunderstorm hazard assessment to afford clients an independent and current viewpoint of risk. 

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6. Chart: Top 10 Largest Insured Losses Versus Projections for COVID-19: Company-reported COVID-19 losses are near USD 30 billion. When added to 2020 large losses, total loss is approximately USD 110 billion. Using the mid-point of public COVID-19 loss estimates, a number in excess of USD 140 billion is generated. 

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7. Address Ergonomic Problems Before Remote Work Becomes a Costly Risk: Last spring, workplaces across the world closed as COVID-19 spread. Millions of employees made the overnight shift to working from home, some from their couch, kitchen table or bedroom floor. Guy Carpenter, our clients and reinsurers were all up and running very quickly as we moved from our traditional office environments to remote working locations. We are proud of how the industry has responded to the unprecedented challenges we are facing. 

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8. Narrow Artificial Intelligence Is Latest Disrupter to Insurance Industry: Society is entering the age of artificial intelligence. Significant players in every industry are implementing narrow artificial intelligence (NAI) to improve their business processes. As a consequence, no element of the global insurance business model will be untouched. Most insurance product lines will need to be reengineered to reflect the new risks arising out of the adoption and deployment of NAI, according to Pete Thomas, President of GC Genesis, Guy Carpenter, and Samantha Busenhart, Vice President, Distribution and Thought Leadership, Guy Carpenter. 

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9. What If We Applied the Urgency of Solving COVID to Climate Change? It is crucial that companies and the (re)insurance market incorporate climate change into business considerations as investors, ratings agencies and financial regulators apply pressure on firms. There has been a lot written about what climate change and COVID-19 have in common. They both present huge risks to life on our planet and to our economic prosperity. They affect every country, albeit to varying degrees, and they both are causing the greatest harm to the poorest in society, who can least afford the additional suffering, according to David Knipe, Partner at Oliver Wyman, a business of Marsh McLennan. 

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10. Insurance Prices Are Rising, With Cyber Claiming Big Increases: Global commercial insurance prices increased 18 percent, on average, in the first quarter of 2021, although there are signs that increases may be plateauing in some regions. The first quarter increase was lower than the 22 percent seen in the prior quarter. Pricing for cyber insurance diverged from the trend, with prices generally increasing – notably by 35 percent in the United States and 29 percent in the United Kingdom – driven by the frequency and severity of losses. The data comes from the Marsh Global Insurance Market Index. 

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