Week’s Top Stories: March 20 – 26, 2021 – GC Capital Ideas
Reinsurance Implications of the United Kingdom’s Business Interruption Test Case: On January 15, 2021, the UK Supreme Court issued its widely anticipated decision in the Financial Conduct Authority’s business interruption (BI) test case. The FCA brought the test case to resolve uncertainty for certain BI policyholders affected by the COVID pandemic. Although the Court ruled that some forms of BI insurance cover COVID losses, the Court adopted a narrow definition of a COVID “occurrence” — an illness suffered by just one person or arguably several people in one household — that has raised questions about the meaning of the word “occurrence” in other contexts.
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.
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.
Community-Based Catastrophe Insurance Creates Incentives for Community-Level and Individual Risk Reduction: The alignment with community-level risk reduction is a potential benefit of community-based catastrophe insurance (CBCI). Because standard disaster insurance policies apply at the level of individual properties, using insurance to incentivize mitigation of community scale hazards, such as levees or ecosystem-based interventions, for example, restored wetlands¹, creates inherent difficulties. Yet community-level risk reduction can often be the most effective and cost-efficient means of managing a given risk. Additionally, such interventions can create a variety of co-benefits that support other community goals.
Chart: Estimated Alternative Reinsurance Sector Capital: The reinsurance sector continues to demonstrate capital strength and resilience in light of the significant disrupters it encountered in 2020. New capital raises by new and existing participants contributed to the 2020 dedicated capital estimate.
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(Re)insurance Leaders Weigh In: The Next Forty Years: Peter Hearn, CEO of Guy Carpenter, spoke with Reactions, reflecting on the last 40 years and providing his perspective on what the next 40 will look like for the industry.
