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The Economist Intelligence Unit is relaunching its industry blog. Now known as EIU Views, the site features data-driven commentary by members of the EIU’s industry team. The approach is much the same as Daily Data Point, but the new site will feature a broader pool of editors writing about a wider range of sectors (including, of course, the financial services industry).
Please update your bookmarks and head over to www.eiuviews.com. To see only the finance posts, visit www.eiuviews.com/index.php/category/financial-services. For the finance RSS feed, use www.eiuviews.com/index.php/category/financial-services/feed.
Munich Re, the world’s largest reinsurer by premiums, reported its latest quarterly results today, covering “the most loss-afflicted [quarter] in reinsurance history in terms of natural catastrophes,” according to chairman Nikolaus von Bomhard. The devastating earthquake and tsunami in Japan, in addition to another earthquake in New Zealand and widespread flooding in Australia, saddled Munich Re with €2.7bn in costs in the first quarter.
The impact of recent natural disasters on reinsurers is vividly illustrated by key players’ combined ratios—the ratio of losses and expenses to earned premiums. Munich Re reported a combined ratio of 159% in the first quarter, up from 96% in the previous quarter. Second-ranked reinsurer Swiss Re reported a similarly dire combined ratio of 164% in the first quarter.
Financially speaking, there is a silver lining to the recent losses: upward pressure on premium prices. Munich Re saw price increases of up to 50% on certain earthquake policies for April renewals, and predicts a “hardening effect” on a broader range of business lines during the July renewals. For its part, Swiss Re saw “strong” price increases in Japan and a “flattening” in prices in the US and Europe following decreases in January. With a series of severe tornadoes striking the US South and Midwest in April, and the Atlantic hurricane season approaching, further catastrophe losses could bring about a decisive turn in the pricing cycle sooner rather than later.
Apologies for the light posting of late. The chart makers have been busy on a number of large projects, including exciting plans for the future of this site. Normal blogging will resume towards the end of next week.
In the meantime, as always, normal service continues at the parent site.
The scale of the human trauma as a result of the earthquake and tsunami that struck Japan on March 11th is terrible. By comparison, the economic costs of the disaster are modest. Still, estimates of the financial toll of the catastrophe are beginning to emerge.
Disaster modelling firm AIR Worldwide predicts that insured property losses will range between US$15bn and US$35bn. Any result in this range will dwarf the insured losses that stemmed from the last large quake in Japan, the 1995 Kobe temblor that cost the insurance industry US$3.5bn, according to Swiss Re.
Japan’s insurance industry is dominated by domestic firms, so they will take a large share of the losses—up to US$7.2bn, according to Moody’s. Shares of Japanese insurers plunged today, the first full trading session since the quake. Many commercial risks, however, are passed on to international reinsurers, who also face daunting costs. Following the series of natural disasters in Australia and New Zealand in recent months, the talk is now of a potential end to the long-running soft market. To the extent that a silver lining can be found amidst the tragedy, this could be positive for brokers.
The devastating earthquake in Christchurch, New Zealand yesterday was the latest, deadliest natural disaster to strike the region in recent months.
For insurers, losses as a result of the catastrophe are likely to be the largest since Hurricane Ike led to around US$20bn in insured losses in 2008. Early estimates suggest that the Christchurch quake may cost the insurance industry up to US$8bn. This follows an earthquake that struck near Christchurch less than six months ago and cost insurers US$3bn. Australia, meanwhile, was hit with two costly natural disasters earlier this year, as widespread flooding across Queensland caused an estimated US$2bn in insured losses in January, while Cyclone Yasi, which touched down in Queensland in early February, could cost the industry up to US$1.5bn.
Last year, global insured losses from natural disasters were around US$38bn, according to Aon Benfield. The toll from catastrophic events so far this year is already a significant share of 2010’s total and, as the chief executive of an Australian insurance group put it today, “horrible from a human perspective and a financial perspective”.
Good news for job seekers, if the latest survey by the Association of Executive Search Consultants (AESC) is to be believed. Nearly 70% of executive recruiters have a positive outlook for the year ahead, up from 56% in a similar poll 12 months ago. What’s more, headhunters expect the financial services industry to be one of the three fastest growing sectors—particularly in the Americas—in 2011.
The chart makers have scattered for the holidays. Blogging will be light through the end of the year.
Normal service continues at the parent site.
Corporate insurance buyers from around Europe are gathered in London today and tomorrow for the annual conference of the Federation of European Risk Management Associations (FERMA). FERMA conducts a wide-ranging survey of risk managers every two years, and the latest poll was released at the start of today’s gathering.
Among other issues, risk managers were asked to rank their top concerns about the insurance market. The ability to identify (and, ultimately, insure against) future risks was, unsurprisingly, respondents’ biggest worry. The second-ranked concern in the survey was a looming hard market, although an informal poll of the conference audience during a panel discussion suggested that this fear may be overdone. The looming impact of the Solvency II regime on the cost and availability of insurance ranked third.
Much of today’s discussion focused on the lessons to be learned by insurance buyers from the recent financial crisis. Constant vigilance against unlikely “tail risk” scenarios is an obvious conclusion, but as one panellist put it, insurance alone—however wisely deployed—is not enough to mitigate the damage of large magnitude events like the credit crunch. In other words, not all risks can be managed, even by the best risk managers (and their preferred insurers). The element of chance was fittingly underscored by a large poker tournament taking place in the same hotel as the risk managers’ conference. “It’s not that far away from what we do,” a speaker quipped.
The latest survey of financial industry executives by PricewaterhouseCoopers and the Confederation of British Industry is encouraging, with reported business volumes up for the fifth consecutive quarter. But the results are also tinged with disappointment, as survey respondents’ forward-looking expectations have been far too optimistic in recent months.
Last quarter, a balance of 63% of respondents expected volumes to improve over the next three months; in the end, “only” 28% actually reported higher volumes for the quarter. In the latest survey, which closed on September 1st, a net 24% of respondents expect higher business volumes over the next three months. This can either be seen as a warranted moderation in forecast volumes or, given financiers’ recent tendency to overshoot, sign of a significant slowdown ahead.
Heavy workloads for the chart makers have made blogging difficult this week.
Bear with us; normal service will resume soon. As always, content flows freely over at the parent site.