JohnStreet110813 - Insurance Information Institute

Rising Risk and Global Opportunity
Musings on Mega Issues in Global Insurance
& Growth Prospects
John Street Club
New York, NY
November 8, 2013
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  [email protected]  www.iii.org
Presentation Outline
 Risk, Insurance and Opportunity: A Global Perspective
 Old Risk, New Opportunity: Catastrophic Loss
 The Old World: Money Left on the Table?
 The Emerging Markets: Where (Most) of the Growth Is
 Energy
 Terrorism
 Low Yields: Are They Forever?
 Q&A
2
Risk, Insurance and
Opportunity
U.S. and Global Perspective
Is the World Becoming a
Riskier, More Uncertain Place?
Or Does It Just Seem that Way?
3
Uncertainty, Risk and Fear Abound:
Insurance Can Help Mitigate Risk
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US Debt and Budget Crisis
European Sovereign Debt & Eurozone Crises
Political Gridlock in the US, Europe, Japan
“Hard Landing” in China/Emerging Economies
Fiscal Imbalances
Monetary Policy/Tapering/Low Interest Rates
Unemployment
Political Upheaval in the Middle East
Resurgent Terrorism Risk
Diffusion of Weapons of Mass Destruction
Cyber Attacks
Record Natural Disaster Losses
Climate Change
Environmental Degradation
Income Inequality
(Over)Regulation
Are “Black Swans”
everywhere or
does it just seem
that way?
4
5 Major Categories for Global Risks,
Uncertainties and Fears: Insurance Solutions
1. Economic Risks
2. Geopolitical Risks
3. Environmental Risks
4. Technological Risks
5. Societal Risks
While risks can
be broadly
categorized,
none are
mutually
exclusive
Source: Adapted from World Economic Forum, Global Risks 2013; Insurance Information Institute.
5
Top 5 Global Risks in Terms of Likelihood,
2007—2013: Insurance Can Help With Most
In 2013,
economic
and climate
change
concerns
dominated
frequency
concerns
Concerns Shift Considerably Over Short Spans of Time. Shift in 2012 to
Economic Risks and Away from Environmental Risks
Source: World Economic Forum, Global Risks 2013; Insurance Information Institute.
6
Top 5 Global Risks in Terms of Impact,
2007—2013: Insurance Can Help With Most
Impacts
from
economic,
societal,
geopolitical
and
environme
ntal risks
were all of
great
concern in
2013
Concerns Over the Impacts of Economics Risks Remained High in 2013,
but Societal, Environment and Societal Risks Also Loom Large
Source: World Economic Forum, Global Risks 2013; Insurance Information Institute.
7
Insured vs. Uninsured
Catastrophe Losses
Do Insurers Leave Money on the Table
Even With Risks We’ve Encountered
for Centuries?
8
Top 16 Most Costly World Insurance
Losses, 1970-2012*
(Insured Losses, 2012 Dollars, $ Billions)
2012 insured CAT Losses totaled
$60B; Economic losses totaled
$140B, according to Swiss Re
$60
$50
$40
$30
$20
$10
5 of the top 14 most
expensive catastrophes in
world history have occurred
within the past 3 years
(2010-2012)
$48.7
Hurricane Sandy is now the
6th costliest event in global
insurance history
$11.1 $13.4 $13.4
$9.6
$9.2
$8.7
$8.5
$8.1
$7.8
$38.6
$23.9 $24.6 $25.6
$18.8
$13.4
$0
Hugo
(1989)
Winter
Storm
Daria
(1991)
Chile
Quake
(2010)
Ivan
Charley Typhoon Wilma Thailand New Ike
Sandy Northridge WTC
(2004) (2004) Mirielle (2005) Floods Zealand (2008) (2012)** (1994) Terror
(1991)
(2011) Quake
Attack
(2011)
(2001)
*Figures do not include federally insured flood losses.
**Estimate based on PCS value of $18.75B as of 4/12/13.
Sources: Munich Re; Swiss Re; Insurance Information Institute research.
Andrew Japan Katrina
(1992) Quake, (2005)
Tsunami
(2011)**
9
Natural Disasters in the United States,
1980 – June 2013*
Number of Events (Annual Totals 1980 – June 2013*)
300
There were 68 natural
disaster events in the
first half of 2013
250
Number
200
150
100
41
19
50
121
3
1980
1982
1984
1986
1988
Geophysical
(earthquake, tsunami,
volcanic activity)
*Through June 30, 2013.
Source: MR NatCatSERVICE
1990
1992
1994
1996
1998
2000
Meteorological (storm)
Hydrological
(flood, mass movement)
2002
2004
2006
2008
2010
2012
Climatological
(temperature extremes,
drought, wildfire)
10
Losses Due to Natural Disasters in the US,
1980–2013*
(Overall and Insured Losses)
(2012 Dollars, $ Billions)
90
80
70
60
50
40
2013 First Half
Losses
Indicates a great
deal of losses are
uninsured (~40%50% in the US) =
Growth
Opportunity
First Half 2013 losses
were running below
2011 and 2012 but
were consistent with
the decade prior.
Approximately 57% of
the overall cost of
catastrophes in the
US was covered by
insurance in 2013:H1
Overall : $13.8B
Insured: $7.9B
30
20
10
1980
1982
1984
1986
1988
1990
1992
Overall losses (in 2012 values)
*Through June 30, 2013.
Source: MR NatCatSERVICE
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Insured losses (in 2012 values)
11
Natural Disasters Worldwide,
1980 – 2013* (Number of Events)
There were 460 natural
disaster events globally
in the first half of 2013
and 905 for full-year 2012
1 200
1 000
Number
800
600
400
41
19
200
121
3
1980
1982
1984
1986
1988
Geophysical
(earthquake, tsunami,
volcanic activity)
*Through June 30, 2013.
Source: MR NatCatSERVICE
1990
1992
1994
1996
1998
2000
Meteorological (storm)
Hydrological
(flood, mass movement)
2002
2004
2006
2008
2010
2012
Climatological
(temperature extremes,
drought, wildfire)
12
Losses Due to Natural Disasters Worldwide,
1980–2013* (Overall & Insured Losses)
(Overall and Insured Losses)
(2012 Dollars, $ Billions)
2012 Losses
450
Overall : $101.1B
400
Insured: $57.9B
350
2013: 1st Half Losses
There is a clear
upward trend in both
insured and overall
losses over the past
30+ years
300
250
200
Overall : $45B
Insured: $13B
150
100
50
1980
1982
1984
1986
1988
1990
Overall losses (in 2012 values)
*Through June 30, 2013.
Source: MR NatCatSERVICE
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Insured losses (in 2012 values)
13
Total Value of Insured Coastal Exposure
in 2012
(2012, $ Billions)
New York
$2,923.1
$2,862.3
Florida
Texas
$1,175.3
The value of insured
Massachusetts
$849.6
New Jersey
$713.9
coastal exposure in NY is
Connecticut
$567.8
now highest in the US for
$293.5
Louisiana
the first time.
S. Carolina
$239.3
Virginia
$182.3
In 2012, New York Ranked as the #1 Most
Maine
$164.6
Exposed State to Hurricane Loss, Overtaking Florida
North Carolina
$163.5
with $2.862 Trillion. Texas is very exposed too, and
Alabama
$118.2
ranked #3 with $1.175 Trillion
Georgia
$106.7
in insured coastal exposure
Delaware
$81.9
New Hampshire $64.0
The Insured Value of All Coastal Property Was $10.6
Mississippi $60.6
Trillion in 2012 , Up 20% from $8.9 Trillion in 2007 and
Rhode Island $58.3
Up 48% from $7.2 Trillion in 2004
Maryland $17.3
$0
Source: AIR Worldwide
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
14
Total Potential Home Value Exposure to
Storm Surge Risk in 2013*
($ Billions)
$386.5
Florida
$135.0
New York
$118.8
New Jersey
$78.0
Virginia
$72.0
Louisiana
S. Carolina
$65.6
Florida is by far the state most
$65.2
N. Carolina
vulnerable to storm surge.
$51.0
Texas
$50.3
Massachusetts
$35.0
Connecticut
$22.4
Maryland
$20.5
Georgia
$15.9
Delaware
The Value of Homes Exposed to Storm Surge was
$10.4
Mississippi
$1.147 Trillion in 2013.* Only a fraction of this is
Rhode Island $7.2
insured, hence the huge demand for federal aid
Alabama $4.7
following major coastal flooding events.
Maine $3.1
New $2.7
Pennsylvania $2.6
DC $0.6
$0
$50
$100
$150
$200
$250
*Insured and uninsured property. Based on estimated property values as of April 2013.
Source: Storm Surge Report 2013, CoreLogic.
$300
$350
$400
$450
15
U.S. Residual Market Exposure to Loss
(1990-2012) ($ Billions)
($ Billions)
Hurricane
Sandy
$1,000
Katrina,
Rita and
Wilma
$900
$800
$700
4 Florida
Hurricanes
$600
$500
$400
Hurricane
Andrew
$281.8
$300
$200
$100
$884.7
$771.9
$656.7
$696.4
$818.1
$757.9
$703.0
$430.5$419.5
$372.3
$292.0
$244.2
$221.3
$150.0
$54.7
$0
1990 1995 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
In the 23-year period between 1990 and 2012, total exposure to loss in the
residual market (FAIR & Beach/Windstorm) Plans has surged from $54.7
billion in 1990 to $818.1 billion in 2012.
Source: PIPSO; Insurance Information Institute (I.I.I.).
16
U.S. Residual Market: Total Policies In-Force
(1990-2012) (000)
(000)
The combined
ratios for
Katrina, Rita
and Wilma and
both personal
commercial lines
2,840.4
4 Florida substantially
improved
2,780.6
Hurricanes
2,621.3
in 2013:H1
3,500
3,000
Hurricane
Sandy
3,311.8
3,227.3
2,841.4
2,479.4
2,500
2,209.3
2,203.9
2,000 Hurricane 1,785.0
1,741.7
Andrew
1,642.3
1,458.1
1,500
1,319.7
1,196.5
1,000
931.6
500
0
1990 1995 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
In the 23-year period between 1990 and 2012, the total number of policies in-force in
the residual market (FAIR & Beach/Windstorm) Plans has more than tripled.
Source: PIPSO; Insurance Information Institute
17
I.I.I. Poll: Disaster Preparedness
Q. If you expect some relief from the government, do you purchase less
insurance coverage against these natural disasters than you would have
otherwise?
Don’t know
Yes
6%
22%
No
More than 20
percent cut back
on insurance
coverage in
expectation of
government
disaster aid
72%
Seventy-two percent of Americans would not purchase less insurance if
they expect some relief from the government—but 22% would.
Source: Insurance Information Institute Annual Pulse Survey.
18
Near and Far:
The Global Economy Creates
Opportunity, Transmits Risks
Globalization Is a Double Edged Sword—
Creating Opportunity and Wealth But
Potentially Creating and Amplifying Risk
Emerging vs. “Advanced” Economies
19
Close to Home: Sectors Likely to
Generate Above Trend Growth
Into the 2020s, Certain Sectors Should
Provide More Key Opportunities for
Insurers in the US
20
2014 is expected
to see a modest
acceleration in
growth
1.4%
-8.9%
2000
2001
2002
2003
2004
2005
2006
07:1Q
07:2Q
07:3Q
07:4Q
08:1Q
08:2Q
08:3Q
08:4Q
09:1Q
09:2Q
09:3Q
09:4Q
10:1Q
10:2Q
10:3Q
10:4Q
11:1Q
11:2Q
11:3Q
11:4Q
12:1Q
12:2Q
12:3Q
12:4Q
13:1Q
13:2Q
13:3Q
13:4Q
14:1Q
14:2Q
14:3Q
14:4Q
-9%
-5.3%
-7%
-3.7%
-5%
Recession began in
Dec. 2007. Economic
toll of credit crunch,
housing slump, labor
market contraction
was severe
-1.8%
-1%
-3%
2.3%
2.2%
2.6%
2.4%
0.1%
2.5%
1.3%
4.1%
2.0%
1.3%
3.1%
0.4%
1.1%
2.5%
2.8%
2.4%
2.6%
2.8%
2.9%
2.9%
1%
-0.3%
3%
1.3%
5%
The Q4:2008 decline
was the steepest
since the Q1:1982
drop of 6.8%
1.1%
1.8%
2.5%
3.6%
3.1%
2.7%
0.5%
3.6%
3.0%
1.7%
7%
4.1%
Real GDP Growth (%)
5.0%
US Real GDP Growth*
Demand for Insurance Continues To Be Impacted by Sluggish Economic
Conditions, but the Benefits of Even Slow Growth Will Compound and
Gradually Benefit the Economy Broadly
*
Estimates/Forecasts from Blue Chip Economic Indicators.
Source: US Department of Commerce, Blue Economic Indicators 10/13; Insurance Information Institute.
21
Net Premium Growth: Annual Change,
1971—2013:H1
(Percent)
1975-78
1984-87
25%
2000-03
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.
20%
15%
2013:H1 =
4.5%
10%
2012 growth
was +4.3%
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
13:H1
-5%
Shaded areas denote “hard market” periods
Sources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.
22
12 U.S. Industries for the Next 10 Years:
Insurance Solutions Needed
Health Care
Health Sciences
Energy (Traditional)
Alternative Energy
Petrochemical
Agriculture
Natural Resources
Technology (incl. Biotechnology)
Many
industries are
poised for
growth,
though
insurers’
ability to
capitalize on
these
industries
varies widely
Light Manufacturing
Insourced Manufacturing
Export-Oriented Industries
Shipping (Rail, Marine, Trucking, Pipelines)
23
Value of New Private Construction:
Residential & Nonresidential, 2003-2013*
Billions of Dollars
New Construction peaks
at $911.8. in 2006
Trough in 2010
at $500.6B,
after plunging
55.1% ($411.2B)
$1,000
$900
$800
$15.0
2013: Value of new
pvt. construction
hits $622.8B, up
24% from the 2010
trough but still
32% below 2006
peak
$613.7
$700
$600
$500
$332.1
$298.1
$400
$300
$261.8
Non Residential
Residential
$200
$100
$290.8
$238.8
$0
03
04
05
06
07
08
09
10
11
12
13*
Private Construction Activity Is Moving in a Positive Direction though
Remains Well Below Pre-Crisis Peak; Residential Dominates
*2013 figure is a seasonally adjusted annual rate as of June.
Sources: US Department of Commerce; Insurance Information Institute.
24
New Private Housing Starts, 1990-2019F
1.9
1.7
1.5
1.3
1.1
0.9
0.7
0.5
New home starts
plunged 72% from
2005-2009; A net
annual decline of 1.49
million units, lowest
since records began
in 1959
1.18
1.35
1.44
1.50
1.51
1.50
2.1
0.55
0.59
0.61
0.78
0.97
1.19
1.01
1.20
1.29
1.46
1.35
1.48
1.47
1.62
1.64
1.57
1.60
1.71
1.85
1.96
2.07
1.80
1.36
0.91
Job growth, low inventories of
existing homes, low mortgage
rates and demographics are
stimulating new home construction
for the first time in years
(Millions of Units)
0.3
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F14F15F16F17F18F19F
Insurers Are Starting to See Meaningful Exposure Growth for the First Time
Since 2005 Associated with Home Construction: Construction Risk Exposure,
Surety, Commercial Auto; Potent Driver of Workers Comp Exposure
Source: U.S. Department of Commerce; Blue Chip Economic Indicators (8/13 and 3/13); Insurance Information Institute.
25
Payroll vs. Workers Comp Net Written
Premiums, 1990-2012E
Payroll Base*
$Billions
$7,000
7/90-3/91
$6,000
$5,000
$4,000
$3,000
WC NWP
$Billions
Wage & Salary Disbursements
3/01-11/01
WC NPW
12/07-6/09
WC premium
volume dropped
two years before
the recession began
+9% in
2012E
$50
$45
$40
WC net premiums
written were down
$14B or 29.3% to
$33.8B in 2010 after
peaking at $47.8B
in 2005
$2,000
$35
$30
$25
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*
Continued Payroll Growth and Rate Increases Suggest WC NWP Will Grow
Again in 2012; +7.9% Growth in 2011 Was the First Gain Since 2005
*Private employment; Shaded areas indicate recessions. WC premiums for 2012 are I.I.I. estimate based YTD 2012 actuals.
Sources: NBER (recessions); Federal Reserve Bank of St. Louis at http://research.stlouisfed.org/fred2/series/WASCUR ; NCCI; I.I.I.
26
Far from Home: Growth Beyond
US Borders Will Be Faster but
Riskier
The Risk/Reward Tradeoff Is Rising and
Will Continue to Rise
27
GDP Growth: Advanced & Emerging
Economies vs. World, 1970-2014F
GDP Growth (%)
10.0
8.0
World output is forecast to grow by
3.1% in 2013 and 3.8% in 2014. The
world economy shrank by 0.6% in
2009 amid the global financial crisis
Emerging economies (led
by China) are expected to
grow by 5.0% in 2013 and
5.4% in 2014.
6.0
4.0
2.0
(2.0)
(4.0)
Advanced economies are expected
to grow at a sluggish pace of 1.2% in
2013 but accelerate to 2.1% in 2014.
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
12
13F
13F
0.0
Advanced economies
Emerging and developing economies
Source: International Monetary Fund, World Economic Outlook , July 2013 WEO Update; Ins. Info. Institute.
World
7.6%
7.8%
2.4%
2.6%
9.3%
1.8%
1.6%
0.9%
0.2%
0.9%
0.9%
1.5%
2.6%
2.2%
1.6%
2%
1.8%
4%
4.6%
1.8%
6%
3.4%
The Eurozone
is ending
3.0%
8%
Growth in China has
outpaced the US
and Europe
3.0%
10%
US growth
should
accelerate
in 2014
7.7%
Real GDP Growth Forecasts:
Major Economies: 2011 – 2014F
-2%
US
-0.6%
-0.6%
0%
Euro Area
2011
UK
2012
Latin America
2013F
Canada
China
2014F
Growth Prospects Vary Widely by Region: Growth Returning in the US,
Recession in the Eurozone, Some strengthening in Latin America
Sources: Blue Chip Economic Indicators (9/2013 issue); Insurance Information Institute.
29
S. Korea
4.1%
2.9%
3.9%
3.9%
2.8%
2.6%
3.6%
2.4%
3.5%
2.7%
0.9%
2.7%
3.6%
2.8%
3.4%
4.3%
6.7%
5.7%
4.0%
3.7%
Strong economies in smaller
industrialized nations will bolster
demand for products, services,
international trade and insure
1.3%
2.8%
4.1%
3.6%
2.7%
2.0%
3.6%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
7.7%
Real GDP Growth Forecasts:
Selected Economies: 2011 – 2014F
Taiwan
India
2011
2012
Russia
2013F
Brazil
Australia
Mexico
2014F
Growth Outside the US, Europe and Japan is Relatively Strong
Sources: Blue Chip Economic Indicators (9/2013 issue); Insurance Information Institute.
30
World Trade Volume: 1948—2013F
$ Billions
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
Global trade volume will
approach $19 trillion in 2013, a
155% over the past decade
$18,828
$7,377
$3,676
$59
$84
$157
$579
1948
1953
1963
1973
$1,838
1983
1993
2003
2013F
Insurance Regulation Will Necessarily Become More Transnational,
Following Patterns of Global Economic Growth, the Creation of New
Insurable Exposures and International Capital Flows
Sources: World Trade Organization data through 2011; Insurance Information Institute estimate for 2013 based on
IMF forecasts as of July 2013.
31
World Population Growth: 2010—2100F
The future of
insurance will
be tied global
population
growth—life
insurance more
closely than
nonlife.
Sources: United Nations, World Population Prospects, June 13, 2013; Insurance Information Institute .
Mid-range
scenarios
suggest a
massive
slowdown in the
number of
available lives to
insure. Growth
will be increasing
dependent on
product
penetration rates
in emerging
economies
32
Population Growth: Developed vs. Less
Developed Countries 2010—2100F
Virtually all of the world’s
population growth through the
end of the 21st century will
occur in the developing world
Sources: United Nations, World Population Prospects, June 13, 2013; Insurance Information Institute .
33
Potential Output of Total Economy: US,
China, India, Indonesia and Japan, 2000-2060F
$ 2005 PPP
Growth in economic
output will be
concentrated in certain
developing economies
such as China and India
China will likely
become the
world’s largest
economy between
2025 and 2030
Source: OECD; Insurance Information Institute .
34
Global Insurance Premium
Growth Trends:
Life and Non-Life
Growth Is Uneven Across Regions
and Market Segments
35
World
N.
America
Latin
America
Life
Non-Life
Total
13.0%
10.5%
13.8%
-1.0%
-0.1%
3.9%
4.8%
4.2%
1.9%
13.0%
8.1%
8.8%
5.8%
4.9%
W.
Central & Advanced Emerging
Europe E. Europe Asia
Asia
Middle
East &
Central
Asia
Africa
-4.9%
-10%
Growth in Advanced Asia
(incl. China) markets was
third highest in 2012
-0.4%
-5%
-2.0%
-3.1%
0%
4.8%
5.1%
Latin America
growth was
the strongest
in 2012
-0.4%
1.8%
1.7%
2.0%
2.4%
5%
2.6%
10%
2.3%
15%
11.7%
20%
7.8%
16.8%
Premium Growth by Region, 2012
Oceania
Global Premium Volume Totaled $4.613 Trillion in 2012, up 2.4% from
$4.566 Trillion in 2011. Global Growth Was Weighed Down by Slow Growth
in N. America and W. Europe and Partially Offset by Emerging Markets
Source: Swiss Re, sigma, No. 3/2013.
36
Distribution of Global Insurance
Premiums, 2012 ($ Trillions)
Total Premium Volume = $4.613 Trillion*
Non-Life,
$1.99 ,
43.2%
Life insurance
accounted for nearly
57% of global
premium volume in
2012 vs. 43% for
Non-Life
Life, $2.62 ,
56.8%
Source: Swiss Re, sigma, No. 3/2013; Insurance Information Institute.
37
Global Real (Inflation Adjusted) Premium
Growth (Life and Non-Life): 2012
Emerging markets in
Asia, including China,
showed faster growth
an the US or Europe
Market
Life
Non-Life
Total
Advanced
1.8
1.5
1.7
Emerging
4.9
8.6
6.8
World
2.3
2.6
2.4
Source: Swiss Re, sigma, No. 3/2013; Insurance Information Institute.
Premium
growth in
emerging
markets was 4
times that of
advanced
economies in
2012
38
Life Insurance: Global Real (Inflation
Adjusted) Premium Growth, 2012
Real growth in life
insurance premiums
was a bit slower in
China than the US
Market
Life
Non-Life
Total
Advanced
1.8
1.5
1.7
Emerging
4.9
8.6
6.8
World
2.3
2.6
2.4
Source: Swiss Re, sigma, No. 3/2013.
39
Life Insurance: Global Real (Inflation
Adjusted) Premium Growth, 2012
Global Life Insurance
growth in 2012 was
lower than the precrisis average but
above than the postcrisis average.
Advanced Asia
economies like China
saw stronger growth
on average than before
or after the crisis.
Source: Swiss Re, sigma, No. 3/2013.
40
Non-Life Insurance: Global Real (Inflation
Adjusted) Premium Growth, 2012
Real growth in nonlife insurance
premiums was faster
in China than the US
Market
Life
Non-Life
Total
Advanced
1.8
1.5
1.7
Emerging
4.9
8.6
6.8
World
2.3
2.6
2.4
Source: Swiss Re, sigma, No. 3/2013.
41
Global Real (Inflation Adjusted) Nonlife
Premium Growth: 1980-2010
Average: 1980-2010
Real growth rates
Industrialized Countries: 3.8%
Emerging Markets: 9.2%
20%
Overall Total: 4.2%
Nonlife premium growth in
emerging markets has
exceeded that of
industrialized countries in
27 of the past 31 years,
including the entirety of the
global financial crisis..
15%
10%
5%
0%
-5%
Real nonlife premium growth is very erratic in
part to inflation volatility in emerging markets as
well as a lack of consistent cyclicality
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-10%
Total
Source: Swiss Re, sigma, No. 2/2010.
Industrialised countries
Emerging markets
42
Non-Life Insurance: Global Real (Inflation
Adjusted) Premium Growth, 2012
Global Non-Life
growth in 2012
exceeded the precrisis and post-crisis
average. The same is
true for advanced Asia
economies like China
Source: Swiss Re, sigma, No. 3/2013.
43
Life and Non-Life Insurance Penetration
as a % of GDP: 1962-2012
Source: Swiss Re, sigma, No. 3/2013.
Non-life markets have been
slower to grow than life
Emerging Markets
Advanced Markets
Life insurance in emerging
markets has experienced the
fastest in recent decades
44
Premiums Written in Life and Non-Life,
by Region: 1962-2012
Emerging market shares rose rapidly over the past 50 years
Source: Swiss Re, sigma, No. 3/2013.
45
Population Distribution, by Region:
1962-2062F
Enormous population shifts will impact insurance demand
over the next half century
Africa is
expected to
be the fastest
population
growth over
the next 50
years, but no
expectation
now of Asialike growth in
economies or
insurance
demand
Source: Swiss Re, sigma, No. 3/2013 from United Nations Department of Economic and Sovial Affairs, Population Division.
46
Relationship Between Real GDP and Real
Life and Non-Life Premium Growth, 2012
Advanced Markets
The was a clear but
highly relationship
between real GDP
growth and real
premium growth in
advance markets in 2012
Source: Swiss Re, sigma, No. 3/2013.
Emerging Markets
The correlation between
real GDP growth and real
premium growth in
emerging markets was
much stronger than in
advanced markets in 2012
47
Insurance Density and Penetration for
Advanced and Emerging Markets, 2012
Advanced Markets
Emerging Markets
Spending and
penetration are
highly variable
in emerging
markets
Spending and penetration are
generally much higher in
advanced markets, though growth
is fastest in emerging markets
Source: Swiss Re, sigma, No. 3/2013.
Chinese spending on
insurance is very
similar to Russia, but
Russian spending is
mostly non-life and in
China the majority is life
48
The Unfortunate Nexus:
Opportunity, Risk & Instability
Most of the Global Economy’s Future
Gains Will be Fraught with Much
Greater Risk and Uncertainty than in
the Past
49
Political Risk in 2011/12: Greatest Business
Opportunities Are Often in Risky Nations
The fastest growing
markets are generally
also among the politically
riskiest, including East
and South Asia
Heightened risk
has economic
and insurance
implications
Australia and NZ
rate well but most
neighbors do not
Source: Maplecroft
50
Energy is a Long-Term Global
Growth Play for Insurers and
Reinsurers
Extraction, Generation, Transmission
All Provide Opportunities for Decades
to Come in an Energy Hungry World
51
World Primary Energy Consumption,
1990-2030P
Quadrillion BTUs
800
678.3
700
637.3
595.7
600
551.5
462.1
500
400
300
200
100
472.4
508.3
347.7
Between 2006 and 2030,
energy consumption in
projected to increase
annually by 1.5% worldwide
but only 0.5% in the US
Global energy
consumption is
expected to increase by
33.4% between 2010 and
2030 but by only 12% in
the US
0
1990
2005
2006
2010P
2015P
2020P
2025P
Source: Energy Information Administration, 2009 International Energy Outlook, Insurance Information Institute.
2030P
Cumulative Projected Investment in
Global Energy Infrastructure, 2011-2035 ($ Trill.)
Projected energy
infrastructure investment
through 2035 total $38
trillion; Implies substantial
incurrence of risk.
Natural
Gas, $9.5 ,
25%
Coal, $1.1 ,
3%
Biofuels,
$0.3 , 1%
Power,
$16.9 , 44%
Oil, $10.1 ,
27%
Source: International Energy Agency, World Energy Outlook 2011.
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
2/30/2
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Jul-13
200
195
190
185
180
175
170
165
160
156.4
156.4
156.7
157.6
158.7
157.8
158.0
159.5
160.0
161.5
161.2
161.2
163.1
164.4
166.6
169.3
170.1
171.0
172.5
173.6
176.3
178.2
178.5
180.9
181.9
183.1
184.8
185.2
185.7
186.8
187.6
188.0
188.0
188.2
190.0
191.7
191.9
193.4
192.4
192.6
193.1
193.3
194.9
196.3
US Oil & Gas Extraction Employment,
Jan. 2010—August 2013*
(Thousands)
Oil and gas extraction
employment is up 25.5%
since Jan. 2010 as the
energy sector booms.
Domestic energy
production is essential
to any robust economic
recovery in the US.
155
150
*Seasonally adjusted
Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.
54
Is Terrorism an Insurable
Risk or Not?
Issue of Critical Importance with
Looming Expiration of TRIA
Download III’s Terrorism Insurance Report at:
http://www.iii.org/white_papers/terrorismrisk-a-constant-threat-2013.html
55
Loss Distribution by Type of Insurance
from Sept. 11 Terrorist Attack ($ 2011)
($ Billions)
Other
Liability
$4.9 (12%)
Property Life
WTC 1 & 2*
$1.2 (3%)
$4.4 (11%)
Aviation
Liability
$4.3 (11%)
Event
Cancellation
$1.2 (3%)
Aviation Hull
$0.6 (2%)
Workers
Comp
$2.2 (6%)
Property Other
$7.4 (19%)
Biz
Interruption
$13.5 (33%)
Total Insured Losses Estimate: $40.0B**
*Loss total does not include March 2010 New York City settlement of up to $657.5 million to compensate approximately 10,000
Ground Zero workers or any subsequent settlements.
**$32.5 billion in 2001 dollars.
Source: Insurance Information Institute.
I.I.I. TRIA Testimony Before US Senate
Banking Committee (Sept. 25, 2013)
Robert Hartwig, Future of TRIA Program, U.S. Senate Banking Committee
TRIA Outlook
 Difficult Reauthorization Battle Ahead
 Very difficult to overcome antigovernment/small government, Tea
Party forces in the House
 Most Committee members in both houses weren’t around in 2007
 House Hearings in 2012; House and Senate in Sept. 2013
 Additional House hearing on Nov. 13
 If Reauthorized, Insurer Participation Likely Increased
 Some Have Attacked TRIA as “Corporate Welfare”
 In reality the taxpayer is 100% protected
 NFIP, Crop programs have led to miscomprehensions
 Emphasizing Benefits to Employees Under WC is Key
 Misperception by Some that Terrorism is Urban Issue
 Standalone Market Opportunities? “Swiss Cheese” Market?
58
Terrorism Insurance Take-up Rates,
By Year, 2003-2012
80%
70%
58%
60%
59%
62%
64%
62%
57%
49%
50%
40%
30%
59%
61%
Take-up rates for smaller
commercial risks are lower—
potentially very low in some areas
and industries
27%
20%
10%
0%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
In 2003, the first year TRIA was in effect, the terrorism take-up rate
was 27 percent. Since then, it has increased steadily, remaining in the
low 60 percent range since 2009.
Source: Marsh Global Analytics, 2013 Terrorism Risk Insurance Report, May 2013.
59
Terrorism Violates Traditional
Requirements for Insurability
Requirement
Definition
Violation
Estimable
Frequency
Insurance requires large
number of observations to
develop
predictive
ratemaking models (an actuarial
concept known as credibility)
Very few data points
Terror modeling still in
infancy, untested.
Inconsistent
assessment of threat
Estimable
Severity
Maximum possible/ probable
loss must be at least
estimable in order to minimize
“risk of ruin” (insurer cannot
run an unreasonable risk of
insolvency though assumption
of the risk)
Potential
loss
is
virtually unbounded.
Losses can easily
exceed insurer capital
resources for paying
claims.
Extreme
risk
in
workers compensation
and statute forbids
exclusions.
Source: Insurance Information Institute
Terrorism Violates Traditional
Requirements for Insurability (cont’d)
Requirement Definition
Violation
be able to Losses likely highly
Diversifiable Must
spread/distribute
risk concentrated geographically or
Risk
across large number of by industry (e.g., WTC, power
Random
Loss
Distribution/
Fortuity
Source: Insurance
Information Institute
risks
“Law
of
Large
Numbers” helps makes
losses manageable and
less volatile
Probability of loss
occurring
must
be
purely random and
fortuitous
Events are individually
unpredictable in terms
of time, location and
magnitude
plants)
Terrorism attacks are planned,
coordinated and deliberate acts
of destruction
Dynamic target shifting from
“hardened targets” to “soft
targets”
Terrorist adjust tactics to
circumvent new security
measures
Actions of US and foreign govts.
may affect likelihood, nature and
timing of attack
Pyramid of Taxpayer Protection:
Strong, Stable, Sound and Secure
Hard Cap
$100 Bill
Government
Recoupment
If TRIA is
reauthorized, it
is highly likely
insurer
retentions will
be increased
Industry Aggregate
Retention: $27.5 Bill
Insurer Co-Payments
15% Above Retention
Individual Insurer Retention
20% of Premiums Earned
Program Dollar Threshold
$100 Million
Certification Dollar Threshold
$5 Million
Certification of Terrorist Act: Definition Must Be Met
Summary of Terrorism Risk Insurance
Program Extension Bills Introduced in 2013
Bill
Summary
•H.R. 508: “Terrorism Risk
Insurance Act of 2002
Reauthorization Act of 2013”
•Introduced Feb. 5 by Rep.
Michael Grimm (D-NY)
5-Year Extension (through 2019)
Extend recoupment period for any TRIA assistance from 2017 to 2019
•H.R. 2146: “Terrorism Risk
Insurance Program
Reauthorization Act of 2013”
•Introduced May 23 by Rep.
Michael Capuano (D-MA)
10-Year Extension (through 2024)
Extend recoupment period for any TRIA assistance from 2017 to 2024
Requires President’s Working Group on Financial Markets (PWGFM) to
issue reports on long-term availability and affordability of terrorism
insurance in 2017, 2020 and 2023
Reports to be drafted with consultation from NAIC and representatives of
the insurance and securities industries and policyholders
•H.R. 1945: “Fostering
Resilience to Terrorism Act
of 2013”
•Introduced May 9 by Rep.
Benny Thompson (D-MS)
10-Year Extension (through 2024)
Recoupment period changed to 2024
Would transfer responsibility for certification of a “act of terrorism” to the
Secretary of Homeland Security from Secretary of Treasury.
PWGFM to issue reports in 2017, 2020 and 2023
Requires Sec. of DHS to provide insureds with “timely homeland security
information, including terrorism risk information, at the appropriate level of
classification and information on best practices to foster resilience to an act
of terrorism.”
Source: Nelson, Levine, de Luca & Hamilton, FIO Focus, June 10, 2013; Insurance Information Institute.
Terrorist Risk Index
The US is
still
considered
to be at
“Medium
Risk” for a
terrorist
attack
Sources: Maplecroft Terrorism Risk Index; (2011); Guy Carpenter; Insurance Information Institute.
The threat of
terrorism is
highest in
South Asia,
Russia, the
Middle East
and Central
and East
Africa
64
CYBER RISK
Cyber Risk is a Rapidly Emerging
Exposure for Businesses Large
and Small in Every Industry
NEW III White Paper:
http://www.iii.org/assets/docs/pdf/paper_CyberRisk_2013.pdf
65
Data Breaches 2005-2012, By Number of
Breaches and Records Exposed
# Data Breaches/Millions of Records Exposed
700
656
222.5
Millions
662
220
200
600
180
498
500
160
446
127.7
419
447
120
400
300
66.9
100
321
80
35.7
200
157
140
60
16.2
19.1
22.9
17.3
40
20
100
0
2005
2006
2007
2008
# Data Breaches
2009
2010
2011
2012
# Records Exposed (Millions)
The total number of data breaches and number of records exposed
fluctuates from year to year and over time.
Source: Identity Theft Resource Center
2012 Data Breaches By Business
Category, By Number of Breaches
The majority of the 447 data breaches in 2012 affected business and
medical/healthcare organizations, according to the Identity Theft Resource Center.
Banking/Credit/Financial,
17 (3.8%)
Govt/Military, 50 (11.2%)
Business, 165 (36.9%)
3.8%
11.2%
Educational, 61 (13.6%)
36.9%
13.6%
Medical/Healthcare, 154 (34.5%)
34.5%
Source: Identity Theft Resource Center, http://www.idtheftcenter.org/ITRC%20Breach%20Report%202012.pdf.
67
2012 Data Breaches By Category, By
Number of Records Exposed
Government/Military and Business organizations accounted for the majority of
records exposed by data breaches during 2012.
Medical/Healthcare, 2.2 million (12.9%)
Banking/Credit/Financial,
470,048 (2.7%)
Govt/Military, 7.7 million (44.4%)
2.7%
12.9%
Educational, 2.3 million (13.3%)
44.4%
13.3%
Business, 4.6 million (26.7%)
26.7%
Source: Identity Theft Resource Center, http://www.idtheftcenter.org/ITRC%20Breach%20Report%202012.pdf.
68
AIG Survey: Cyber Attacks Top Concern
Among Execs
While companies are focused on managing a variety of business risks, cyber
attacks are a top concern. Some 85% of 258 executives surveyed said they
were very or somewhat concerned about cyber attacks on their businesses.
85%
Cyber Attacks
82%
Loss of income
80%
Property Damage
Securities & Investment
Risk
76%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Source: Penn Schoen Berland on behalf of American International Group.
69
The Most Costly Cyber Crimes, Fiscal
Year 2012
Malicious code, denial of service and web-based attacks account for more than 58
percent of the total annualized cost of cyber crime experienced by 56 companies.
Malware
Botnets
Malicious code
4%
Viruses, Worms, Trojans
4%
7%
Phishing + social
engineering
26%
7%
Malicious insiders
8%
12%
20%
Stolen devices
Denial of service
12%
Web-based attacks
Source: 2012 Cost of Cyber Crime: United States, Ponemon Institute.
70
External Cyber Crime Costs: Fiscal Year
2012
Information loss (44%) and business disruption or lost productivity (30%) account for
the majority of external costs due to cyber crime.
Other costs*
Equipment damages
5%
Revenue loss
Information loss
2%
19%
44%
Business disruption
30%
* Other costs include direct and indirect costs that could not be allocated to a main external cost category
Source: 2012 Cost of Cyber Crime: United States, Ponemon Institute.
71
High Profile Data Breaches, 20122013
Date
Company
Description of Breach
Mar 2013*
South Korean
banks, media cos
Cyber attack causes computers to crash at South Korean banks and media
companies, paralyzing bank machines across the country. No immediate reports
of records compromised.
July 2012
Yahoo
Security breach at Yahoo in which some 450,000 passwords lifted and posted to
the Internet.
July 2012
eHarmony
Online dating site eHarmony confirms security breach in which some 1.5 million
user names and passwords compromised.
July 2012
LinkedIn
Social networking site LinkedIn reportedly targeted in hacker attack that saw 6.5
million hashed passwords posted to the Internet.
April 2012
Utah Dept of
Technology
Services
Utah Department of Technology notifies of a March 30 breach of a server
containing personal data including social security numbers for about 780,000
Medicaid patient claims. Breach traced to Eastern Europe hackers.
Mar 2012
Global Payments
Credit card processor Global Payments confirms hacker attack has compromised
the payment card numbers of around 1.5 million cardholders.
Mar 2012
CA Dept of Child
Support Services
Officials announce that four computer storage devices containing personal
information for about 800,000 adults and children in California’s child support
system were lost by IBM and Iron Mountain Inc.
Jan 2012
Zappos
Online shoe retailer Zappos announces that information, such as names,
addresses and passwords on as many as 24 million customers illegally
accessed.
Jan 2012
NY State Electric +
Gas Co
Security breach at NYSEG that allowed unauthorized access to NYSEG
customer data, containing social security numbers, dates of birth and bank
account numbers, exposing 1.8 million records.
*March 2013 attack is not part of ITRC research.
Sources: Identity Theft Resource Center, http://www.idtheftcenter.org/ITRC%20Breach%20Report%202012.pdf; Insurance
Information Institute (I.I.I.) research.
Average Organizational Cost of a Data Breach,
2008-2011* ($ Millions)
The average organizational cost of a data breach in 2011 was $5.5 million,
down 24% from $7.2 million in 2010. Companies have improved steps
($ Millions)
taken in both preparing for and responding to a data breach.
$6.7
2008
$6.8
2009
$7.2
2010
$5.5
2011
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
*Findings of this benchmark study pertain to the actual data breach experiences of 49 U.S. companies from 14 different industry sectors, all of
which participated in the 2011 study. Total breach costs include: lost business resulting from diminished trust or confidence of customers ;costs
related to detection, escalation, and notification of the breach; and ex-post response activities, such as credit report monitoring.
Source: 2011 Annual Study: U.S. Cost of a Data Breach, the Ponemon Institute.
73
Main Causes of Data Breach
Negligent employees and malicious attacks are most often the cause of the
data breach. Some 39 percent of incidents involve a negligent employee or
contractor, while 37 percent concern a malicious or criminal attack.
Negligence
System glitch
24%
39%
Malicious or criminal
attack
37%
Source: 2011 Cost of Data Breach Study: United States, Ponemon Institute, March 2012
74
Marsh: Increase in Purchase of Cyber
Insurance Among U.S. Companies, 2012
Interest in cyber insurance continues to climb. The number of companies
purchasing cyber insurance increased 33 percent from 2011 to 2012.
33.3%
All Industries
Services
75.5%
Education
72.2%
32.2%
Financial Institutions
Retail/Wholesale
Communications, Media & Technology
Health Care
All Other
22.9%
21.6%
20.2%
27.7%
Source: Marsh Global Analytics, Marsh Risk Management Research Briefing, March 2013
75
Marsh: Total Limits Purchased, By Industry –
Cyber Liability, All Revenue Size
Cyber insurance limits purchased in 2012 averaged $16.8 million across all
industries, an increase of nearly 20% over 2011.
($ Millions)
Avg. 2012 Limits
Avg. 2011 Limits
$33.4
$26.0
$24.6
$20.5
$20.7
$16.8
$13.1 $12.4 $12.6 $14.1
$14.1
$8.1
All Industries
Comms, Media
& Technology
$9.8 $9.0
$9.3
Education
Financial
Institutions
Health Care
$8.1
Retail/Wholesale
Services
All Other
Source: Marsh Global Analytics, Marsh Risk Management Research Briefing, March 2013
76
Marsh: Total Limits Purchased, By Industry –
Cyber Liability, Revenue $1 Billion+
Among larger companies, average cyber insurance limits purchased in 2012
increased nearly 30% over 2011.
($ Millions)
Avg. 2012 Limits
Avg. 2011 Limits
$59.4
$46.6
$41.8
$40.6
$38.7
$30.0
$27.9
$14.1
$18.7 $17.3
$11.7
All Industries
$27.5
Comms, Media
& Technology
$12.7$11.3
$9.0
Education
Financial
Institutions
Health Care
$11.6
Retail/Wholesale
Services
All Other
Source: Marsh Global Analytics, Marsh Risk Management Research Briefing, March 2013
77
INVESTMENTS:
THE NEW REALITY
Investment Performance is a Key
Driver of Profitability
Depressed Yields Will Necessarily
Influence Underwriting & Pricing
78
Property/Casualty Insurance Industry
Investment Income: 2000–2013*1
($ Billions)
$60
$54.6
$52.3
$50
$40
$51.2
$49.5
$49.2
$47.1
$38.9
$38.7
$37.1
$36.7
01
02
$39.6
$47.7
$47.6
$46.2
Investment earnings are
running below their 2007
pre-crisis peak
$30
00
03
04
05
06
07
08
09
10
11
12
13*
Investment Income Fell in 2012 and is Falling in 2013 Due to Persistently
Low Interest Rates, Putting Additional Pressure on (Re) Insurance Pricing
1
Investment gains consist primarily of interest and stock dividends..
*Estimate based on annualized actual H1:2013 investment income of $23.199B.
Sources: ISO; Insurance Information Institute.
U.S. Treasury Security Yields:
A Long Downward Trend, 1990–2013*
9%
Yields on 10-Year U.S. Treasury
Notes have been essentially
below 5% for a full decade.
8%
7%
U.S. Treasury
security yields
recently plunged
to record lows
6%
5%
4%
3%
2%
1%
0%
Recession
2-Yr Yield
10-Yr Yield
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Since roughly 80% of P/C bond/cash investments are in 10-year or shorter durations,
most P/C insurer portfolios will have low-yielding bonds for years to come.
*Monthly, constant maturity, nominal rates, through October 2013.
Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm.
National Bureau of Economic Research (recession dates); Insurance Information Institute.
80
THE SEARCH FOR YIELD
DISCOVERS REINSURANCE
Alternative (Convergence) Capital
and Reinsurance Markets
81
Global Reinsurer Capital, 2007-2013:H1*
($ Billions)
$600
+18%
$500
$410
$400
-17%
+18%
-3%
$470
$455
2010
2011
+1%
+11%
$505
$510
2012
2013:H1
$400
$340
$300
$200
$100
$0
2007
2008
2009
Global Reinsurance Capital Has Been Trending Generally Upward Since
the Global Financial Crisis, a Trend that Seems Likely to Continue
*Includes both traditional and non-traditional forms of reinsurance capital.
Source: Aon Benfield Aggregate study for the 6 months ending June 2013; Insurance Information Institute.
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Long-Term Evolution of Shareholders’ Funds for
the Guy Carpenter Global Reinsurance Composite
200
Hard market softening
180
160
USD bn
140
Hard market
120
Excess capital
100
Soft market
Crisis
80
60
1998
1999
Source: Guy Carpenter
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1Q13
Alternative Capacity as a Percentage of Global
Property Catastrophe Reinsurance Limit
(As of Year End)
Alternative Capacity accounted for
approximately 14% or $45 billion
of the $316 in global property
catastrophe reinsurance capital as
of mid-2013 (expected to rise to
~15% by year-end 2013)
Source: Guy Carpenter
Property Catastrophe Reinsurance
Capacity by Source as of Mid-2013 ($ Bill)
Total = $316 Billion*
Catastrophe
Bonds, $16 , 5%
Collateralized
Reinsurance
(Sidecars), $15 ,
5%
Industry Loss
Warranties, $6 ,
2%
Traditional
Reinsurance,
$268 , 88%
“Convergence
Capital” accounted
for an estimated $45B
or 14% or total
property catastrophe
reinsurance capacity
as of mid-2013, up
$10B over the past 18
months (since 1/1/12).
Penetration of this
type of capacity is
growing
Collateralized
reinsurance (sidecars) is
the fastest growing
segment recently
Source: Guy Carpenter; Mid-Year Market Report, September 2013; Insurance Information Institute.
85
Alternative Capacity Development,
2001—2013:H1
Source: Guy Carpenter; Mid-Year Market Report, September 2013; Insurance Information Institute.
Non-Traditional Property Catastrophe
Limits by Type, YE 2012 vs. YE 2015E
NON-TRADITIONAL P/CAT LIMITS BY TYPE
Cat Bond
Retro
Collateralized Re
$57
$60
$50
ILW
$44
$23
$40
$15
$30
$20
$11
$10
$6
$10
$8
$13
$15
2012*
2015E
$0
Source: Guy Carpenter; *As Of Mar-2013
Source: Guy Carpenter; Reinsurance Association of America; Insurance Information Institute.
Alternative capital
is expected to rise
by 30% by YE 2015
and will ultimately
account for 2030% of total
reinsurance
spend, according
to Guy Carpenter
Catastrophe Bonds: Issuance and
Outstanding, 1997- 2013*
1,130.0
966.9
97
98
99
00
01
1,991.1
1,729.8
1,219.5
1,142.8
11
$14,835.7
$16,617.3
4,767.6
10
5,852.9
$12,139.1
$12,508.8
$12,043.6
$12,185.0
4,108.8
984.8
$2,000
846.1
$4,000
633.0
$6,000
Financial crisis
depressed issuance
4,600.3
$8,000
$3,450.0
$2,950.0
$10,000
3,391.7
$12,000
2,729.2
$14,000
$4,904.2
$16,000
$4,040.4
Risk capital
outstanding
reached a record
high in 2013
4,693.4
$18,000
$8,541.6
$20,000
6,996.3
$14,024.2
Risk Capital Amount ($ Millions)
$0
02
Risk Capital Issued
Risk Capital Outstandng at Year End
03
04
05
06
07
08
09
CAT bond issuance will likely
reach a record high in 2013v
12
7M
13
Catastrophe Bond Issuance Is Approaching Pre-Crisis Levels While Risk
Capital Outstanding Stands at an All-Time Record
*Through July 2013.
Source: Guy Carpenter; Insurance Information Institute.
Insurance Information Institute Online:
www.iii.org
Thank you for your time
and your attention!
Twitter: twitter.com/bob_hartwig
Download at www.iii.org/presentations
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