Duffy Tues 3pm Ven II

8/12/2019 Duffy Tues 3pm Ven II

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STATE OF THE MARKETJANUARY 1, 2014 PROPERTY REVIEW


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Agenda

Overview

Market Drivers

US Overview

Quote and Firm Order Behavior

Pricing and Structures

Market Capacity

Renewal Summary & Outlook

GUY CARPENTER 1


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Property Catastrophe Renewal Overview

CoveragePricing & Capacity Market Drivers

In an increasingly client-centric

environment effective solutions

were sourced through a

combination of products and

Rates on line fell significantly in

nearly all regions and business

segments

Global ROL Index fell 11%

Abundant supply

Near record capital

estimated at USD322

billion

prov ers

Individual company priorities

impacted how coverage

changes were tailored Man com anies ultimatel

rm or ers were genera y very

aggressive as compared to

quotes

Pricing was impacted byselection of covera e chan es

g t g o a oss act v ty

Near USD40 billion as

compared to ten-year

average of USD60billion

focused strictly on price, not

changes in coverage

and historical factors

Capacity was abundant even at

aggressive pricing

While much of the newer

capital focused on peak

catastrophe zones, its

presence spurred competition

GUY CARPENTER 2

coverage innovation


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Regional Rate on Line Index at January 1, 2014

GUY CARPENTER 3

Data points do not reflect pricing relativities between geographies.


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MARKET DRIVERS


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Market Drivers

Global Catastrophe Insured Losses: 1970 2013

GUY CARPENTER 5February 13, 2014


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Market Drivers

Quarterly Loss Activity: 2011 2013

GUY CARPENTER 6


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Market Drivers

Distribution of Global Catastrophe Insured Losses: 2011 2013

GUY CARPENTER 7February 13, 2014

last three years were driven by international losses


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Market Drivers

Evolution of Dedicated Reinsurance Sector Capital: 2012 YE 2013

GUY CARPENTER 8

. - . . .

are solely Guy Carpenters.


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Market Drivers

Alternative Capital

GUY CARPENTER 9


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Market Drivers

Catastrophe Bond Issuance and Capital Outstanding: 1997 YE 2013

GUY CARPENTER 10


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U.S. Overview

GUY CARPENTER


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U.S. Property Catastrophe Renewal Overview

Robust capital and light catastrophe loss activity combined to create

significant pricing and coverage pressure.

a e on ne n ex ecrease

The market focused on tailoring solutions and adding value

and pursued structures that best met their combination of coverage and pricing

goals

Extended hours clause

Full terrorism coverage excluding NBCR

Multiple year coverage

Improved reinstatement terms

GUY CARPENTER 12

Price tended to be the priority for many companies


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QUOTE AND FIRM ORDER BEHAVIOR


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Summary of Quote and Firm Order Behavior at January 1, 2014

Reinsurer quoting behavior was relatively stable and largely in line with trends seen

for 2013 renewals

compared to January 1, 2013 Firm orders were issued at an average discount of 9% below the average quote (2013:

7% discount)

Firm orders were more aggressive in general on nationwide and larger programs

In general, reinsurers were willing to support renewal or increased lines at pricing

levels below initial quotes

GUY CARPENTER 14


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PRICING AND STRUCTURES

GUY CARPENTER


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Summary of Pricing and Structure at January 1, 2014

Risk adjusted pricing declined by 10% to 20% on average

Programs viewed as supporting larger existing margins (such as nationwide carriers)

experienced larger decreases

Programs with loss activity or development on prior year losses and smaller regional

programs viewed with thinner margins experienced smaller decreases

Majority of programs renewed with similar structures, with no clear trends in

structure changes

GUY CARPENTER 16


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US Rate on Line Index at January 1, 2014

GUY CARPENTER 171/1/14 represents a 15% decrease from 1/1/13 and a 9% decrease from the 2013 full year calculation.


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Typical US Property Catastrophe Risk Adjusted Price Change by PeakZones

GUY CARPENTER 18Significant variation in individual treaty renewal results due to a variety of factors including loss activityand historical factors.


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MARKET CAPACITY


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Summary of Market Capacity at January 1, 2014

Preliminary analysis is based on finalized programs as of 1/13/2013, data is

included for a majority of the capacity placed at January 1, 2014

reduced slightly (~2%) year over year compared to January 1, 2013

Overall authorized capacity on renewal programs increased significantly (~8%) year

over year compare o anuary ,

Percentage of authorized capacity utilized for placements decreased significantly

with 74% taken up at January 1, 2014 vs 85% at January 1, 2014

Non traditional capacity did not have a significant direct impact on traditional

property catastrophe programs, representing a small portion of total

authorized/signed capacity

Impact more substantial on cat aggregate and RPP programs where nontraditional capacity represented approximately 25% of capacity

GUY CARPENTER 20


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CONCLUSION:

GUY CARPENTER


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Renewal Summary & Outlook

US Insurers saw significant risk adjusted price reductions in the cost of cat

reinsurance at January 1, 2024

Pro ram structures and overall market demand for covera e was relativel

stable year on year

Insurers had greater ability to customize the terms of coverage to suit their

unique risk management needs

Notwithstanding lower risk adjusted returns, overall supply of capacity from

reinsurers increased year on year

Resulting increase in excess capacity due to imbalance of supply & demand

The trends above are expected to persist for the balance of 2014 resulting in lower

risk adjusted pricing for Q2 cat renewals

- Will YOY rate decreases diminish as we lap rate reductions of June 2013?

- Will YOY rate decreases continue driven by competition amongst reinsurers?

GUY CARPENTER 23


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Important Disclosure

Guy Carpenter & Company, LLC provides this report for general information only. The information and data contained herein is based on sources we

believe reliable, but we do not guarantee its accuracy, and it should be understood to be general insurance/reinsurance information only. Guy Carpenter &

Company, LLC makes no representations or warranties, express or implied. The information is not intended to be taken as advice with respect to anyindividual situation and cannot be relied upon as such. Please consult your insurance/reinsurance advisors with respect to individual coverage issues.

Readers are cautioned not to place undue reliance on any calculation or forward-looking statements. Guy Carpenter & Company, LLC undertakes no

obligation to update or revise publicly any data, or current or forward-looking statements, whether as a result of new information, research, future events or

otherwise. The rating agencies referenced herein reserve the right to modify company ratings at any time.

Statements concerning tax, accounting or legal matters should be understood to be general observations based solely on our experience as reinsurance

brokers and risk consultants and may not be relied upon as tax, accounting or legal advice, which we are not authorized to provide. All such matters should

be reviewed with your own qualified advisors in these areas.

This document or any portion of the information it contains may not be copied or reproduced in any form without the permission of Guy Carpenter &

Company, LLC, except that clients of Guy Carpenter & Company, LLC need not obtain such permission when using this report for their internal purposes.

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