Catastrophe events on the (Re)Insurance market Presented by Thomas - PowerPoint PPT Presentation

The Influence of the 2010 – 2011 Catastrophe events on the (Re)Insurance market Presented by Thomas Dubecq

Contents Section I CAT NAT Losses in 2010 – 2011 Section II Financial Consequences on Insurance Sector

Section I CAT NAT Losses in 2010 – 2011

CAT / NAT 2010 – 2011 Event Type Event Location Insured Loss (USD) Reinsured Loss (USD) 2010 Earthquake Chile 8,500,000,000 8,000,000,000 Windstorm Xynthia France, Portugal, Spain, Belgium, Germany 3,650,000,000 1,750,000,000 Earthquake New Zealand (Darfield) 5,500,000,000 3,600,000,000 2011 Earthquake New Zealand (Lyttleton) 10,500,000,000 7,000,000,000 Earthquake Japan (Tohoku Region) 35,000,000,000 12,000,000,000 Flooding Australia (Queensland) 2,660,000,000 1,800,000,000 Severe Weather U.S.A Tornadoe and Hurricane 28,000,000,000 5,000,000,000 Earthquake New Zealand (Sumner) 500,000,000 170,000,000 Total 94,310,000,000 39,320,000,000 3

Chile Earthquake  Loss Richter Scale Magnitude 8.8, 210 miles SW of Santiago  Estimated Return Period, 80 - 100 Years  521 lives lost  Estimated Economic Loss USD 31bn – Approx. 18% of GDP  95% Reinsured – Estimated Insured Loss USD 8.5bn – Estimated Reinsured Loss USD 8bn • (Treaty 3.2bn, Fac 4.8bn) 4

New Zealand Earthquakes  Loss Richter Scale: – Magnitude 7.1 Darfield, 4 th Sept 10 – Magnitude 6.3 Lyttleton 22 nd Feb 11 – Magnitude 6.3 Sumner, 13 th June 11  Estimated Return Periods 500 - 2500 years  182 Lives lost  Estimated Economic Loss USD 21bn – Approx. 12% of GDP  73% Reinsured – Total Estimated Insured Damage USD 17bn – Total Estimated Reinsured Damage USD 13bn 5

Japan Earthquake  Loss Richter Scale Magnitude 9.0 Tohoku, 234 miles NE of Tokyo  No Estimation of Return Period was made for an event above M 8.8 in that location  15,822 Lives lost  Estimated Economic Loss USD 200bn – 300bn – 3.5% - 5.5% of GDP  45% Reinsured – Estimated Insured Loss USD 35bn – Estimated Reinsured Loss USD 12bn 6

Conclusion  Earthquake events have dominated catastrophe losses in 2011  2010 Economic Losses by Year by Type – USD 17.65bn Insured Loss – USD 13.35bn Reinsured Loss  2011 – USD 76.66bn Insured Loss – USD 25.97bn Reinsured Loss  Total since Chile EQ – USD 94.31bn Insured Loss – USD 39.32bn Reinsured Loss  2011 economic losses to date are approaching USD 400bn while the average from 2004 to 2010 was USD 89bn 7

Section II Financial Consequences on Insurance Industry

Market Outlook  Global Reinsurer capital is likely to be higher at year end  Capacity remains adequate to supply the current needs of insurers 9 Source: Individual Company Reports, Aon Benfield Analytics

ABA – Aon Benfield Aggregate  Analyzes the financial results of 28 companies with a specialization in reinsurance. Most are publicly listed, but a few are U.S subsidiaries of larger groups  Represents approximately 50% of the estimated global reinsurer capital  Provides a strong indication of overall global reinsurance trends 10

ABA – Combined Ratio Comparison  Major events in Japan, Australia, New Zealand and the U.S. increased the catastrophe loss impact to the combined ratio from 10.9 percent for H1 2010 to 34.1 percent in H1 2011 Source: Individual Company Reports, Aon Benfield Analytics 11

Impact of Cat Losses on Shareholders’ Funds 12 Source: Individual Company Reports, Aon Benfield Analytics

ABA – SHF Development 1H 2011 vs FY 2010  Dividends totalling USD 7.1bn and share buybacks totalling USD 2.5bn were the main drivers of the overall capital reduction in the first half of 2011 250 1.2 -7.1 0.8 246.6 0.2 -2.5 2.4 USD (billions) 242.4 0.7 240 230 FY 2010 Additional Net Dividends FX Investment Share Other 1H 2011 SHF capital income gains buybacks SHF  Total Shareholders Funds at 1H 2010 were USD 232.1bn Source: Individual Company Reports, Aon Benfield Market Analysis 13

But there is light at the end of the tunnel....

ABA Gross Written Premiums 75 74 73 10.5% 72 71 USD (billions) 70 -6.3% 69 74.4 68 71.9 67 66 67.4 65 64 63 1H 2009 1H 2010 1H 2011  The increase in premium income was driven largely by solvency-relief deals in Asia and increased demand for natural catastrophe cover in loss-affected areas Source: Individual Company Reports, Aon Benfield Market Analysis 15

ABA – Pre-Tax Profit 25 20 15 14.7 10 USD (billions) 5 0.8 0 -5 -10 -15 -20 1H 2010 1H 2011 Other Capital gains/losses Life underwriting result Non-life underwriting result Investment income Pre-tax profit Source: Individual Company Reports, Aon Benfield Market Analysis 16

ABA Net Income 9 6.9 6.5 7 5.4 5.4 4.6 5 USD (billions) 3 1 -4.2 -1 -3 -5 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 Source: Individual Company Reports, Aon Benfield Market Analysis 17

Change in Global Insurance Capital  Insurer capital increased 12% from year end 2009 to year end 2010  It increased 3% through H1 2011 despite significant catastrophe losses Source: Individual Company Reports, Aon Benfield Analytics 18

Conclusion  Exceptional International Catastrophe activity in the past 18 months  On the whole, (Re)Insurance industry capital unimpaired  Government (Re)Insurance schemes proved responsive and drastically mitigated the effect on the Insurance market  The absence of an active U.S. Windstorm season has allowed the market to make a swift recovery  Despite minimal 3 rd quarter losses, financial instability could have an impact on Insurance Companies’ balance sheets 19

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