Academics call on re/insurers to abandon cat models relying on historical data: Convergence 2020

ORIGINAL PUBLICATION HERE

A panel of academics at ILS Bermuda’s Convergence 2020 conference has slammed the re/insurance industry’s catastrophe prediction models as not fit for purpose.

Cat models that use historical inputs are based on “short and incomplete” data that would be misleading, even if the data were comprehensive, because of the impact of climate change, said Professor Kerry Emanuel, professor of atmospheric science at the Massachusetts Institute of Technology.

Speaking on a panel titled The Effects of Climate Change on Wind, Flood & the Earthquake Zombie Hypothesis, that was chaired by Samantha Medlock, a senior counsel who sits on the Climate Crisis Select Committee for the US House of Representatives, Emanuel argued that climate data was only reliable going back as far as the 1970s.

Can one earthquake cause a cascade of more?

ORIGINAL ARTICLE BY Matthew Blackett & Coventry University HERE

Europe isn’t a region well known for intense seismic activity, but large earthquakes do happen. In 1953, a devastating 6.8 magnitude quake struck the Greek Ionian Islands. Though these large events tend to be the exception rather than the rule, a flurry of significant earthquakes struck the Balkans on November 27 2019, with epicentres in Bosnia, Albania and Crete. Geologists are worried that these events might gain momentum, with larger and more destructive events imminent.

Should residents be worried? The Balkans – a region stretching from Croatia to mainland Greece, and the Greek islands to the south – has a very complex geology. The whole region is tectonically active due to compression of the Earth’s crust further north and subduction – when one tectonic plate moves under another – to the south. Each process plagues this part of the world with frequent, though usually small, tremors.

Insurance and ILS will remain attractive to investors in H1 2019: Twelve Capital

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The insurance sector will remain attractive to investors in the first half of 2019, and there are “clear signs of momentum” in how natural catastrophe risk is priced in the equity and ILS markets in the wake of two recent heavy loss years, according to insurance investment manager Twelve Capital.

In Twelve Capital’s H1 2019 outlook, the company suggested that capital markets are increasingly willing to invest in a wider scope of insurance risk.

Rising sea levels a manageable concern for re/insurers, says climate expert

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Sea level rise over the 21st century will not be as severe as many climate models have predicted and should not present a major issue for re/insurers provided it is managed appropriately, according to Dr. Judith Curry, President of Climate Forecast Applications Network and Professor Emeritus, Georgia Institute of Technology.

Curry acknowledged that sea level rise has the potential to be one of the most consequential impacts of global warming, with millions of people in the U.S alone living in areas at risk of coastal flooding, and more moving to vulnerable areas every year.

The average yearly rate of sea level rise is 3 millimetres, but there are concerns that man-made global warming could accelerate the process, with some climate models forecasting sea levels to rise by more than 5 feet over the 21st century.

ILS growth to return, as longer-term investors remain committed: Aon

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Longer-term investors in insurance-linked securities (ILS) and reinsurance linked assets are expected to remain committed to the sector despite the impact of losses over the last two years, with a resumption of ILS market growth anticipated once recent losses have been digested.

Reporting in its latest Reinsurance Market Outlook, Aon highlights the strong growth that was seen in alternative capital through the first nine months of 2018, as the ILS market grew in the wake of the 2017 hurricane events.

The traditional reinsurance market shrank a little over the same period, largely due to rising interest rates and a stronger U.S. dollar, the broker notes.

Эль-Ниньо сделает 2019 год рекордно теплым

ОРИГИНАЛЬНАЯ ПУБЛИКАЦИЯ ЗДЕСЬ

Москва. 28 декабря. INTERFAX.RU – Метеорологи предполагают, что 2019 год может стать для планеты самым теплым за всю историю инструментальных наблюдений, заявил научный руководитель Гидрометцентра России Роман Вильфанд.

“По климатическим моделям, другим статистическим исследованиям следующий год может быть самым – в целом по глобусу – самым теплым за всю историю метеонаблюдений”, – сказал Вильфанд на пресс-конференции.

Optimism & panic at renewals, but improving reinsurance returns expected

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There is a mix of optimism and panic as the key January 1st reinsurance renewal rapidly approaches, after losses, market improvement programs at Lloyd’s and a chaotic retrocession market, all continue to make conditions challenging for some.

But the longer-term outlook is for improving reinsurance returns generally, which will encourage ILS investors who are largely set to hold steady for January as they await the outcome of late and sometimes hotly contested renewals.

We’re being told that some markets, both traditional reinsurance and insurance-linked securities (ILS) funds, are still not quoting on renewal requests, even at this late stage.

Major UNL retro programs hit market at relatively flat pricing & terms

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For all the talk of a capacity crunch in retrocessional reinsurance markets, resulting in a renewal that is seen to be in disarray and set to be very late, we’re told that some major UNL retrocession programs have hit the market offering relatively flat pricing and terms in recent days.

At the same time we’re told that some markets are pushing for up to 30% rate increases for retrocession renewals, particularly on aggregate UNL retro contracts.

Putting those two things together, buyers and brokers seeking flat renewals and markets looking for steep rate increases, it is no surprise that the sides are not meeting and many sources report a lack of agreement on price and terms, in some cases unlike anything they’ve experienced before.

Insurers gear up to grapple with the impact of climate change

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The earth’s climate could be changing faster than first thought – and definitely faster than insurers would like. This presents great challenges to the industry which needs to address them quickly, Intelligent Insurer discovers.

Scientists have warned for some time that rising air and sea temperatures could mean an increase in the frequency and severity of natural catastrophes.

Re/insurers have always paid close attention so such ideas, and any related research, as they could be particularly hard hit by such developments, both on the asset as well as on the liability side of their balance sheets.

Alternative investments to expand to $14tn by 2023, niches to benefit

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The alternative investments sector is forecast to see explosive growth over the coming five years, with alternative assets under management, consisting of private capital and hedge funds, likely to reach $14 trillion by 2023.

According to Preqin, a tracker of data on the alternative asset management space, the industry held $8.8 billion of assets in 2017 and this is now forecast to expand by 59% over the next five years, representing compound annual growth of 8.0% per annum.

Within this explosive growth one of the big areas expected to benefit from increasing investor interest and appetite in alternatives is the so-called niche or esoteric strategies, which is where insurance-linked securities (ILS), catastrophe bonds and other reinsurance linked investments sit.