Guy Carpenter Briefing Shows Rates Rising on U. S. Property Catastrophe Reinsurance at April 1, 2009 Renewals

Capacity Continues to Tighten
NEW YORK--(Business Wire)--
A briefing issued today by Guy Carpenter & Company, LLC, the leading global risk
and reinsurance specialist, finds reinsurance rates continuing to increase for
the U.S. property-catastrophe reinsurance market at the April 1, 2009 renewal.
The briefing, titled Rates Up on Tightening Capacity at U.S. 4/1 Prop-Cat
Renewal, is available for download at www.GCCapitalIdeas.com.

RATES/PRICING

* According to the briefing, national programs rose between 10 percent and 14
percent on a risk-adjusted basis, with the Northeast seeing 6 percent to 8
percent increases. Risk-adjusted pricing was up 12 percent to 14 percent on
average for residual markets, though results varied widely, depending on risk
pool characteristics.
* By comparison, reinsurance rates increased 11 percent on average at the
January 1, 2009 renewal.
* Quoting behavior varied widely, ranging from -15 percent to 15 percent for
certain programs. Capacity needs, regions, and specific perils were among the
factors influencing the final rates that insurers were able to secure.
* For the U.S. market, firm order terms (FOTs) ended up at 94.8 percent of
average quotes - 80.5 percent of the top quote and 110 percent of minimum
quotes. Increases were less pronounced in the Northeast, where higher layer FOTs
discounted 8 percent to 10 percent relative to quotes, with lower layers at 10
percent to 12 percent discounts.
* Relative to 2008 FOTs, prices rose 14 percent to 16 percent year-over-year for
higher layers and 10 percent to 14 percent for lower layers. For programs
focused on the Northeast, lower layer FOTs were up only 4 percent to 6 percent
from April 1, 2008, and higher layers saw increases of 8 percent to 10 percent.
* Pricing trends were substantially impacted by the availability of capacity -
especially for perils in historically capacity constrained zones - as well as
program-specific loss histories.

CAPITAL

* According to the Guy Carpenter Global Reinsurance Composite, shareholder funds
dropped 18 percent last year - reflecting a decline in capital of $19.7 billion.
Unrealized losses on investment assets accounted for 53 percent of the decline.
Share repurchases and dividend payments resulted in the depletion of capital as
well, though most programs were suspended by the end of last year.
* Capital is likely to continue to be constrained in 2009, with uncertainty in
the financial markets likely to impair investment assets. The ability to secure
additional capital will depend on specific companies and lines of business.

FLORIDA RENEWALS

* As a result of concern about continued price increases, a number of Florida
renewals are already underway. The outcome of the current Florida legislative
session and the decisions by the Florida Hurricane Catastrophe Fund Trustees
could have a profound impact on the market.

QUOTES

Lara Mowery, Head of Guy Carpenter`s Global Property Specialty Practice

"The rise in reinsurance rates at the April 1 renewal extends the upward trend
that we saw at the beginning of the year. Capital has undoubtedly been
constrained, and this is translating into decreasing capacity in a number of
areas, which then has an impact on reinsurance pricing."

"Taking early action continues to be critical in helping insurers manage their
cost of coverage. As we move into the Florida renewal season, the many unknowns
make this strategy more difficult for these companies."

TAGS/KEYWORDS

Guy Carpenter, catastrophe, reinsurance, renewal, capacity, pricing, rates,
capital, Florida

LINKS/URLs

Rates Up on Tightening Capacity at U.S. 4/1 Prop-Cat
Renewal:www.gccapitalideas.com/2009/04/07/rates-up-on-tightening-capacity-at-us-41-prop-cat-renewal

Charts Available for Download: http://www.gccapitalideas.com/category/chart-room

GCCapitalIdeas.com Registration:http://feeds2.feedburner.com/gccapitalideas

RSS FEED SUBSCRIPTION

http://feeds2.feedburner.com/gccapitalideas

ABOUT GUY CARPENTER

Guy Carpenter & Company, LLC is the world`s leading risk and reinsurance
specialist and a part of the Marsh & McLennan Companies. With 50 offices
worldwide, Guy Carpenter creates and executes reinsurance solutions and delivers
capital market solutions* for clients across the globe. The firm`s full breadth
of services includes line of business expertise in Agriculture; Aviation;
Casualty Clash; Construction and Engineering; Excess and Umbrella; Life,
Accident and Health; Marine; Medical; Political Risk and Trade Credit;
Professional Liability; Property; Retrocessional Reinsurance; Surety; Terrorism
and Workers Compensation. GCFac is Guy Carpenter`s dedicated global facultative
reinsurance unit that provides placement strategies, timely market access and
centralized management of facultative reinsurance solutions. In addition, Guy
Carpenter`s Instrat unit utilizes industry-leading quantitative skills and
modeling tools that optimize the reinsurance decision-making process and help
make the firm`s clients more successful. Guy Carpenter`s website address is
www.guycarp.com.

Guy Carpenter`s new intellectual capital website, www.GCCapitalIdeas.com,
leverages blog technology, including Real Simple Syndication (RSS) feeds as well
as searchable category tags, to deliver Guy Carpenter`s latest research as soon
as it is posted. In addition, articles can be delivered directly to BlackBerrys
and other handheld devices.

* Securities or investments, as applicable, are offered in the United States
through GC Securities, a division of MMC Securities Corp., a US registered
broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas,
New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as
applicable, are offered in the European Union by GC Securities, a division of
MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial
Services Authority. Reinsurance products are placed through qualified affiliates
of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe)
Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan
Companies. This communication is not intended as an offer to sell or a
solicitation of any offer to buy any security, financial instrument, reinsurance
or insurance product.

Guy Carpenter
Alexis Levenson, 917-937-3264
alexis.levenson@guycarp.com
or
DeMartine Group
Matt Conroy, 203-221-2790
mconroy@demartinegroup.com

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