Catastrophe bond market is experiencing record highs for issuance and total outstanding notional amount for first half of the year New York, July 5, 2023 – The broader market trends seen at January 1 continued at mid-year renewals, but with improved timing and concurrence around terms and conditions. While property pricing saw continued risk-adjusted rate increases in many segments, the average change moderated from January 1, according to Guy Carpenter, a leading global risk and reinsurance specialist and a business of Marsh McLennan (NYSE: MMC). Additional capacity and increased appetite entered the property market at mid-year. However, the increased capacity remained highly disciplined around attachment points, pricing and coverage. The casualty market continues to trend in a cautious direction. Reinsurers are closely monitoring prior-year loss development as well as the moderating underlying rate environment. Key developments during the mid-year renewals included: Property - A strong demand for limit persists, but market corrections have rebalanced the supply/demand disparity faced by many regions a year ago. Across the board, pricing is firm with a wide range of risk-adjusted rate changes seen throughout individual layers. Global property catastrophe reinsurance risk-adjusted rate increases ranged from +10% to +50%, with loss-impacted clients often seeing higher pricing. In the US, property catastrophe reinsurance risk-adjusted rate increases were on average the highest in 17 years, with loss-free accounts generally up +20% to +50%. In many instances, cedents retained more risk rather than accepting unfavorable terms. While lower-layer capacity and aggregates remained highly constrained, new capital raised by existing market participants and growing appetite by other established reinsurers saw overall capacity levels rebound. The preliminary year-to-date Guy Carpenter US Property Catastrophe Rate on Line Index, an alternative measure of price change that incorporates the impact of structural adjustments and current views of risk on actual dollars paid, increased 35 percent for January through July renewals. Casualty - Reinsurance pricing pressure continued across most casualty lines driven by continued prior-year loss development, effects of social and economic inflation, moderating underlying rate changes (in some cases, decreases) and an increase in reinsurer margin requirements. Client differentiation remains critical to renewal outcomes. Sufficient capacity was generally available when the market clearing pricing was set. Cyber - Quota share remains the prevalent reinsurance structure, often purchased in conjunction with aggregate coverage. Overall, capacity for quota share has become more readily available in the cyber market given improvements in underlying rate and portfolio performance. Aggregate capacity, pricing and terms remained stable at mid-year. Retrocession - Mid-year renewals saw a continuation of price and coverage trends experienced earlier in the year, with post January 1 oversight leading to a more orderly renewal process and a narrower range of quotes and firm order terms. Capacity was less scarce mid-year, predominantly due to modest reduction in demand stemming from retro pricing dynamics and favorable terms on inwards portfolios. Catastrophe bonds are experiencing a record first half of the year. Significant developments in the catastrophe bond market included: By June 30, 41 different catastrophe bonds were brought to the 144A market for approximately USD 9.2 billion in limit placed, taking the total outstanding notional amount to more than USD 37.8 billion. By comparison, the total limit placed in full year 2022 was USD 9.3 billion and the average limit placed in the first half of the last five years was USD 6.5 billion. The majority of bonds in the first half of 2023 were oversubscribed in demand and priced either within or below guidance. On average, spreads for cat bonds decreased by double-digits compared with the fourth quarter of 2022. Dean Klisura, President & CEO of Guy Carpenter, said, “Price adequacy across lines and supportable structures are expected to continue to drive sufficient capacity levels. For cedents, higher levels of retained risk across the business in 2023 will most likely impact volatility in 2024, necessitating strategic portfolio management.” “Amid the capacity rebound, a highly viable and revitalized insurance-linked securities market has emerged with a flurry of activity occurring in the first half of 2023. At Guy Carpenter, we are committed to enabling our clients to anticipate and navigate this ever-changing marketplace,” concluded David Priebe, Chairman, Guy Carpenter. MEDIA NOTE: Please visit Guy Carpenter’s Renewal Resource Center to access charts for the Guy Carpenter Rate on Line Index and Catastrophe Bonds Issued and Outstanding; additional quotes from Guy Carpenter leaders; and other important insights and commentary.

WTW, a leading global advisory, broking and solutions company, has announced a collaboration with global law firm Clyde & Co to help clients navigate the rapidly evolving climate risk and liability landscape. Building on a long-standing relationship, WTW will offer Clyde & Co’s climate legal and risk expertise as part of its climate analytics and consulting offering to support clients in managing the impact of physical climate risks and their transition to net zero. The collaboration with Clyde & Co will deliver significant value, complementing WTW’s offering by helping organizations better understand and manage the climate liability risks and respond to the opportunities presented by climate change. Ms. Nadine Coudel, Climate Liability Lead, Climate & Resilience Hub, WTW, said, “The collaboration will further broaden our relationship with Clyde & Co, developed over a number of years. We will be able to give our clients unprecedented access to regulatory and risk advice in the course of their ESG journeys, pairing WTW’s world-leading consulting expertise and capabilities in delivering climate risk analytics with Clyde & Co’s renowned and globally integrated team of climate liability experts.” Mr. Nigel Brook, a partner of Clyde & Co, said, “With regulations tightening in the face of increasingly severe and frequent physical climate risks, there are profound implications for all industries. The onus on boardrooms to manage the risks presented by climate change is stronger than ever.” As part of a wider climate risk assessment, the collaboration will offer WTW’s clients across sectors strategic and legal advice on climate liability risk exposures. WTW already provides physical and transition risk assessments through its Climate and Resilience Hub. To mitigate these risks to avoid a disorderly transition, and to seize opportunities that will enable clients to stay ahead of the curve, three overarching areas of risk will be covered: Liability: Analysis of current climate liability risks. Regulatory: Planning for regulatory responses to climate change. With the landscape of climate regulation and disclosure rapidly evolving, Clyde & Co and WTW will provide advice and guidance on the latest developments. Contractual: Reviewing of current climate contracts for high-risk contract hotspots. Reviews of a client’s identified contracts will be carried out and advice provided on how to address physical risks and make them net-zero-aligned. Source: asiainsurancereview.com

Insurance companies that renew their reinsurance agreements in the current July season face continued strict conditions from reinsurers in light of the high losses in the medical and credit branches. The general manager in charge of reinsurance at an insurance company told Al Mal News that the increase in compensation paid in the credit insurance branch has led to tighter renewal terms cited by reinsurers. He added that there are not many reinsurance companies worldwide specializing in credit insurance and that this line needs underwriters with high experience. He pointed out that credit insurance has become one of the leading branches in the market in terms of premiums, but the rate of losses has increased and it has become difficult to conclude credit reinsurance agreements on easier terms. Regulatory action He praised the Financial Regulatory Authority which recently issued a decision to set a minimum rate for lending agencies to bear compensation of not less than 25% in the event of default by borrowers, in addition to obligating insurance companies to study well the risk and credit profile of the customer who has received loans. He pointed out that the medical insurance branch had been severely hit by rising inflation. This has been reflected in the significant increase in the costs of medical treatment and the prices of medicines, supplies, tests, x-rays, hospital stays and surgery. He stressed that these resulted in increases in the amounts of compensation in the medical insurance branch. In addition, some insurers reduce premiums to win group business. Reinsurers have intervened directly in the pricing of medical insurance policies in recent years. He proposed that insurance companies should use third-party healthcare administration companies (TPAs) to help control costs and reduce misuse by customers of medical services. Source: meinsurancereview.com

Insurers in Australia and New Zealand are adjusting to higher net retentions as reinsurers continue to move away from frequency risk amid consecutive years of heavy major catastrophe losses in the region. But despite the headwinds and increased demand for protection, capacity was stable and sufficient thanks to the support of the Australian Cyclone Reinsurance Pool, reports Aon. The Australia and New Zealand mid-year reinsurance renewal “was orderly, albeit late,” explains re/insurance broker Aon in its mid-year report. July 1st is a key renewal period for the region as more than 75% of the annual property catastrophe reinsurance limit renews. The 2023 mid-year renewal followed four years of major catastrophe losses in the region, which includes the record-breaking USD 6 billion load from the flooding events in Australia in 2022, as well as extreme events in New Zealand this year. As a result of the loss experience in the region, reinsurers reassessed catastrophe pricing and their eagerness to move away from frequency events and less well-modelled perils, such as floods, hail and wildfires, persisted, leading to higher net retentions for buyers. Aon notes that this trend saw return periods of attachment rise from one-in-three year to around one-in-six year levels, and also caused insurers to intensify portfolio optimization efforts and explore opportunities for capital relief. “Insurers are now adjusting to life with higher net retentions and increased earnings volatility, which is likely to prove particularly challenging for the region’s insurers. Small and regional insurers in Australia and New Zealand, which typically rely more heavily on reinsurance to meet regulatory capital requirements, have been hit hardest by changes in the reinsurance market,” says Aon. “Increased retention levels will see many regional insurers now run with a lower regulatory Prescribed Capital multiple, although there are some options to optimize portfolios and capital.” The higher cost of reinsurance, notably for cat-exposed lines, and the uplift in retentions, is occurring alongside increased demand for protection in the region, and while capacity was “stable and “sufficient” to meet demand, Aon reports that buyers were unable to purchase protection at desired attachment levels. “Notably, capacity for the lower levels of programs at the 2023 renewal was not available at any price, a change on the mid-year 2022 when reinsurance for lower layers was still available albeit at increased rates-on-line,” reads the report. One factor that did benefit insurers and the market at the mid-year renewals was the Australian Cyclone Reinsurance Pool, which is backed by an AUD 10 billion federal government guarantee, and provides cyclone and related flood damage reinsurance protection for homeowner and small business property insurance. It’s expected that the pool will take on over 90% of the market’s cyclone risk. The capacity available through the ACRP eased the supply-demand balance, resulting in the market purchasing 10-15% less catastrophe limit at the mid-year than in 2022. All in all, Aon reports catastrophe rate increases in the double-digits at the mid-year renewal in Australia and New Zealand, on top of similar increases at the mid-year renewals in 2022. Source: reinsurancene.ws

The General Arab Insurance Federation (GAIF) has launched an initiative to pool the Nat CAT underwriting capacities of insurers at the Arab level and not only at the level of each country. This is the Arab Initiative for Natural Disaster Reduction that was launched in October 2022. Mr. Chakib Abouzaid, GAIF secretary-general, says in a statement that a number of regulatory authorities and Arab and international insurance and reinsurance companies have responded to the initiative. Through them, a joint Arab solution has been put forward to establish an Arab pool of insurance and reinsurance companies, according to a report by the publication Alwal Alghad. Plans for the pool include collecting all data about natural disasters, in addition to drawing up disaster maps for each Arab country and developing catastrophe modelling. Mr. Abouzaid said, “We have successful national experiences in our Arab countries that can be built upon to increase the level of protection in all countries and narrow the insurance gap. GAIF believes in the necessity of unifying the efforts of the Arab region as a single entity to maintain security and stability and protect its people. Arab Coordination Mechanism for Disaster Risk Reduction The initiative was discussed at the fifth meeting of the Arab Coordination Mechanism for Disaster Risk Reduction held in Rabat on 20-22 June 2023. Representatives of Arab countries and a number of Arab and international organizations that are engaged in disaster risk reduction as well as a group of experts attended the meeting. GAIF was represented by Mr. Abouzaid. The meeting constitutes an important platform for enhancing cooperation and coordination at the regional and international levels in the field of disaster risk reduction. It is part of the Sendai Framework for Disaster Risk Reduction (2015-2030) and the Arab Strategy for Disaster Risk Reduction 2030 in the Arab region, both of which aim to reduce disaster risks. The framework introduces several changes, the most important of which is the strong emphasis on disaster risk management rather than focusing solely on disaster management. In addition, the scope of disaster risk reduction has been expanded to include a focus on natural and man-made hazards and related environmental, technological and biological risks and hazards.

By Herminia S. Jacinto AFTER a busy and stressful week, I thought that I will just cool it and do what women like to do — roam around their favorite mall and go shopping with tons of coffee in between! However, before doing that, I decided to browse over my laptop to check on my mail messages. One of them was the link to the PIRA Fact Book, which I recall I requested for. PIRA stands for Philippine Insurers and Reinsurers Association, Inc., the association of the non-life insurance companies in the country. I quickly forgot about the shopping trip and decided to continue reading the fact book. It is good to know that the 55 non-life insurance companies are all doing well and except for a few, have complied with the minimum net worth requirement of P1.3 billion as of Dec. 31, 2022. Some are way above the minimum level which should be a big comfort for the insuring public. Gross premiums reached a record P120 billion and net income for 2022 was P6.9 billion. The Fact Book mentions the several challenges still facing the industry. Among them are low insurance penetration, competition, natural disasters, claims management and regulation. Low insurance penetration, competition and claims management are internal industry issues which the companies have a certain degree of control over. They can continue improving their products and their marketing strategies. Claims management has improved considerably due to computerization, fast and efficient recording and maintenance of files. Insurance personnel have to undergo continuous training in handling claims of various lines not only here but with specialists abroad. Online courses provide tremendous help in this area. While we have no control over the happening of natural disasters and other events due to climate change, the companies can structure their reinsurance programs to get adequate facilities for the losses that may be incurred. New products like parametric insurance should be studied and recommended to buyers of insurance with the proper understanding of what they cover. There are many other products and facilities available in the global market to address possible and probable losses arising from natural disasters. The challenge is how to fit them into the local reinsurance programs and affordability. Since insurance companies need to be stable, strong and capable of responding to its obligations to the insuring public and society in general, regulation is required. The Philippine insurance companies are regulated and supervised by the Insurance Commission of the Philippines which is under the Department of Finance. Republic Act 10607, more popularly known as the Insurance Code of the Philippines, contains all the legal provisions, including the reportorial requirements of the companies. The Insurance Commission or the Secretary of Finance issues department orders and/or circular letters as the need for them is warranted. But this is not enough. Other government agencies and global regulating bodies have also imposed certain reporting requirements that have to be complied with. The justification is that insurance companies' financial statements and other financial reports have to be comparable with similar financial institutions, insurance being a global business. As of now, the insurance industry is in the middle of revising their accounting systems and ROI's and investment decisions. The revised reporting will be effective for the year 2025 but a parallel run has to be done for the 2024 reports for comparison purposes. While the companies are still in the midst of complying with IFRS17, comes the requirement of the World Bank for companies to submit their Own Risk Solvency Assessment (ORSA). Again, this will require gathering of data which heretofore has not been done by most companies. The challenge is whether the data can be found in existing data bases or will there be a need to revise them? All these new reporting requirements have diverted the resources (most important of which are people) of insurance companies to complying with them and perhaps setting aside the very core of the insurance business which is providing protection for the insured. And revising the accounting and other systems costs a lot of money. The consultants, usually the auditing and actuarial firms, charge high professional fees during the crafting and the implementation of the new accounting system. We just hope that the companies can comply with these new regulations with less impact on their profitability. And that the regulator will be less strict in their audit during the transition period. Source: manilatimes.net

After a turbulent 1 January renewal season, which saw a major shift in reinsurer appetite, a sense of order returned to renewals at the mid-year, says Aon in its "Reinsurance Market Dynamics - June and July 2023" report released yesterday. Building on 1 January, property catastrophe pricing and retentions at mid-year increased compared to the same period in 2022, although pressure on pricing and terms and conditions eased somewhat compared with 1 January. Capacity was more readily available and some reinsurers showed a greater willingness to grow, says Mr. Joe Monaghan, global growth leader at Reinsurance Solutions, Aon, in the report. Major factors driving reinsurer behaviour at 1 January have receded or were absent from the mid-year renewals and property catastrophe pricing is now attractive for markets even without securing retro coverage. Retro has stabilized and catastrophe bond markets have rebounded, while Hurricane Ian losses have developed in line with expectations, if not at the lower end of expectations. More stable footing Despite headwinds, the insurance market is in good shape, following the re-pricing of risk and higher interest rates, which are beginning to work their way through to improved results. The more orderly renewal also reflected the preparations of insurers, which anticipated reinsurers’ requirements and adjusted their portfolios and reinsurance strategies accordingly. Reinsurers’ willingness to enter large private placements early, also helped to set the tone for the renewal. Having reset its risk appetite at 1 January, the catastrophe reinsurance market has also found a new equilibrium. Catastrophe losses in the first half of this year suggest the burden of high-frequency catastrophe events has now shifted toward insurers, with fewer ceded losses for the reinsurance market. Bolstered by rate increases and higher interest rates, reinsurer return on equity in the first quarter of 2023 averaged around 17.5%, compared with a six-year average since 2017 of just under 6%. Capacity improving Property catastrophe capacity at mid-year was ample, with top layers on some US national programmes oversubscribed. Reinsurer capital increased by 5%, or $30bn, in the first quarter of 2023, as earnings were strong and catastrophe bond markets rebounded. While capacity has not returned to 2022 mid-year levels, reinsurers are showing a willingness to support current terms and grow in target areas. Per-risk and parts of the specialty reinsurance market remain challenging. However, casualty remained broadly attractive for reinsurers, with ample capacity and only single-digit increases, despite signs of rising claims costs and adverse prior-year development. Pent-up demand Having strategically held off buying additional limit at 1 January, insurers with earlier inception dates returned to the market at mid-year to purchase additional limit as catastrophe capacity was more readily available. Demand for property catastrophe reinsurance protection for 2023 is now expected to increase by high single digits globally or as much as 10% for US catastrophe as insurers look to reduce net exposure and/or secure capacity ahead of 2024. Inflation remains a key factor driving demand, with increased claims cost now being felt across property and casualty lines. However, the market appears to have a good handle on valuations while headline inflation has begun to ease in most key markets. Combined with anticipated updates to vendor catastrophe models, inflation is likely to support increased demand for reinsurance protection into 2024. Market cycles At current pricing and retention levels, the reinsurance market has found a new level where it can make sustained returns and provide volatility protection for insurers. However, catastrophe losses in the second half of the year, and changes in demand and supply, will be key to renewals in 2024, says Mr. Monaghan. Source: asiainsurancereview.com

Reinsurance rates are up across the board, especially in the short-tail lines (property and property catastrophe), panelists told participants at the 39th Annual Insurance Conference of S&P Global Ratings (S&P) on 20-21 June 2023. Rather than only being a response to loss trends, panelists said this harder reinsurance market is driven by investors wanting to see a better return on their capital, according to a statement released by S&P. This means the increases are more sustainable than usual. Despite higher reinsurance rates, demand from primary insurers appears resilient so far. Nevertheless, Mr. Wayne Peacock, president and CEO of USAA, a financial services company, noted that primary insurers will see more volatility as reinsurers raise rates or lower capacity. Since 2017, reinsurance profits have been curtailed by property catastrophe (cat) losses, but Odyssey CEO Young was optimistic. He dubbed 2023, "The year of CAT" and called it "probably the best CAT market" he's ever seen. Ms. Elyse Greenspan, managing director at Wells Fargo, also said it wasn't just about pricing—reinsurers have made fundamental changes to their CAT offering. On the other hand, the casualty side is starting to lose margin, and RenaissanceRe CEO O'Donnell said his company is moving aggressively out of traditional casualty in favour of specialty lines. S&P says that while its sector view on global reinsurance is negative, it believes the pricing and underwriting changes could bode well for reinsurers' profitability this year. Higher interest rates At the conference, the message from panelists was clear: The insurance industry remains well capitalized to withstand potential adverse market or economic developments. Acrisure Holdings co-founder, chairman, and CEO Greg Williams said macroeconomic risks such as higher inflation are tailwinds for the countercyclical broker industry. Meanwhile, higher interest rates will cause short-term pain for life insurers but long-term gain for those that survive, said Mr. Charles Lowrey, chairman and CEO of Prudential Financial. Given industry regulation, panelists did not foresee any asset-liability mismatches such as those that contributed to the failure of Silicon Valley Bank. As banks pull back from lending following the first-quarter turmoil, CEO and CIO panelists see opportunities for life insurers. Asked whether higher interest rates would cause the return of cashflow underwriting, Mr. John Marchioni, president and CEO of P&C writer Selective Insurance Group, said he isn't seeing any signs yet. Cashflow underwriting was popular in the 1990s as an attempt to drum up more business by loosening underwriting standards and pricing products lower than needed to cover expected losses, with the expectation that these losses would be more than offset by investing the additional premiums to generate more investment income. On the reinsurance side, Mr. Kevin O'Donnell, president and CEO of RenaissanceRe Holdings and Mr. Brian Young, president and CEO of Odyssey Group Holdings, said some companies will be pressured to do it. Mr. Young highlighted that IFRS 17, as a discounted cashflow reporting system, could incentivize cashflow underwriting in non-US markets, where such pressures tend to originate. Source: asiainsurancereview.com

For almost six decades of providing quality service, the company recognizes the hard work and passion of its employees and agents, as well as the unwavering support of its clients. The heart of its 59th Year Anniversary is to encourage all its stakeholders to protect and conserve the environment as everyone deserves a balanced and healthful ecology for sustainable future, while having fun under the sun to boost the wellness program of TRISCO for its employees in support of their mental health. Thus, in celebration of TRISCO’s 59th Year Anniversary on June 25, 2023, the company collaborated with the Municipal Environment and Natural Resources Office (MENRO) of San Juan, Batangas and TRISCO-Batangas Branch, to organize a mangrove planting activity at Malaking Ilog River, Brgy. Catmon. TRISCO planted a total of 500 mangrove trees to help in the rehabilitation and preservation of Malaking Ilog River, the biggest freshwater in Region IV, covering four (4) cities and eighteen (18) municipalities. After the mangrove planting, TRISCO employees and participating agents from Batangas Branch enjoyed the white sands and water activities of Laiya, San Juan, Batangas, strengthening the camaraderie among the participants, while fostering their mental health thru rest and recreation. Visit www.triscoph.com to know more about it.