In Vietnam, 2011 is the Year of the Cat, and people who doubt the legitimacy of such astrology-based designations might want to reflect on the fact that the year has indeed seen record levels of catastrophe (“cat”) losses.
The extraordinary run of natural catastrophes is expected to take global insured losses this year to USD 100 billion, which, lest we lose perspective by concentrating solely on the consequences for the insurance industry, signifies massive devastation and upheaval for those with the great misfortune to be caught up in any of the year’s loss events.
Cat and Non-Cat Losses
The impact on the insurance market of this year’s cat losses is discussed in our latest Power Market Review, which has just been released. Interestingly, in Vietnamese astrology the Year of the Cat is supposed to be a stress-free year, but for underwriters the events in Japan, New Zealand, Thailand and elsewhere have meant that it has been anything but.
A particular feature of the power market is that in addition to the year’s cat losses, insurers continue to be beset with attritional machinery breakdown claims and have also been hit with three “mega” non-cat claims of USD 100m or more, which are discussed in the Claims section of the Review.
Our Review notes that despite these events the market remains well capitalized, and in the absence of a “game-changing” event that fundamentally alters market expectations and behavior, there seems to be limited scope for underwriters to achieve meaningful rate increases to try to claw back their losses – but there always exists the possibility that market conditions will change.
This is the third Power Market Review that we have produced, the last one having been issued in summer last year. It is made up of contributions from a number of Willis Associates in London, Singapore and the US on the important insurance and related issues affecting the sector.
A Little Help From Our Friends
We’ve also included articles from several external specialists such as Rick Hartley of the loss adjuster The Richard Hartley Partnership, and Markus Heiss, from forensic accountants Matson Driscoll & Damico, who have both chosen to write on the treatment of Business Interruption claims – which is no surprise, as this is one of the most complex insurance issues for power companies, where it is critically important to get the policy wording right from the outset.
But Al Stewart?
Older readers will recognize the lyrics quoted above as coming from Al Stewart’s 1976 masterpiece Year of the Cat, and might be struggling to discern any relevance to the Willis Power Market Review – but if Peter Lorre were here today contemplating a white collar crime and not wanting to end up in San Quentin (which was of course the title of a Bogart movie), he would be well served reading the piece by Patrick Devine of Chadbourne & Parke on bribery and corruption.
For a country where they turn back time, look no further than Germany, which in the wake of the Fukushima disaster is going back to pre-nuclear power days, the implications of which are discussed, among other topics, by Tony Ward, Head of Power and Utilities at Ernst & Young in the UK. Which only goes to show that you can fit anything into your chosen blog theme if you try hard enough!