The Nation Newspaper

Tag: catastrophe

  • Catastrophe, large losses hamper Africa Re’s premium growth

    Catastrophe and large losses have hampered the strong growth in premium income of Africa Reinsurance Corporation (Africa Re), the Corporation’s Group Managing Director, Mr Corneille Karekezi, has said.

    He made this known in a statement made available to journalists in Lagos.

    He said the corporation posted a premium income of US$ 577.41 million at the end of the third quarter of 2018, representing 11.65 per cent growth compared to US$ 517.15 million at the same period of last year.

    This strong performance, he said, was driven by new businesses in West and Southern Africa as well as African currencies that were relatively stable against the US dollar.

    He said: “The performance of the period was impacted by run-off of the 2017 catastrophe claims in South Africa and large property and energy losses in many of the Corporation’s markets namely: Central Africa, West Africa, South Africa and the Middle-East. This situation led to an underwriting loss of US$ 20.89 million during the period under review, an improvement from last year’s underwriting loss of US$ 24.48 million.

  • Swiss Re profit rises by 14 % on lower catastrophe losses

    Swiss Re profit rises by 14 % on lower catastrophe losses

    Swiss Re, the world’s second-biggest reinsurer, said its third-quarter profit has risen by 14 per  cent after lower-than-expected losses from natural catastrophes.

    Net income rose to $1.23 billion from $1.07 billion in the year-earlier period, the Zurich-based reinsurer said in a statement. That beat the $928.6 million average estimate of 13 analysts surveyed by Bloomberg.

    Swiss Re is cutting back on catastrophe coverage and moving into new lines of business to bolster earnings growth as low interest rates and fewer natural disasters undercut prices. Munich Re, the world’s largest reinsurer, said third-quarter profit rose by 16 percent, while German rival Hannover Re reported a 21 percent increase for the period.

    Chief Financial Officer David Cole said in the statement: “I’m pleased to report that all business units have again delivered solid performance during the third quarter, contributing to an overall strong group result.

    “This performance was supported by a lower-than-expected loss burden from natural catastrophes as well as a continued improvement in the life and health operating margin.”

    Swiss Re has fallen about five percent this year, valuing the company at 29 billion Swiss francs ($29.8 billion). That compares with a 4.3 percent increase in the 32-company Bloomberg Europe 500 Insurance Index.

    Swiss Re wants to invest $3 billion of its excess capital at an 11 per cent  return on equity by next year. It does not disclose how much of the capital it holds.

    Reinsurers such as Swiss Re that help primary insurers cover the costs of damage claims from disasters like floods and hurricanes are under pressure from declining prices for their coverage and years-long slump in borrowing costs across developed countries.

  • South Sudan is on the ‘verge of catastrophe’

    South Sudan is on the ‘verge of catastrophe’

    IN THE violence and misery caused by the civil war in South Sudan, a very faint ray of light appeared this week. Since December, the nascent nation has been torn apart by armed conflict between forces loyal to President Salva Kiir and the rebel leader and former vice president Riek Machar. Thousands have been killed and hundreds of thousands displaced. On Friday, Secretary of State John F. Kerry won a promise from Mr. Kiir to sit down with his rival and begin talking about peace and a transitional government.

    We can only hope that this time will be different. The two sides never honored a January cease-fire agreement. They have turned deaf ears to appeals to restrain their forces, split along ethnic lines between Mr. Kiir’s Dinka and Mr. Machar’s Nuer group. An attack last month on the oil hub Bentiu after Mr. Machar’s forces took the town left hundreds dead. Then, residents of Bor, a predominantly Dinka town, attacked a United Nations base where the Nuer were sheltering. The twin assaults brought U.N. High Commissioner for Human Rights Navi Pillay to investigate. At a news conference Wednesday in the capital, Juba, she warned that a “boiling point” has been reached and the two leaders have “embarked on a personal power struggle that has brought their people to the verge of catastrophe.”

    By all evidence, including that offered by Ms.   Pillay, the catastrophe already exists. More than 9,000 children have been recruited into the armed forces of both sides, women and girls have been raped and all civilians have been subjected to indiscriminate violence. Humanitarian groups already have described South Sudan as one of the world’s most urgent crises, along with Syria. “How much worse does it have to get before those who can bring this conflict to an end — especially President Kiir and Dr. Machar — decide to do so?” Ms. Pillay asked.

    The world ought not wait. If Mr. Kiir and Mr.   Machar show up for peace talks in Addis Ababa aimed at a transitional government, and if they truly engage in negotiations, it might be a good sign, but their behavior so far sows grave doubts. More needs to be done to prevent the civil war from becoming a genocide.

    Mr. Kerry said agreement with the foreign ministers of Uganda, Kenya and Ethiopia was reached on the “terms and timing” of sending an additional 2,500 African peacekeepers to augment the existing 7,700 United Nations troops in the coming weeks. That’s better than doing nothing, but to see South Sudan survive, a larger intervention of well-equipped forces is called for, and not just from Africa. Peacekeepers must do their utmost to protect civilians and provide safe conditions for humanitarian relief.

    Mr. Kerry was right to warn that those who commit crimes against humanity will be held to account. We can only hope that Mr. Kiir and Mr. Machar will come to their senses. Their nation, so filled with hope upon achieving independence, cannot be allowed to become just another failed, violent state.

    – Washington Post

  • Pensions influence catastrophe reinsurance

    The $30 trillion global pension fund industry is starting to muscle in on traditional reinsurers financing protection against earthquakes and tornadoes.

    This is even as interest rates, which near record lows spur the search for yield on catastrophe.

    According to The Telegraph, Guy Carpenter, the reinsurance brokerage of Marsh & McLennan Cos, said a record $10 billion of institutional money flowed into insurance linked investments in the 18 months through June, and for the first time is directly influencing pricing of some catastrophe risk coverage.

    LGT Capital Partners AG added that catastrophe bonds can yield as much as 15 per cent.

    Coverage provided by alternative capital, as pension and hedge-fund money is known in the insurance industry, reached $45 billion at the end of 2012, about 14 percent of the total global property catastrophe limit purchased, Carpenter said. While welcomed by nations seeking to spread disaster burdens, pension investment is pushing down prices, even as reinsurers press for higher rates to compensate for more frequent extreme weather.

    David Flandro, global head of business intelligence at Guy Carpenter in New Yorksaid this is the biggest change to the reinsurance sector’s capital structure in the last 20 years.

    “Catastrophe reinsurance is relatively high-risk, high-return. Pension funds are looking for direct access. Most of the capital is here to stay.”

    In a catastrophe bond, insurers pay buyers some of the premiums collected for protection against damage from natural disasters. In exchange for above-market yields, investors assume the risk of a disaster during the life of their bonds, with their principal used to cover damage caused if the catastrophe is severe enough. The first catastrophe bonds were issued after Hurricane Andrew in 1992.

    Meanwhile, New Zealand’s Superannuation Fund said in May it planned to more than double its holdings in catastrophe bonds and other insurance linked assets, while firms such as PGGM NV in the Netherlands and Royal Bank of Scotland Group Plc’s employee retirement fund have stepped up their reinsurance investments.

    Pension assets have reached $30 trillion globally this year, according to estimates from J. P. Morgan Asset Management.

    “This is a coming-of-age moment,” said Michael Millette, global head of structured finance at Goldman Sachs Group Inc., which managed a catastrophe bond offering for the New York Metropolitan Transportation Authority after Superstorm Sandy in 2012. “Some of the largest asset-management complexes in the world are becoming more engaged in the space.”

    Catastrophe bonds can become even more attractive in the wake of a disaster as capital is depleted and insurance prices rise, said EvelineTakken, head of insurance-linked securities, or ILS, at PGGM, which oversees about 140 billion euros ($193 billion) in retirement savings for Dutch pension funds.

    PGGM is continuing to set up new investments in catastrophe insurance, eight years after its first forays following Hurricane Katrina, she said by phone from Zeist, Netherlands.

    The Swiss Re Cat Bond Total Return Index, which tracks dollar debt sold by insurers and reinsurers, shows catastrophe bonds have returned about 10 percent this year. U.S. 10-year Treasuries currently yield 2.5 percent. Takken and other fund managers interviewed declined to disclose their returns.