MUNICH, Germany--(BUSINESS WIRE)--June 5, 2006--Insurers and reinsurers are facing major changes this year to catastrophe models and a recalibration of rating agency capital requirements, which "will have dramatic implications on insurers and reinsurers that write business in catastrophe-prone areas," according to an article in the latest issue of EXPOSURE, which is published by GE Insurance Solutions.
The likely effect of these changes is that insurers and reinsurers will need more capital or will have to reduce their peak-zone exposures, according to the article authored by Jonathan Isherwood, Global Product Strategy Leader, GE Insurance Solutions.
Isherwood predicted that return on capital would fall. Further, he added, reinsurers and insurers may have to increase pricing levels "for key-zone catastrophe risks in order to obtain similar return on equity that they were able to earn before the changes."
In addition, Isherwood speculated that companies may seek to improve capital efficiency "by balancing and/or diversifying their portfolios away from peak-zone capital intense areas, which could cause over-capacity -- and competition -- in these desired zones."
Monoline catastrophe writers or companies that have a heavy concentration of catastrophe business "will be disadvantaged in this new environment," he affirmed.
To read the entire article and other EXPOSURE articles, visit http://www.geinsurancesolutions.com/erccorporate/inst/pb/ex/index.htm. (See "Model Changes Will Have Major Industry Implications".)
GE Insurance Solutions (NYSE:GE) is a group of companies that protects people, property and reputations. GE Insurance Solutions is one of the world's leading providers of commercial insurance, reinsurance and risk management services.
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