Current Market Conditions

Insured Catastrophe Losses Exceeding $1 Billion
1987 Through February, 1995

United States	Year	Loss ($ B)
Hurricane Hugo	89	5.7
Loma Prieta Quake	89	1.0
Philips Petro Explosion	89	1.4
Denver Hail Storm	90	1.0
Oakland Fire	91	1.6
Hurricane Andrew	92	18.0
Hurricane Iniki	92	2.5
Los Angeles Riot	92	1.0
Nor’ Easter	92	1.0
March Winter Storms	93	2.8
Winter Storms	94	2.0
Northridge Quake	94	12.0

Europe	Year	Loss ($ B)
October Hurricane	87	2.7
January Storms	90	5.0
February Storms	93	3.3

Japan	Year	Loss ($ B)
Typhoon Mireille	91	5.3
Kobe Earthquake	95	??

The Current Property Catastrophe Market

Domestic	London
AXA Re (U.S.)	Bartleet (Tony Holt)
CNA Re	Harvey Bowring (Richard Trubshaw)
Constitution Re	B.F. Caudle (Brian Caudle)
Everest Re	Peter Grove (John Hamblin)
F&G Re	R.J. Kiln (Bill Rendall/ Andrew Carrier)
Nationwide	D.P. Mann (Mark Rayner)
PXRe	A.N. Taylor (Tony Taylor/ Toby Stubbs)
SCOR Re	Hiscox (Rob Childs/ Richard Watson)
St. Paul Re
Transatlantic Re
Vesta
Bermuda	Other
Cat Ltd.	AXA Re
Global Capital Re	Hannover Rück
IPC Re	New Capital Re
LaSalle Re	Reinsurance Australia (ReAC)
Mid-Ocean Re
Partner Re
Renaissance Re
Tempest Re

Reinsurance Market vs. OTC Swap Market

Insurance Policy	Swap Agreement
Rate and form regulation, for on-shore parties, in some cases.	Exemptions for hedgers, suitable counter-parties.
Ordinary income & expenses. Clear reflection in utilities’ rate base.	“Hedge accounting” rules for GAAP and Tax.
State insurance premiums taxes or Federal Excise Tax.	No excise taxes.
Principal of Indemnification “Proof of Loss” or Valued policy	CFTC Hedge requirements Hedger is offeree Contract addresses existing risk exposure

Many traders and hedgers use a “transformer” to execute an OTC swap, backed by reinsurers

• No rate or form regulation


• No taxes


• No proof of loss

The Current Property Catastrophe Market

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