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(From Post Magazine)
Byline: Andrew Kendrick, chairman and chief executive officer, Ace Europe.
The perception of risk has changed. Does anyone really believe that Hurricane Katrina was the big one - the one-in-100-year, or one-in-250-year, storm? We know that the number of powerful hurricanes occurring worldwide, most notably in the US Gulf region, is on the increase. We appear to have entered a new era of increased storm activity, the result of the natural cycle, including rising sea temperatures and global warming. Catastrophe-related losses, and the increased frequency of large storms, have undermined confidence in risk models. Catastrophe modelling was always a crude science, and recent events have demonstrated just how much.
Katrina, Rita and, more recently, Wilma may have all been in the same region but the consequences affect the insurance industry's global supply and demand equation, driven by capital and the perception of risk. In addition to the capital-depleting effects of these storms, there is also a growing sense of risk between both the buyers and sellers of insurance and reinsurance.
The result is that companies will be less willing to leverage their capital against risk in the future because they have ...