Insurers must beware of “cold spots” as well as peak exposures: Guy Carpenter report

The global re/insurance industry is realizing the emerging volatility of “cold spots” – exposures that surprised insurers in 2011 because they were not considered to be risky areas in the past.
Reinsurance industry Guy Carpenter flagged the emerging theme of “cold spots” in its report on the January 2012 renewal season, entitled Catastrophes, Cold Spots and Capital – Navigating for Success in a Transitioning Market.
The report lists 10 major themes emerging after the 2012 renewal outcome, which saw a 9.5% average increase global property catastrophe rates as of Jan. 1, 2012.
The tenth item outlines the significance of ‘cold spots’ and how they have been affected by globalization.
“Exposures previously considered ‘cold spots’ caught many insurers by surprise in 2011,” the report reads. “As the international insurance penetration and wealth grow, carriers must focus on emerging ‘peak’ risks in areas which would not have been considered risky in the past. This is a byproduct of the increasingly global economy in which insurers operate.
“Such globalization will inevitably lead to increased demand for reinsurance in new regions and markets that have not historically been considered peak zones. This, in turn, will see losses becoming ‘internationalized’ to an extent never before seen and further reinforce the need to understand exposures, particularly in non-modeled countries.”