Summary
Although the major reinsurance players have anticipated in Monte Carlo a hardening or stabilization of the renewal reinsurance terms and conditions, most of the lights show a trend toward a softening. Only a major catastrophe happening during the remaining part of the year or a further crash of the financial markets could justify a hardening.
Analysis
The "Rendez-Vous de Septembre" that took place in Monte Carlo from the 4th to the 10th of September, is the usual forum for major reinsurers to anticipate terms and conditions trends for the upcoming renewal campaign of January.
Not only this: Monte Carlo It is also the place where other trends in the industry are discussed like:
- down- and upgrades by rating agencies
- Impact of major events, like catastrophes
- entry or exit of new players
Feedbacks of all these discussions hold by top managers, will be then included in the renewal strategies set up by the underwriting teams. First results of these strategies will then be discussed by the underwriters during the Baden-Baden Meeting from 25th to 29th of October and finalization will take place during the last weeks of December when renewing the reinsurance treaties.
Elements that are driving the reinsurance prices are the following:
- major event (storm or earthquake) that has eroded the global equity position of reinsurers and their ceding companies
- impact of financial markets (stock and interest rates) on the global equity position of reinsurers and their ceding companies
- new competition
Whilst there has been no major event until the end of the summer 2009, there could still be some European Storms that could impact the global equity positions, but nothing similar than the previous years. Financial markets have recovered, reinforcing the equity positions of the ceding companies, thus encouraging them to keep more of their business on their own account. But there is also new competition, following the injection of fresh capital into the European markets (Novae Re in London and Zurich, Ariel Re in Zurich,...). This new competitors will have to fight to create their portfolio and the existing markets will have to resist to keep the maximum of their business.
All these features give a good chance for prices to decline at next renewal and the anticipations made by the big players in Monte Carlo are there only to limit this expected softening.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
