After a brief sojourn away from the hallowed halls of fac it was lovely to be surrounded by so many familiar faces at this year's Inside FAC Monte Carlo Roundtable.
As I like to point out, it's always good to carve out some space for the fac market in such a crowded arena.
I came with genuinely few expectations as to the "mood music" of the market at the moment, so it was extremely encouraging to see that in such a challenging environment the fac sector is more than holding its own, and there is some interesting trading going on.
I suppose it's fair to say that in the current market, to compensate for those major cedants that have decided to trim their fac spend there have been other cedants looking to grow by geography or class of business that have been eager to utilise fac as a tool for growth. Which, of course, is great news and demonstrates that the fac market remains agile and keenly responsive.
Where is this demand coming from? Traditional spot fac remains under pressure, given the large treaty capacities out there, yet with so many carriers having entered the (re)insurance space over the past couple of years it's hardly surprising that some interesting possibilities have opened up.
More structured deals and tailor-made solutions, especially those in the hybrid space between treaty and fac, continue to be in demand, and there seems little doubt that this will be one of the most profitable areas for continued growth for the foreseeable future.
Of course, one-off arbitrage remains on the table, but the wider market has now upped
its game and brought along risk modelling, portfolio analysis and actuarial analysis to the offering. And it's by playing in this nimble space that the fac market can thrive, in essence creating a realm of risk that brings the benefits of fac to the scope of treaty coverage.
Another interesting topic was the sheer volume of M&A activity that is driving the market at the moment, and here the mood of those round the table was decidedly optimistic. As was generally agreed by participants, the worst of all possible worlds for the fac sector is a stable, benign market.
What we thrive on is disruption and dislocation, as this provides the sort of uncertainty where fac can step in and provide reassurance and support. Let Armageddon come!
To view the roundtable please click here.
Marcus Alcock
Editor
Inside FAC