The Insurance Insider Monte Carlo Roundtable 2014
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The Insurance Insider Monte Carlo Roundtable 2014

Dear friend,

One of the most important qualifications for being an underwriter is an eternal sense of optimism. If insurers or reinsurers thought the worst of every risk they were offered, nothing would ever get underwritten.

Paradoxically it turns out that, in private at least, the brokers are the ones who tend to be more pessimistic by nature.

One might assume that, as non-risk bearers, the middlemen would be the silver-tongued salesmen of the piece, glibly glossing over any inconvenient truths that get between them and their commissions.

But in more candid moments the brokers often feel that one of their final duties is to save the market from the most destructive effects of its own exuberance at the bottom of soft markets.

Natural optimism or pessimism aside, simply based on overwhelming evidence, surely this year's roundtable participants at the Fairmont Hotel could have been forgiven for at least feeling a little deflated at industry prospects heading into the renewal season?

It turns out it will take a lot more than tough market conditions to spoil our current mood.

Yes, reinsurance pricing is now being handily compared to other asset classes, like some commodity on a price comparison website.

And yes, the returns that many investors are seeking are much lower than many incumbents would think adequate for the risk they are running.

Indeed, alternative capital does not bring in any new business and just competes away the little margin we have for that which is still on our books; and the spillover of surplus cat capacity into casualty and specialty is something of a worry.

But what does this matter if claims experience has been better than we expected and, despite competitive pressures, we still believe that we are able to put business on our books today at acceptable margins?

This is the point. Despite everything, the market still has a few cushions left to soften its falls.

I hate the lazy old "is the glass half full or glass half empty?" question because the answer is so obvious.

If you are filling the glass up, it is half full. If you are emptying it, it is half empty.

At the moment, no one disagrees that we are emptying the glass, but this should not make us ignore how much nourishing liquid it still contains.

Enjoy the read. To view the supplement please click here.

Mark Geoghegan

Editor, The Insurance Insider

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