Dear Fac-er,
Monte Carlo swung round once again and, if anything, it seemed to be busier than ever this year, with standing room only in the Cafe de Paris and the surrounding hotel lobbies for most of the time.
What was particularly pleasing was seeing so many of you gathered for the Inside FAC Monte Carlo Roundtable, with the biggest turnout I have witnessed for such an event. Who said that Monte Carlo was just for the treaty boys and girls?
This year, there was no doubting the dominant theme of the Rendez-Vous: the rise of so-called "non-traditional" capital - which was the main subject of discussion for the major reinsurers and brokers alike at their various presentations.
And it's not hard to see why the topic is making all the running at the moment. Discussion about the impact of ILS on the fac market came to the fore, as Aon Benfield suggested the next five years will see some $100bn of alternative capital enter and continue to transform the global (re)insurance market.
Well, you know my views on this. As soon as interest rates rise and the market begins to be seriously tested by some major catastrophes, I'm pretty sure the bubble will burst.
Still, this doesn't just mean that as a market we can sit idly by as some sort of dumb sideshow and let those clever merchant bankers make all the running.
Instead, the current boom in the ILS sector, as participants at this year's Roundtable agreed, is a real incentive for the fac market to have a good hard look at itself and make sure it is coming up with the right solutions for clients.
Indeed, a central theme of this year's discussion was that, whether placing or carrying risks, we simply have to make sure we up our game and take the ILS market head on.
I couldn't agree more. So far, much of the encroachment of ILS has been US-centric, but there's no reason to suggest this will remain the case. I can easily envisage a greater geographic spread for future cat bond offerings.
Nonetheless, we shouldn't get ourselves overly worked up by ILS, and there's a much bigger world out there. And one topic that really interested me arising from the discussion was the growth in retentions, which, it was agreed, can easily be as large as $50mn nowadays. What's interesting is that work at the top layers is where a lot of activity is taking place, with the reality being - despite what one might hear in other quarters - that a nifty fac transaction here can be more competitive than buying a top layer on a treaty programme.
And, with cedants increasing retentions, the fac market will also have the ability to write groups of excess fac as facultative facilities, rather than see business walk away.
Besides, we're in the fourth quarter of the year and, as always, deal-making has intensified and the vibes from so many of you continue to be encouraging.
Enjoy the read,
Marcus Alcock,
Editor, Inside FAC
To view the roundtable click here