But what a time to be a financial journalist.
There were rumbles of senior AIG management away days and crisis talks. Then suddenly it was a JC Flowers rescue package with the possibility of Buffett involvement. Then that deal was off and it was a full-blown US government buy-in.
It had started as a bond market gyration, the fall of a few hedge funds and a mismanaged Bear Stearns in the spring. Then there was an auditor’s qualification about super-senior debt in an AIG quarterly report.
But by early autumn Lehman Brothers was gone and a monster was roaming the earth, tearing chunks out of some of the biggest names in western finance.
None of us saw it coming.
Swiss Re was shaken to its core and everybody in the market endured larger hits to capital from their investment portfolios than they did from the not-insubstantial hurricanes Gustav and Ike.
Some smaller firms lost their independence over hefty losses on the sexier elements of the asset side of their balance sheet. We all quickly learned to debate the virtues or otherwise of mark-to-market accounting.
With hindsight, barring XL, AIG and Swiss Re, our sector can say it had a relatively good financial crisis (and indeed none of that trio went out of business).
Claims got paid, rates were fairly stable and within a year the market had recouped its capital losses.
We rose in governments’ estimations as our tax revenues climbed the rankings of top contributors to the public purse. They were reminded that you can’t really have a run on an insurance company the way you can have a run on a bank and they started to pay us a little bit more attention than they used to.
Ten years on, as we return to Monaco for the Rendez-Vous, what has changed in the reinsurance world?
A glance at the S&P reinsurer rankings won’t tell you much – the top 10 still dominate the scene, writing a 74 percent market share, which is up just a tad on a decade before.
Our major reinsurance consolidation happened in the 1990s and was already well behind us a decade ago.
No, the real change is to be found further inside the S&P analysis.
Back in 2008 we were a profitable industry, earning comfortably above our cost of capital.
We had some stellar casualty years in the reserves bank and post-KRW property cat was the icing on the cake. Recovery from the capital crisis was easy – all we had to do was take a hit on our fun assets, go boring and safe by sticking to short-dated treasuries and let our underwriting refill our capital tanks.
These days that is sadly not the case.
According to S&P, in a normal cat year we are going to make 7-9 percent returns and our cost of capital is around 7-8 percent and likely to rise. Given the volatility we take on as an industry that is a seriously losing proposition to take to investors.
Don’t be fooled by gluts of surplus capital. If the financial crisis taught us anything it was that capital can evaporate faster than most people can count.
We need to face facts.
Because our underlying business is fundamentally less healthy than it was, the sobering revelation is that we are far less ready to absorb anything like a re-run of the events of 2008 than we were back then.
To read the first of our Monte Carlo dailies for 2018, please click here.
