IQ Autumn 2019

As an old friend of mine recalls from childhood trips to Monte Carlo with his underwriter father, September’s Monte Carlo Rendez-Vous was an excuse for reinsurance execs to take their spouses and children on a subsidised beach holiday in one of Southern Europe’s most exclusive resorts. All the more luxurious as a child, when you are cushioned from the eye-watering prices demanded by café and bar owners in this playground for the rich, famous and tax-averse.

Alternatively, taking a more cynical, adult’s-eye view, it’s an excuse for unaccompanied reinsurance execs to have an all-expenses-paid, boozy few days in sun-soaked Monaco, free of the encumbrance of partner and kids.

But whether the reinsurance industry is in truth here for business or pleasure, the talk on the terraces and under the parasols of Monte Carlo is bound to focus on the decidedly mixed picture at recent treaty renewals.

As The Insurance Insider’s Rachel Dalton details in part one of our lead feature, while there has been substantive hardening in the market, treaty rate increases have been piecemeal and “highly specific to loss experience, geography and business line”.

And there is no certainty that the key 1 January renewals will lock in the recent hardening of rates to the extent that all can declare the soft market is finally and truly over.

It’s a sobering thought that, the promise of a sunny few days weather-wise notwithstanding, the market may be reliant on loss creep from last year’s major cat events as a backstop against any reversals on reinsurance rates.

Having characterised Monte Carlo as a treaty event, however, it would be remiss of me not to acknowledge the more minor, but not insignificant, role played by the alternative capital markets.

As Trading Risk managing editor Fiona Robertson notes in part two of our lead: “This year marks the point when the narrative around the ILS market started being rewritten.”

Previous boasts that the ILS market has broken the reinsurance cycle and brought on an era of perma-soft rates may have proved to be unfounded, but the so-called alternative market is holding its own.

It may have turned out to be less of a sure bet for investors in ILS funds than previously thought, but despite continuing loss creep from 2018’s Typhoon Jebi, “flexible capital structures are here to stay”.

Which brings me on to my own hobbyhorse – facultative reinsurance.

You may not find many facultative deals being discussed at Monte Carlo, but you still find plenty of fac brokers and underwriters mingling with their treaty colleagues in the Café de Paris.

A hard market in fac rates is by no means guaranteed either, but interest in fac as a solution is undoubtedly on the up.

Submissions have increased, rates have improved in many classes of business and across many geographies and, in the experience of Everest Re at least, fac gross written premiums are at “an all-time high”.

As you survey the figures reclining on nearby beaches, therefore – the bronzed children with their surprisingly relaxed parents, or the boozy, sunburnt gangs of middle-aged men – you may well be looking at treaty’s poorer cousins: the fac lads and lasses.

To read the Autumn 2019 issue of Insider Quarterly, please click here.