Monte Carlo Mood - Uncertainty Prevails
As reinsurers gathered in Monte Carlo for this year's Rendezvous de Septembre, "the mood was uncertain and somber - even a bit fatalistic," reported Mark Lucas, Managing Director of U.S. RE-Europe. "There was no significant theme this year. In 2000, it was the millennium. Last year, the attack on the World Trade Center. This year no single issue took center stage."
"None of the reinsurers I talked with were willing to reduce prices in the current environment. They expressed concern over enormous losses in the capital markets. In prior years, investment income could easily cover losses on the underwriting side, but this is no longer the case. This means that reinsurers are under greater pressure than ever to deliver good technical results. They expect prices to hold firm in the upcoming renewal season with continued increases in some lines but not across the board."
"There was considerable discussion about terrorism reinsurance. The personal accident catastrophe market will offer terrorism cover with ABC (atomic, biological, chemical) exclusions and price increases of 15 to 50 percent depending on the composition of the risk portfolio and the country of origin," Lucas said.
Brian McGuire, U.S. RE Senior Vice President, came away from the conference agreeing that, "there's not much optimism out there and a lot of uncertainty." He pointed to a serious problem for U.S. liability insurers seeking reinsurance after September 11 losses, plus their exposure to Enron, World Com, Tyco, and other corporate calamities. Many insurers may be forced to carry risks themselves because of the unavailability of economical reinsurance," McGuire predicted.
"All this points to the need for reinsurance brokers who can match their clients' needs with reinsurance in the traditional or alternative risk market," McGuire advised. "Gone are the days when a broker could put a sheet under someone's nose and say, 'Underwrite.' It was clear at Monte Carlo that today's market is more difficult than ever. Reinsurers are much more selective in what they underwrite. A broker demonstrates prowess, especially on the liability side through getting the business underwritten, and in such a way that the client benefits."