Back to the future…

Much has changed in the three years since the last Monte Carlo Rendez-Vous.

Back to the future

Unfortunately, much of it is unwelcome. Only last week, came the terribly sad news of the death of Queen Elizabeth II (which led to Lloyd’s cancelling its Monte Carlo reception that was due tomorrow as a mark of respect).

But the past three years have also witnessed the pandemic, war in Europe, nuclear threats, social unrest, recession fears, double-digit inflation, market slumps, lockdowns, Taiwan tensions, strikes and the prospect of a European winter energy crisis.

Frankly, if a DeLorean time machine was parked between the supercars in Casino Square the queue to drive it back to 2019 would stretch to the border.

However, there is one flicker of positivity relevant to us all – the improving health of the P&C sector over that time. Reinsurance may be playing catch-up but many specialty classes have enjoyed rate on rate since 2019.

Even if the wind defies predictions and doesn’t blow this year, few will dispute the confident predictions of reinsurers over the next few days of further rate at 1 January. Underwriters are more disciplined and emboldened.

“After three years, it’s good to be back…

Aggregates have narrowed; capacity is valued and protected. Balance sheet fundamentals are – in most cases – stronger than when we last met in Monte Carlo.

Robust capital

Indeed, S&P recently calculated that even if the P&C industry was hit tomorrow by a $250bn, 1-in-100-year loss event then 14 out of 21 major reinsurers would maintain their existing capital adequacy buffer levels.

If correct, that is an extraordinary testament to the industry’s robustness. It is also all the more impressive considering (re)insurers booked $158bn+ in realised and unrealised investment losses in H1 following the yield curve spike and market wobbles.

So what will be the big themes this year? Inevitably, the socio-economic gloom referenced above will overshadow many discussions.

Property cat will likely feature, as it always does. Yesterday (10 September) is widely regarded as the peak hurricane season day. The fact the season has been so quiet thus far will inevitably lead to optimism that 2022 will offer a reprieve – the first since 2016.

“Few will dispute the confident predictions of reinsurers over the next few days of further rate at 1.1”

Expect greater discussion over the next few days on the protection gap. In fact, chasm may be more appropriate. Swiss Re, for example, calculated that the differential between economic losses from 2021 nat cat events and the insured cost was $169bn. Factor in other major losses to the global economy and the difference would be $200bn+.

The tragic flooding in Pakistan is just another reminder of the cost in human and economic terms. Poorer societies are typically more affected by nat cats and yet don’t have the resource for post-event funding. We will examine the issue in greater detail this week.

Climate change

The three years since the last Rendez-Vous have also seen the climate change agenda rise further in the public consciousness – along with the role (re)insurers can play as a force for good by supporting energy change.

This is to be celebrated – but it also places the industry in the spotlight. In the past few years, insurers have found themselves increasingly targeted by activists, especially when it comes to controversial projects.

As well as understanding the implications of climate change for their businesses (and investors), reinsurers must also be aware of developing clear policies with other stakeholders in mind. This will no doubt be discussed, as will the wider issue of accurately modelling the impact of climate change.

And there is at least one other theme that will be discussed sotto voce: the relevance and future of the Monte Carlo Rendez-Vous in the modern world after a three-year hiatus.

This is ultimately down to the reinsurers, buyers and delegates attending this week to decide. For what it’s worth, The Insurer believes that as long as reinsurance remains as much a business of trusted relationships and negotiated risk transfer as it is of capital and balance sheets, gatherings like the Rendez-Vous should be encouraged.

So, we congratulate the organising committee and president Claude Tendil for ensuring its return. After three years, it’s good to be back…