Clear skies above the Côte d’Azur
If it’s September, then it’s time for Les Rendez-Vous de Septembre! This is the event which, for 53 years now, holds a place in the agenda of leaders of insurance and reinsurance companies all around the world. Thus, each September, in the heart of Monaco, informal discussions take place between senior representatives of the groups related to the renewal of reinsurance contracts for the coming year.
But 2009 is a special year, a year in which the industry faces an unprecedented crisis, this aspect somehow changing the data of the equation, both for insurers and reinsurers.
Despite the difficult economic situation in which important names on the market find themselves in, the event benefited, as every year, of the participation of over 2,500 leaders and experts from 80 countries (reinsurers, insurers, brokers, lawyers, financial advisers and international press), Les Rendez-Vous de Septembre – RVS being one of the two major international profile meetings, along with the one held in Baden-Baden.
RSV consists in, largely, meetings between representatives of the ceding companies and the reinsurers and marks, every year, the beginning of the negotiations of the conditions for renewal of the reinsurance treaties, most of them expiring on the 1st of January, 2010.
In addition, in Monte Carlo, players of the profile markets as well as observers are taking the pulse of global reinsurance and analyzing the consequences of natural disasters, of the crisis and other factors upon the profile industry.
PRIMM - Insurance & Pensions Magazine was represented at the event by Sergiu COSTACHE, President, Adriana PANCIU, CEO, Alexandru CIUNCAN, Business Development Director, and Vlad PANCIU, Senior Editor.
The economic downturn changes the rules of the game
One of the conclusions of the RVS is that European insurance companies could be forced to pay more for reinsurance cover in the 2009-2010 renewal season, as a consequence of the financial crisis. This aspect was pointed out by Jean Philippe THIERRY, Chairman of the Organizing Committee of Rendez-Vous de Septembre.
THIERRY, that now is also leading one of the largest insurance companies in France, AGF, now part of the ALLIANZ Group, believes that the negotiations that mark the end of the year will focus, more than ever, on matters such as financial security and capacity offered by the reinsurers, than on pricing.
Many analysts present in Monte Carlo consider that if the pressure of the rates charged by reinsurers becomes too strong, then primary insurers may be tempted to find viable alternatives to traditional reinsurance: risk securization, increasing their own retention or the creation of pools. Meanwhile, everyone hopes that the end of the year will not bring a new wave of natural disasters, which would certainly cause liquidity problems for some small and medium players.
I’m sure that, by the beginning of 2010, insurers and reinsurers will find the necessary balance for the business, Jean Philippe THIERRY concludes.
In this context, major reinsurers react and announce the formation of an association - GRF (Global Reinsurance Forum), designed to promote stability and free competition in the profile industry. In fact, the objective seems to be to create a common front with greater negotiating power in relation to insurers and supervisory and control entities.
MUNICH Re, SWISS Re, SCOR, Gen Re, HANNOVER Re, PARTNER Re are some of the big names who were involved in this initiative, whose stake is developing a global business that exceeded EUR 130 billion in 2008. At this point, we cannot talk about a unitary representation of the reinsurance industry, that would promote its interests globally, Denis KESSLER, CEO of SCOR, said.
Reinsurers held on... until now
Even from the beginning of the crisis, European reinsurers were able to achieve excellent performance without any financial support external to the industry - is one of the conclusions of a report released by the broker AON Benfield with the occasion of RVS.
Given the renewals of 2010, the industry is, in our opinion, in a position of strength, underlined Andrew APPEL, CEO of AON Benfield. According to analysts of the brokerage company, the fact that the reinsurance industry did not need assistance from countries of origin throughout the most serious crisis of our generation is a statement of the well-adapted risk management methods, as well as of the investment strategies of reinsurance companies.
Throughout this economically difficult period, reinsurers have stayed by the cedents, most of whom were affected by the financial crisis, said Byron EHRHART, CEO of AON Benfield Analytics.
The leader of the international reinsurance market, MUNICH Re, has also come out „well” from the crisis, even managing to redefine its business model during this period. The word of order: „traditional reinsurance”, thus distancing from risk transfer instruments related to capital markets, which have brought so much trouble to the competitors of SWISS Re.
But talking with George DASCHNER, Member of the Board of MUNICH Re, it was showed clearly that the reinsurer’s attention towards Eastern Europe will continue to be maintained, as part of the overall strategy of development; however, experts of MUNICH Re are worried by the effects of economic recession on certain lines of business, such as D&O insurance or professional liability. But not negligible are either the increases of the reinsurance premiums that will be borne by primary insurers in Eastern Europe, including Romania. We have seen an increase of damage on the motor insurance segment in Romania [...], hence we may be forced to increase tariffs on this market, the representative of the German giant told us.
The insurance-reinsurance world seen from Monte Carlo
Global insurance industry reached EUR 3.067 billion in the previous year, which means an increase of 3% compared to 2007. Meanwhile, global reinsurance amounted to EUR 130 billion, while maintaining the same level as in 2007, Jean Philippe THIERRY said.
Global reinsurance market represents 4.2% of the insurance industry, if we compare the volume of underwritings to the one of premiums ceded in reinsurance. On this market, the leader according to the volume of gross written premiums, is MUNICH Re, with USD 26.9 billion, followed by SWISS Re (USD 24 billion) and BERKSHIRE HATHAWAY (USD 11.1 billion). Furthermore, the top 10 reinsurers accounted for approximately 62% of the profile market in 2008, while the Top 3 equals 50% of the total volume of premiums ceded in reinsurance.
Premiums ceded on the life insurance class represent 2% of total underwritings, while premiums ceded on the non-life insurance segment reflects 7% of the total (note: Non-life insurance is more volatile and therefore the percentage of reinsurance ceding is greater).
North America ranks first in the global top of cedents, with 50% of total premiums, while Europe is ranked first in the chapter of premiums taken over in reinsurance.
On the reinsurance market, the top is the following: AON Benfield, with USD 1.5 billion – volume of mediated premiums, followed by GUY Carpenter, with USD 0.87 billion, and by WILLIS Re, with USD 0.61 billion. It should be noted that number one (AON Benfield) represents as much as the occupants of places two and three together.
Regarding the ratings of reinsurers, there are, in the first 6 months of 2009, two companies rated „AAA”, neither with „AA +” and three with „AA”.
After Monte Carlo... where to?
So, the big event that reunites the entire insurance-reinsurance market has ended, drawing some important trends for the current year. Moreover, RVS is designed to prevent the parties concerned about the possibility of giving up some contracts for 2010, in the context in which most of them are automatically renewed on December 31 (editor’s note: Waiving decision is made, in principle, by the end of September).
From Monte Carlo, insurers and reinsurers will move in late October, in Baden-Baden, Germany, where traditionally specific details relating to reinsurance contracts are discussed, contracts which will be signed shortly after.
