Welcome to Monte Carlo Today

The Rendez-Vous de Septembre in Monte Carlo may have been cancelled for the first time—due to COVID-19—but the re/insurance industry has long and proud traditions. For more than 60 years, executives have travelled to Monte Carlo in September to start the process of negotiating the year-end renewals.

Despite there being no event, that same ritual will take place this year—in a virtual setting.

Press conferences and roundtables are going ahead; and senior executives are giving interviews putting their markers down in terms of their expectations for changes in rates and terms and conditions.

On this basis, we are publishing our Monte Carlo newsletter Monte Carlo Today—usually distributed live at the event—as we have always done.

We will interview senior executives, attend the virtual events and ensure our readers have their finger on the pulse of the industry at this critical and unprecedented time.

We hope you find the content in the following pages as useful and insightful as you have always done. We miss seeing the industry face to face as well, but we will still do what we have always done: report on the most important events, news stories, opinions and debates to keep our readers informed and ahead of the game as they make decisions.

Wyn Jenkins, managing editor, Intelligent Insurer

A sneak preview: more exclusive content and interviews inside

Low interest rates will drive longer hard market

This hard market cycle may be elongated compared with previous upturns in pricing due to historically very low interest rates, according to Michael Pickel of Hannover Re when he spoke to Monte Carlo Today.

“If you look at cycles, the property cycle becomes much harder than the casualty cycle initially; then the casualty business becomes harder and lasts longer.

“On average, it’s a five-year circle at least, but this time might be longer due to the very low interest rates,” Pickel said.

He was speaking in an interview held on Intelligent Insurer’s Re/insurance Lounge, an online platform where interviews and panel discussions are held live on a weekly basis and content is available on demand at any time to members.

Pickel noted that he expects a recession after the COVID-19 crisis.

“The federal reserve has printed money. We’re going to see zero or negative interest rates for a very long time and this should, in theory, keep up the rates for quite a long time,” he added.

Low interest rates were a feature many years ago but now we have negative interest rates, said Pickel, adding that this is driving rates up. In addition to an accumulation of cat losses from previous years, 2020 has featured a broad brush of unexpected losses coming out of the COVID-19 pandemic, affecting nearly every class of business.

With such complex forces at work, some have suggested that experience will be key in this renewal.

“It’s a difficult market,” admitted Pickel. “The younger underwriters have never seen such a hard market. Our main task is how to address this properly.”

And, while Pickel doesn’t believe there will be a capacity crunch, he does see a lack of interest for alternative to come into the market massively.

“This signals what will come in the future for alternative capital in the next renewal. There will be trapped securities—they can’t release the securities because they are uncertain given the COVID-19 situation,” he explained.

A sneak preview: more exclusive content and interviews inside

Wildfires and new storms will boost hardening

It could mean rate hikes of 15 to 20 percent on cat and retro: Warwick from ILS Capital Management

IGI reaps rewards of cautious approach

It walked away from event cancellation insurance at just the right time, says Jabsheh

A sneak preview: more exclusive content and interviews inside

Industry has role to play in making pandemic risk transfer a reality

The industry needs to move towards the creation of pandemic backstops sooner rather than later, says Charles Whitmore of Guy Carpenter.

“We all recognise that a pandemic such as COVID-19, which has the ability to create contagion across multiple lines of business and geographies, is impossible to insure via conventional means,” Whitmore said.

“Sustainable and robust economic resilience against the next pandemic can be generated only via the establishment of government-backed risk transfer mechanisms which will allow funds to reach those most in need swiftly following a loss.

“In the meantime, the insurance industry needs to move quickly to apply its risk modelling expertise and risk mitigation techniques to help make pandemic risk more insurable,” Whitmore said.

He noted that Marsh & McLennan Companies has created a combined Group Task Force to help governments and insurance associations consider the best approach.

He acknowledged there are many ways these backstops could be structured, from solutions for specific lines of business such as event cancellation to wider-reaching mechanisms that provide post-loss financing for entire sections of the economy.

“Developing these kinds of solution is very complex and requires ongoing communication and collaboration across a wide range of stakeholders to come to fruition. That takes time and lot of goodwill, so it is will not be an easy task,” he said.

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