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Monte Carlo or Bust!

on 15 September 2016
Well, incredibly 2016 marks the 60th anniversary of the annual Monte Carlo Reinsurance Rendez-vous where the great and the good of the reinsurance industry gather together each September to discuss the state of the market, the trends and the upcoming renewal season. It’s true to say that much of the deliberating and cogitating involves coffee, tea and an occasional cocktail or two, but the event also acts as a barometer for things to come and sets the tone for the serious negotiations in the coming weeks and at the Baden-Baden reinsurance meeting in October.
 
For me, it was also a good opportunity to catch up with some names and faces from my underwriting past and to see how their careers (and hairlines) have evolved over the last 15 years. It’s often said that the reinsurance market is a small one, and while it's valuable to meet the new faces, it's equally great to see the familiar ones.
 
So what’s the format? Unlike most conferences, there are very few formal presentations, and there is no central exhibition hall. Monte Carlo works at a far more informal level with thousands of smaller discussions, either one to ones or small groups getting together in cafes and hotel lobbies for half hour pre-arranged meetings. This is supplemented with press interviews, panel debates, roundtables and a number of networking events hosted by the larger brokers and carriers; the trick seems to be ensuring your name is on the invitation list.
 
One of the bigger talking points of the first day was the highly original rebranding of the broker Cooper Gay to Ed; the announcement made by CEO Steve Hearn was always going to get tongues wagging and reactions to Ed were predictable. We at Xuber saw the same thing when we launched our rebranding four years ago; some loved it, some really didn't, but now it’s an accepted part of who we are. The same will be true for Ed...see it's already sounding better!
 
Recent years have seen some pretty dramatic changes not only to the way reinsurers are capitalised with over 12% of the $580Bn capital now coming from alternative sources like Insurance Linked Securities (ILS), trust funds and Cat Bonds, but also to the way reinsurers operate and indeed survive in one of the longest and softest markets on record; as Mark Geoghegan from Insurance Insider aptly called it this week, ‘the Andrex Market’.
The abundance of capital predictably remained a hot topic, but as this looks like becoming the new norm for the market, the focus is on how to remain profitable and stay in the game. Margins are getting tighter, and the importance of tracking aggregation and exposure is becoming even more critical as some reinsurers try to retain income levels and bolster their return on equity. There have even been suggestions that a significant hurricane season this year could tip some over exposed reinsurers over the edge.
 
Conversely, there also remains a strong contingent maintaining that underwriting discipline is the key to survival and leaving others to chase the rates to the bottom. So has the bottom been reached yet? Well, every indication seems to suggest no. In a recent Insurance Day article, Standard & Poors stated that they expected a decline of 5% this year and the same in 2017. That being said, the overall mood of the rendez-vous seemed to be positive.
So with these ‘Andrex’ conditions set to become normal, what can reinsurers do to steady the ship? Better use of technology seems to be at the top of many agendas, and I’d wholly support that, but I guess I would coming from a technology supplier! The need for reinsurers to be innovative and adaptive with the use of technology was widely discussed, and there’s an acceptance that the digital revolution and its consequent business transformation as seen in other markets is rapidly approaching reinsurance. Additionally, technology is seen as one of the levers carriers have available to them to control and manage cost in an effort to retain margin. 
 
The adoption of next generation technology is already evident with reinsurance analytics providing a deeper insight into data, exposure modelling and portfolio management tools that give a comprehensive understanding of reinsurers’ aggregations. New and innovative products covering cyber risk, drones, driverless cars and usage based insurance are widely available. Perhaps now is also the time to look at transforming and integrating an aging policy administration system by moving to an agile platform. One with the flexibility and configurability that allow a nimble change of direction to access a new market, launch a new product or enter a new territory.
 
Whatever the driver, the ever growing march of digital disruption and the inability of older legacy technology systems to respond to the inevitable e-trading competition need to be addressed; those that do so now will be better placed to take advantage of the upturn as and when it arrives.
 
That an industry event has survived pretty much unchanged for sixty years proves the Monte Carlo format is as relevant now as it was at its inauguration back in 1956; it still works and will most likely continue for another sixty years. However, the uninitiated may question why in such tough times do reinsurers need to gather in the Cote D ’Azure rather than say, Southend-on-Sea. Well the answer to that is quite simple, there are just not enough yacht moorings in Southend!

BLOGGER BIOGRAPHY

Name
John Racher
Title
Head of Product Strategy
Bio
John joined the insurance software business in 1999, bringing with him over 12 years’ market experience with a Lloyd’s Syndicate, latterly managing the run off of a number of Syndicates.