The world – at least the insurance world – took another step back to normality in the middle of September when representatives of the global reinsurance market descended on Monte Carlo for the Rendez-Vous de Septembre, taking place face-to-face for the first time since 2019.
The Rendez-Vous started in the late 1950s and over the decades established itself as the key event in the global insurance and reinsurance calendar for establishing the direction of the annual renewal season. Many of the world’s largest reinsurance contracts are renewed on 1 January and for many years, Monte Carlo was the place where the hard negotiations over rates, terms and availability of cover started in earnest.
These tentative deals set the rates for a wide range of insurances, from the largest natural and man-made catastrophes to vast portfolios of individual motor insurance policies. By reinsuring these portfolios the primary insurers protect themselves against the possibility of, say, an excessively harsh winter causing a huge spike in car accidents and motor insurance claims. It’s like bookmakers laying off large bets and spreading them around the market – an analogy reinsurers loathe.
In short, what is discussed over cocktails in cafes and bars in the late summer sun of the south of France impacts what everyone pays for their insurance the following year.
Over the years, the Monte Carlo Rendez-Vous lost some of its hard commercial edge as the tough negotiations tended to start later in the autumn and the focus moved to another, less flamboyant, gathering of reinsurers, insurers and brokers in the German spa town of Baden-Baden towards the end of October.
Discussions at Monte Carlo had shifted to become more about medium-term prospects and longer term challenges. This year was different.
Those returning from this year’s Rendez-Vous say it was much more business-like with a real focus on the prospects for the 1 January 2023 renewals. For old hands it was something of a return to earlier times when hard numbers were put on the table.
What do those numbers tell us about where the UK general insurance market might be heading next year?
Ominously for the industry’s customers, the big reinsurers almost all came away from Monte Carlo in an optimistic mood. Reinsurers are optimistic when they know they can sustain or increase rates. That means they charge the primary insurers more and, inevitably, some of that will be passed onto consumers.
It is no surprise that the hard market – where rates tend to increase – is being sustained. The world has become a very risky place and that shows no signs of easing any time soon. New risks, such as cyber, have soaked up vast amounts of capacity, leaving less to share around other markets. Some of the huge losses from natural catastrophes have forced a few reinsurers out of the market altogether or persuaded them to cut their exposures to these areas, meaning that those left can be more bullish on rates.
Reinsurers in Monte Carlo are always looking nervously at the latest predictions for the US hurricane season which has such an impact on global property insurance markets. News of mega-typhoons hitting Japan will only have strengthened their determination to hang onto the rate increases of recent years.
With all domestic markets reeling from huge spikes in the cost of living, it does not look as if individual of business policyholders can expect any relief in terms of decreasing insurance costs. For most classes of insurance it looks as if premium increases will be the norm. The question for insurers faced with rising reinsurance costs will be just how much of that increase do they pass on.
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