TL;DR:

• RVS 2023 showcased a transition towards market stability after the prior year's upheavals.
• New reinsurance startups are facing funding hurdles, despite the sector's evident profitability.
• Inflation is driving an increased reinsurance demand, even as reinsurers remain selective about counterparties.
• The apparent isolated case of Vesttoo’s cover fraud has eyebrows raised but doesn't signify systemic flaws.

The esteemed RendezVous de Septembre (RVS) reinsurance conference, annually held in Monte Carlo, never ceases to shape and reshape the global reinsurance perspective.

Its 65th edition has been no different.

The convergence of key industry players from around the globe has allowed for collective introspection and vision-setting.

We interviewed key industry players on the Supercede yacht in Monte Carlo this year for The Reinsurance Podcast - watch them here for free.

Here are the key takeaways from RVS 2023:

1. Transition to a Stable Market Outlook

The tempestuous market of 2022, marked by significant rate hikes and capacity constraints, saw a welcomed transition towards stability in the lead-up to RVS 2023.

The consistent messaging emanating from rating agencies, brokers, and reinsurers was that of moderate rate increases.

It's inferred that while we may still experience price hikes, notably due to inflationary pressures, the aftershocks of the 2021 catastrophes have largely been absorbed.

2. Capital and the Startup Dilemma

Historically, the reinsurance realm has witnessed waves of capital influx, especially in the aftermath of major loss years.

RVS 2023 brought into sharp focus an anomalous trend: new reinsurance startups grappling with capital raising.

And that’s in spite of the backdrop of improved sector profitability.

Several hypotheses were tabled to account for this:

• Outsiders view greater investment return prospects beyond the reinsurance arena.
• A tilt towards generalists over sector specialists by investors.

Whatever the cause it's clear that even as existing reinsurers attract more investor interest, new entrants are caught in funding limbo.

3. The Reinsurer’s Perspective: Cautiously Optimistic

Notably, reinsurers rebounded in 2022, a stark contrast to previous years that were dappled with losses.

But industry participants were quick to inject a dose of realism.

One profitable year, though commendable, isn’t a harbinger of long-term profitability.

Many at RVS expressed that while optimism for 2023 is growing, it was very much tentative.

Warnings for measured rate augmentations persist with themes of continued discipline and meticulous risk selection echoed throughout.

4. Inflation’s Dual Role: Catalyst and Constraint

Inflation has always been a formidable variable in the financial equation.

And its recent persistence has nudged insurers towards seeking elevated reinsurance limits.

While this has naturally bolstered reinsurance demand, the supply side tells a slightly different story: capacity is not burgeoning.

Reinsurers, benefiting from an advantageous position, have grown particularly selective about their counterparties.

Smaller firms, especially those writing specialist lines of business, may find the landscape increasingly challenging with affordable coverage becoming increasingly elusive.

The retro market, however, flush with excess capacity, has ensured that reinsurers' own reinsurance remains largely untouched.

5. The Vesttoo Saga: Anomaly or Indicator?

RVS 2023 also served as a platform to dissect specific incidents that could have broader implications: the Vesttoo cover fraud was one such incident.

Initial reactions ranged from scepticism to alarm.

Yet, as discussions matured, a consensus emerged; the Vesttoo case, while significant, is largely seen as an isolated incident rather than an indicator of systemic issues within the realm of Insurance-Linked Securities (ILS) or credit risk transfer instruments.

Vesttoo are currently seeking to recover over $200m from their two ousted co-founders.

RVS 2023 was a mirror to the reinsurance industry’s resilience, adaptability, and forward-thinking approach.

From nuanced market outlooks to dissecting incidents that have the potential to reshape industry norms, this year's conference underlined the sector's capacity to learn, innovate, and grow.