TL;Dr

  • Stable Pricing Landscape: The reinsurance market shows signs of stability with minor adjustments expected in property catastrophe pricing.
  • Upward Pressure on US Casualty Rates: Inflation and increased litigation in the US are driving up casualty rates and reducing capacity.
  • Re-emergence of Willis Re: A joint venture between Bain Capital and Willis Towers Watson is set to relaunch Willis Re, stirring conversations about talent acquisition and market impact.
  • Growth in MGA Formation: There's a notable surge in the creation of Managing General Agents (MGAs), influencing service providers and support industries.
  • Predictions for 1/1 Renewals: Anticipated slight decreases in property cat pricing and upward pressure on US casualty rates, with regional and line-specific variations.

For deeper insights (many of which informed this article) watch our interviews with key industry players at Monte Carlo 2024 on The Reinsurance Podcast.

The 66th edition of the Rendez-Vous de Septembre (RVS) in Monte Carlo once again served as a pivotal gathering for the reinsurance industry. This year's conference was marked by insightful discussions on market pricing, significant corporate developments, and emerging trends shaping the future of reinsurance.

Here are the key takeaways from RVS 2024:

1. A Stable Outlook for Market Pricing

Unlike previous years characterised by significant pricing volatility, RVS 2024 highlighted a more muted and calm market environment. The general consensus among industry leaders points toward a stable pricing landscape:

  • Property Catastrophe Pricing: Expectations indicate slight downward pressure on property cat pricing, potentially decreasing by low single digits. Estimates suggest property cat excess layers may see premiums down by about 5%.
  • Benign Hurricane Season: A relatively quiet hurricane season so far has contributed to the stability. Although storms like Hurricane Francine have made landfall with estimated losses around $1 billion, they haven't had a substantial impact on pricing dynamics.

2. Upward Pressure on US Casualty Rates

The US casualty sector emerged as a focal point due to escalating concerns over reserve adequacy and litigation trends:

  • Inflation and Litigation: The US is experiencing a surge in litigation, with inflation significantly affecting settlement sizes. This environment is leading to increased scrutiny on how insurers reserve for future losses.
  • Reduced Capacity and Increased Pricing: The market is likely to see reduced capacity and upward pressure on casualty rates. Reinsurers are exercising caution, paying close attention to reserve adequacy and risk selection.

3. International Casualty: Regional Variations

The international casualty market presents a mixed picture, with regional disparities influencing reinsurance dynamics:

  • Specific Areas of Focus: Regions such as Turkey, Italy, and Central Europe are under the spotlight, with each exhibiting unique risk factors and market conditions.
  • Pluses and Minuses: While some areas may experience increased capacity and favourable terms, others might face challenges due to economic and geopolitical factors.

4. The Re-emergence of Willis Re

One of the most talked-about developments at RVS 2024 was the anticipated relaunch of Willis Re:

  • Joint Venture Formation: A collaboration between Bain Capital and Willis Towers Watson is expected to resurrect Willis Re as a formidable entity in the reinsurance brokerage space.
  • Structure and Strategy: Bain Capital will hold a majority stake, while Willis Towers Watson acts as a minority partner. The new entity will inherit Willis Towers Watson's branding, intellectual property, technology, and analytics capabilities.
  • Talent Acquisition Challenges:To build a competitive team, the venture may need to offer attractive packages to lure talent, particularly former Willis employees now at Gallagher. Long-term incentives and the potential exit strategy of Bain Capital are key considerations affecting talent decisions.
  • Leadership Speculations: Industry whispers suggest that prominent figures like James Kent and Steve Hearn may be involved in the new venture, though official confirmations are pending.

5. Surge in MGA Formation and M&A Activity

The conference highlighted a significant uptick in mergers and acquisitions, as well as the formation of new underwriting entities:

  • Growth of MGAs:There's a notable increase in the creation of Managing General Agents (MGAs), focusing on niche and specialised lines of business.
  • Support Industries Flourish:The rise of MGAs is boosting companies that provide services to them, including capacity sourcing, software solutions, analytics tools, and legal services.
  • Industry Dynamics:This trend reflects a broader shift towards specialisation and agility within the reinsurance market, offering new opportunities and challenges.

6. Predictions for January 1st Renewals

Looking ahead to the critical 1/1 renewal season:

  • Property Catastrophe:Expectations are for mostly flat pricing with slight downward adjustments. Regional and line-specific variations will play a significant role.
  • US Casualty:Anticipated upward pressure on rates due to the factors discussed, with reinsurers likely to maintain disciplined underwriting practices.
  • Cyber Insurance:The market continues to soften, presenting different dynamics compared to property and casualty lines.

7. Emphasis on Disciplined Underwriting

Across the board, reinsurers are emphasising the importance of disciplined underwriting and risk selection:

  • Selective Capacity Deployment:Reinsurers are cautious about where they deploy capacity, focusing on profitability and long-term sustainability.
  • Reserve Adequacy:There's increased attention on ensuring that reserves are sufficient to cover future claims, especially in volatile sectors like US casualty.

Conclusion

RVS Monte Carlo 2024 reflected an industry at a crossroads of stability and cautious optimism.

With a stable pricing environment, significant corporate movements like the re-emergence of Willis Re, and evolving trends such as the growth of MGAs, the reinsurance market is navigating through a complex landscape.

As we approach the January 1st renewals, all eyes will be on how these factors play out in terms of pricing, capacity, and market dynamics.

The emphasis on disciplined underwriting and strategic positioning suggests that reinsurers are preparing for a market that demands both agility and prudence.