Ten talking points for this year’s Rendez-Vous

Unsure on what are likely to be the chief talking points over the next four days? Do not fear, as The Insurer highlights 10 topics likely to feature prominently during this year’s Rendez-Vous.

1. What will happen if the wind doesn't blow?

Hurricane Beryl’s record-breaking early-season activity served as a warning that the Atlantic Basin has the potential to deliver highly dangerous storms. At the time of writing, however, expectations of a hyperactive Atlantic hurricane season have yet to materialise and it is highly unusual to be attending Monte Carlo without even formations developing.

It is still unlikely that this lull will continue throughout the remaining months of this year’s season, but the extent to which the reinsurance sector experiences H2 cat losses will naturally have a bearing on upcoming renewal discussions.

What happens if the industry swerves a notable hurricane loss in 2024? Will cat reinsurers’ resolve remain steadfast or will the market buckle after two strong years? And what of the reputation of the modellers and meteorologists if this is a season that defies all forecasts?

2. Social inflation

US casualty remains a major talking point as we gather for this year’s Rendez-Vous, so much so that it dominates the front page of today’s daily edition. The past 12 months have seen substantial reserve strengthening and while some price corrections are in place, reinsurers remain cautious – as demonstrated by comments from Hannover Re CEO Jean-Jacques Henchoz. Expect greater scrutiny of underlying portfolios during this year’s renewal discussions amid mounting concern that corrections to date have not gone far enough.

3. Earnings protection coverage

A year ago there was recognition that more needed to be done to address the coverage gap left by reinsurers’ retreat from lower layers. This shift in retentions led to bumper 2023 results for P&C reinsurers, which have for the most part continued in the first half of 2024, with the majority of industry losses again retained by primary companies. While there is unlikely to be significant movement in attachment points in the near future, reinsurers are keen to grow in this phase of the cycle and in some cases are willing to look at solutions that address earnings protection.

4. Flood and SCS

Flood and severe convective storms have been the dominant driver of industry losses in the year to date. According to Swiss Re, severe convective storms cost the industry $42bn in the first half of the year, or 70 percent of total industry losses. Flood caused around half of the remaining losses, driven by events in Germany, Brazil and Dubai, all of which triggered reinsurance recoveries. Discussions around so-called “secondary perils” will again feature prominently at this year’s Rendez-Vous.

5. Concerns around SRCC

The surprise $1bn+ hit from this year’s New Caledonia riots has further highlighted the potential for major industry losses from strikes, riots and civil commotion (SRCC). Several reinsurers voiced the need to address SRCC in wordings at last year’s Rendez-Vous. New Caledonia will have further stoked fears around accumulation scenarios. Reinsurers will likely seek to better understand how cedants are managing these exposures, and what steps are in place to address accumulation risks. Finally, will the French terrorism reinsurance pool GAREAT come under political pressure if it doesn't engage?

6. Post-CrowdStrike cyber demand spike?

On the subject of accumulation risks, the recent CrowdStrike outage served as a warning to the market of the loss potential from a major cyber event. While the impact will be manageable for the industry, there is potential for impacts on sentiment among both buyers and reinsurers at the upcoming renewals. There will likely be an increased demand for both primary cover and reinsurance, and questions remain as to whether the market has the capacity to meet that demand and to what extent the industry should work with governments to develop partnership solutions for systemic losses. Much of the focus around cyber at Monte Carlo and beyond will be on how the market addresses this as it continues to grow.

7. Time to carve out AI?

Over recent years underwriters have taken steps to address “silent cyber” exposures across multiple classes of business. There is now growing awareness that AI has similar potential to trigger claims across many lines, raising questions as to whether similar steps need to be taken to address “silent AI” risks. There will likely be increasing focus during renewal discussions around where AI exposures may be unintentionally covered. This trend will likely become increasingly prominent over the coming years as AI influences the world in which we operate.

8. Data transparency and granularity

At the heart of all these challenges is the need for more transparent and granular data from cedants. Reinsurers are increasingly interested in understanding terms and conditions offered by primary carriers, particularly for the thematic areas listed above. Being able to demonstrate how accumulation exposures are being managed will be critical to securing the best terms. Client differentiation will again be of high importance during renewal discussions, (particularly for those looking to secure earnings-level protection mentioned above).

9. Collateral concerns continue

At last year’s Monte Carlo the industry was still gripped by the collateral fraud allegations against Vesttoo. A year later, concerns remain around the lack of scrutiny of collateral backing certain MGAs/(re)insurers and whether it is time for regulators and rating agencies to take a tougher stance. The issue is clearly not unique to Vesttoo. ILS fund manager Leadenhall is locked in an explosive dispute with companies associated with 777 Partners with allegations of hundreds of millions of dollars of collateral fraud.

10. Will this be the Ozempic Monte Carlo?

And finally, on a lighter note (literally), weight-loss drugs such as Ozempic have been spreading from Hollywood to boardrooms over the past year. As anyone who has had to sprint from the Fairmont to the Metropole will testify, the Rendez-Vous is a challenge for those of us carrying extra baggage. Perhaps this year will be different as match-fit reinsurance executives skip from one meeting to another, no longer burdened by the effects of years of late client dinners?