What happens at 1.1 if the wind doesn’t blow?

There is a degree of journalistic licence in our headline above – the wind has already blown, of course, with Hurricane Beryl becoming the earliest calendar year Category 5 Atlantic hurricane on record.

But that was two months ago. We arrive in Monte Carlo for this year’s Rendez-Vous following a lengthy lull in Atlantic activity, which is already leading some forecasters to reduce their record pre-season predictions for a highly active year.

As we approach 10 September – the date considered the climatological peak of the hurricane season – the US has yet to see any major hurricane losses and, even more significantly, there are no obvious signs of formations.

While the current lull is still likely to end at some point, questions are naturally going to be asked at the Rendez-Vous about what impact another unexpectedly quiet year will have on 1.1 renewal negotiations.

In particular, what will this mean for property catastrophe rates, terms and conditions? Reinsurers have publicly spoken of their desire to maintain discipline but they are also targeting continued growth.

They go into this year’s renewal season on the back of very strong results in 2023 and in some cases an even stronger performance in the first half of 2024.

While the year to date has not been without catastrophes, once again the majority of losses have been retained by primary carriers.

There were signs of softening at the mid-year renewals as reinsurers continued to pursue growth in what remains a very favourable market.

Assuming we don’t see any major losses during the remaining months of the year, the question is whether this softening will become more meaningful at 1.1.

Following the market recalibration at the start of last year, which saw reinsurers broadly retreat from lower layers, there remains limited appetite to give ground on retentions.

But there may be more willingness to make concessions on rate as reinsurers eye continued growth opportunities.

Already, the shadow boxing has begun. At our Pre-Monte Carlo Forum in London last week, Howden Group CEO David Howden took up the brokers’ pitch of warning reinsurers that they risk becoming irrelevant if they continue to shield themselves from the impact of cat losses, while the CEO of Lloyd’s-Bermuda (re)insurer Ark Underwriting Ian Beaton warned that one or two good years should not be regarded as sufficient to warrant a reset.

Casualty concerns

Away from property cat, the ongoing challenges around US casualty are also set to come to the fore in Monte Carlo over the coming days.

Seaking at the same event last week, Arch Worldwide Reinsurance Group CEO Maamoun Rajeh said the industry is still not reserving sufficiently for casualty exposures.

And as you may have noted from the front page of today’s edition, Hannover Re CEO Jean-Jacques Henchoz has warned that recent pricing corrections for US casualty lines have not gone far enough.

In contrast to property cat, few, if any, reinsurers appear especially keen to grow meaningfully in US casualty this year.

Those willing to deploy more capacity – we expect – will likely do so on a cedant-by-cedant basis, with greater scrutiny of underlying portfolios and steps being taken to manage exposures.

The challenges around social inflation – in particular the rising power of the litigation finance industry – is becoming an increasingly significant problem for the reinsurance sector.

With no way currently of limiting that phenomenon, some classes of business will remain very challenging to reinsure.

But there will, of course, be many other topics of conversation, including all the traditional themes of capital raises, potential M&A and people and account moves.

The good news is that you won’t miss out on any major developments, with The Insurer’s editorial and analytics team out in force bringing you in-depth coverage on the ground via our alert service. In addition, look out for our bumper daily editions, which will be available in the foyers of all the major hotels and Casino Square…