Insight and Intelligence on (Re)insurance Convergence with the Capital Markets

17 December 2017

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Trading Risk Monte Carlo Roundtable 2017

6 October 2017

For the first time in years, finding a subject to talk about was not a problem at the industry's annual gathering in Monte Carlo. Hurricane Irma was the topic on everyone's minds as the storm battered Florida on the Sunday evening of the Rendez-Vous.

Instead, the problem for the reinsurers and brokers hosting official press events became how to talk about Irma when there was still so much uncertainty at such an early stage during the event.

It quickly became apparent that Irma would not be the massive Miami disaster that had initially been feared, but many were still reluctant to venture an opinion on the storm.

But at the Trading Risk roundtable, our group of attendees had an engaging debate about the potential pitfalls - and opportunities - that lay ahead.

Some suggested that trapped collateral would emerge as a major factor that could change the pricing dynamic at the 1 January renewals, with the reinsurance buyers that attended the discussion seeing the event as a chance to gauge the market's ability to repay and reload.

However, Aon Securities CEO Paul Schultz argued that the mechanics of the post-loss situation would roll along smoothly and urged attendees not to focus on trapped collateral. He suggested ILS investors would accept the market opportunity that was presented to them by the time the renewals came along.

The next few months clearly present a major challenge for the ILS sector to determine the scale of losses and new demand, and to gauge what will entice investors to provide fresh capacity.

Some had already been involved in the market for back-up covers that emerged as wary reinsurance buyers watched Irma heading towards the US.

But the panel agreed the losses of 2017 should offer opportunities to the market in 2018 and the chance to build on its growing momentum in the first half of this year. While Irma was at the forefront of minds in Monte Carlo, Harvey had not long exposed the scale of uninsured flood risk in the US market, and Maria was yet to unleash its destruction on the Caribbean.

Ultimately, there are a lot of delicate negotiations and discussions to be had in the next few months and we hope publication of this initial debate helps to illuminate some of the issues that will be tussled over.

To read the Trading Risk Monte Carlo Roundtable for 2017 please click here.

Fiona Robertson
Editor, Trading Risk

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