We find ourselves at a unique moment in financial history.

The credit crisis has claimed not only another Wall Street investment bank (Lehman, after Bear Stearns fell last March) but also now AIG, one of the world’s greatest insurance companies.

The $85bn loan the U.S. government granted on 16 September to save AIG is larger than the total cost of the damage caused by Hurricane Katrina in 2005. “Fin cat” is an apt phrase to describe the financial catastrophe.

It is too soon to tell whether AIG’s asset sale programme will be completely successful. Ed Liddy correctly wants to sell assets rapidly, in large chunks, and to good names. But will natural buyers themselves be able to raise sufficient funds for large purchases?

Meanwhile, some AIG clients are understandably concerned.

While AIG will fight to reassure its clients, rival insurance companies have been making detailed and active plans to take advantage of that concern to win new business.

AIG’s collapse was due to the involvement of its financial services division in credit default swaps. The subprime meltdown caused massive losses for AIG on its credit default swap positions, and it was unable to meet requirements to post collateral in cash.

The role of the credit default swap market in spreading the subprime crisis was highlighted on this page last month. We should not be surprised if AIG proves to be not its last victim.

On a happier note, industry executives from the world’s major reinsurance companies descended on Monte Carlo for this year’s annual Rendez-Vous, held from Sunday 7 September until Wednesday 10 September. They braved the sweltering heat, the countless parties, the even more countless meetings, at which they shook more hands and met more people than, well…since last year’s event. They were to be seen in the Café de Paris, or in the lobby of the Hotel de Paris, or in the Hermitage, waiting for their next appointment. Sometimes they were to be seen scrutinising each other’s name badges, looking for the person they were scheduled next to meet…

The reinsurance industry is a relationship-driven industry. And nowhere do you feel that more than at the Rendez-Vous.

They were to be seen in the lobby of the Fairmont hotel, or in

its Piano Bar, where some had virtually set up temporary office.

All the major players had successful parties. Aon’s was spectacular, at the Le Méridien Beach Plaza, on a rocky outcrop overlooking the Mediterranean, in a massive auditorium seemingly suspended in the starry sky.

Guy Carpenter’s party, at the Hotel de Paris on Sunday night, had the advantage of starting early (before the senior figures were whisked off to their exclusive dinners) – and (perhaps as a result) it was positively star-studded. Ajit Jain graced the party with his presence. Tats Hoshina made it, too, even though earlier that day he had completed the Monaco Half Ironman race (see photo on page 11).

Between the cocktails, there was a lot of serious talk. The official conference was on the topic of ‘Securitisation in the insurance industry’. There was much talk elsewhere on the topics of rates, and the effects of the credit crunch. Much gossip was devoted to the implications of the Aon-Benfield merger: who will lose, and who will gain?

But, above all, Monte Carlo was a chance to catch up with old friends, and make new ones. The reinsurance industry is a relationship-driven industry. And nowhere do you feel that more than at the Monte Carlo Rendez-Vous.

See you there next year.

David Sandham, Editor

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