Key messages from the reinsurance meetings in Germany

It has been one of those rare years in which the reinsurance landscape has remained relatively stable between the end of the Monte Carlo Rendezvous and the beginning of the Baden-Baden.

Previous years have seen the industry – and renewals – change beyond recognition throughout September and October as a result of the financial crisis or natural and manmade catastrophes. However, rates remain largely "flat to slightly negative" across major lines of business except those which have seen significant previous loss activity or a fall in capacity such as Gulf of Mexico property, financial D&O and trade credit.

The key messages being discussed in Baden-Baden were: the economic landscape, Solvency II’s effect on pricing, a broader syndication of risk and the increasing role of brokers.

The role of brokers has come into sharper focus primarily due to fundamental disagreement over pricing in major business lines, particularly non-cat-exposed property.

In addition to price negotiations brokers have stepped in to assist on the technical side, armed with an arsenal of analytics products and aided by residual distrust of catastrophe modelling.

Patrick Hartigan, leader of the reinsurance division at Beazley, said several factors pointed to brokers playing “a greater role”.

“Where the primary insurer can’t get a full suite of products, they will approach the broker to syndicate and find an appropriate source of capacity. Brokers have possibly been busier this year.”

Ross Howard, COO for Towers Perrin’s reinsurance brokerage division, who was attending the PCI reinsurer meetings i the US, the challenge for brokers will be to “establish more favourable terms to protect clients” if their clients and reinsurers cannot find accommodation on price.

“Primary insurers across the industry are seeing loss development in certain areas. Losses they have seen have been net retention losses rather than reinsurance recoverables,” Howard said.

“We need to give clients the kind of flexibility on the reinsurance structures that would give them protection a bit lower down, such as looking at aggregate stop losses. We were certainly talking to our clients about that.”