We could never go back to the market lows of the '90s

What Monte Carlo suggested, Baden-Baden has confirmed: the outlook for the reinsurance industry in general is bleak, and given the lack of a market-turning event, rates will continue to fall in business lines not hit by losses.

However, while there was the inevitable hand-wringing about the state of the market, there is considerable cause for optimism. There are several signs that there is a limit to how far rates can go down. Investment returns are still paltry, reserve releases cannot be relied on to prop up earnings for much longer, and the threat of inflation in several markets looms.

Pessimism about the state of the market is understandable. Many have painful memories of how bad the market was before the September 11 2001 terrorist attacks returned sanity to pricing and are in no hurry to go back there. But the reinsurance industry is a very different place to what it was then. Chief executives' persistent talk about underwriting discipline aside, risk models - and reinsurers use of them - has improved significantly and equity analysts’, rating agencies’ and journalists’ questions have got tougher and more incisive, leaving the industry’s leaders little choice but to back up their words with action.

As one reinsurance executive put it: “For the people who remember the 1990s, we’re nowhere near that.”

Guy Carpenter’s Europe chief executive Nick Frankland agreed, telling me that the market is no longer equipped for unbridled price-slashing.

And although rates are softening, that does not mean the reinsurance market lacks opportunities. While there is some business that the whole market competes for - which is inevitably going to be the worst-hit by price cutting - there are other areas that are only open to a select few, whether because of their complexity or sheer capital intensity.

Reinsurers should also take heart from the fact that the bonds between themselves and their clients is growing stronger. Insurers are also hurting, and so need support and understanding from long-serving business partners.

And while there has been a trend towards higher retentions and greater use of excess-of-loss reinsurance – both of which weaken ties between cedant and reinsurer – the recent spate of heavy losses in Europe is starting to reverse this.

It would be foolish to suggest that times are easy and that the next few years will be plain sailing for the industry, but equally there is still a lot to be positive about.