Thomas Blunck: Peter, I am happy that you said that and I didn't have to, and I agree that it relies on relationships, but the manner of the relationship has changed. We look into each other's eyes and then talk about very sophisticated analytics: we go into data, we go into modelling insurance and go very deep into the programming, into the pricing, into the coverage and then it is a comprehensive relationship. And that is clearly something that has changed compared to ten years ago when it was purely based, in many cases, on the relationship and now it is the relationship and analytics.

David Priebe: By having a strong relationship you get to exactly what Thomas said in terms of transparency and an openness of exchange of information and ideas. And it is important that the reinsurer is willing to share their thoughts, their processes and how they arrived at their underwriting decision because it enables the client to come back and say, "I understand that or you may not have fully understood this aspect of my portfolio so let's have a further dialogue on that", and through that process you come to a meeting of the minds. The key is having a very honest exchange of views and working through that to come to a solution that works.

Jeremy Brazil: We have found that but I think in the past the broker was very much at the interface, probably to actively discourage the client from meeting the reinsurer. And just as reinsurers interrogate us we also interrogate them and we actually encourage them to come in before people write our programmes and to sit with the underwriter in the box, do a file review, talk to the claims department so you really understand exactly what we do and how we are doing it. It is more of a US thing, but it is much more prevalent in London now, and as Thomas was saying before, perhaps where the reinsurance process was previously a once a year visit, and you would put it in the filing cabinet and wait for another 11 months before you went and talked to them again, now, certainly on cat exposed stuff, people want quarterly updates. They want to see whether you are still doing what you said you would do.

Thomas Blunck: We are focusing the whole discussion on cat exposure but everything you mention is even more important on professional indemnity and other long-term lines of business.

Jeremy Brazil: Exactly.

Peter Grove: It is also important that the communication is not just at the very senior level. It is essential that it is at the portfolio manager's level and the reinsurance underwriter level as well, this is just as important as the management meeting.

Helen Yates: How important to insurers is the credit rating of the reinsurers that you do business with?

Peter Grove: It is a shame we haven't got cameras here because all eyes are focusing on Marcus because that is why it is so very very important.

Marcus Rivaldi: I would of course coax people to use ratings but there has got to be some intelligent usage. Simple things like not all "A-"s are the same. There are a number of rating agencies out there and you have got to understand that they are different. Secondly, a number of you guys will be operating closer to the market coalface than S&P would be and you should be supplementing our ratings with your own views of what is going on in the marketplace, within the different businesses.

Helen Yates: What is your view on the clauses that are written into policies whereby if the reinsurer drops below an "A" rating all its clients jump ship?

Marcus Rivaldi: Well I think we have this big issue anyway with this cliff that the market imposes between an "A" and "BBB", and none of the evidence that we have supports that. We have our own default statistics, we have our transition statistics and all that indicates is where the real issue comes in is "BBB" to the "BB" range. Now unfortunately we keep talking until we are blue in the face about this, but people don't tend to listen. The problem is that sometimes these clauses are not particularly well worded, they may just refer to "falls below ‘A-'" and again I would point out that there is a quality difference between the agencies and when it does happen it can put undue strain on certain businesses. I have followed what happened with SCOR very closely and this is where relationships will kick in. For businesses that operate in some of those credit sensitive business lines, distribution channels and relationships become absolutely vital and a number of those businesses are still around today, and it is not because of credit ratings, it is about relationships.

Rupert Boswell: Is this client-driven or broker-driven?

David Priebe: It is client-driven and geographical. The North American and Australian regulatory environments and the clients in those environments generally have strict guidelines in terms of acceptable counterparty ratings for their insurers so therefore if someone does drop below an S&P "A" or an AM Best "A-" it does generally have an effect. I think in the European environment and maybe the Asian environment there is a little more understanding beyond the numbers. So I think that is why SCOR and Converium were able to work through their temporary challenges with their European trading partners, whereas SCOR's portfolio in Australia went to virtually zero and the North American portfolio dropped off to virtually a minus amount, so it is very much about the regulatory environment they are operating in.

Marcus Rivaldi: It's a tight reinsurance market already and with some of these clauses you are almost cutting your nose off to spite your face. Can you really afford to lose ?3bn of reinsurance capacity?

Jeremy Brazil: You have to get the balance right between flight to quality and eggs in baskets and then you may have to have conversations about collateralisation or global funding and then people say, "What is the point of having an ‘AA' rating if you are going to expect letters of credit on top of that".

Peter Grove: I think to a certain extent a client has to be comfortable with his reinsurer and it is about more than just the rating. You have got to know a little bit about your reinsurer's portfolio as well to be able to judge...

Jeremy Brazil: It about the quality. We use agencies very much for the quantitative aspects and for the qualitative as well, they may be "AA+" but do they actually pay claims? What is the standard of the service and those softer issues? In a way, they are more of an indication of potential likely outcome rather than what the rating is itself.

Marcus Rivaldi: I have heard rumours about some carriers slowing their payments down on Katrina or raising unnecessary questions. From being at the coal face on a day-to-day basis I would expect that you would have much greater access to such market intelligence and be able to pick up sooner on indicators with regard to the financial security of market participants.

Jeremy Brazil: There was an interesting Aon report where they were showing how a company faired looking at its stock prices as opposed to say the rating. It was felt that the stock market was six months ahead of the rating agencies, because with the rating agencies you get a visit once a year, which looks at what happened over the previous, say 15 months, whereas the stock markets pick up on the gossip, innuendo and street talk and react to that.

Thomas Blunck: I think credit rating is important and each insurer should of course have security guidelines on how to allocate capacity to the different security areas. Going forward, I think in this respect we also have a converging world of the rating agencies', the regulatory and the internal risk management requirements. In the medium term standards applied under the different regimes will become more or less equal.

Helen Yates: What is the main thing that insurers and reinsurers want from their broker?

David Priebe: I will start and then Peter can tell me if I am doing the right thing. Clearly our role is very much to be a partner with our client and their business, assisting them in assessing exposure and understanding the risks and the issues they have to achieve their goals, and working with them in order to understand what that means and sharing with them a lot of information about what the available solutions are, what the market dynamics are and ultimately giving them both a quantitative and qualitative process to assess what that optimum solution is. And then, most importantly, being able to execute that in the most efficient manner into the marketplace. It has evolved into a very comprehensive role and one whereby the better we can understand the needs of our clients, help them think through solutions to support their goals and provide enough information to assist in that complicated and very difficult risk management/capital management process, the better service we can offer.

Rupert Boswell: Would you would like to have a broker acting for the reinsurers, a receiving broker, or is it always easy to just deal direct with the reinsurer?

David Priebe: Well we are the advocate of the client but we really need to understand the appetite and the ability of the reinsurer and match those parties in the most effective way.

Thomas Blunck: From the perspective of a reinsurer we benefit from brokers as well. Firstly, they are a very important distribution channel for us by giving us access to clients and risks. Secondly, they can help clients in imporving the level and quality of data and information, which is compiled, for instance, for the renewal offerings. They can also work as a consultant for the client on topics like reinsurance structure, coverage issues or price benchmarking.

David Priebe: In terms of resource we organise ourselves to cover both ends fully because first off, we have all the transactions in the market so we know market behaviour and it is very important that our team is out there understanding what Markel's appetite is, what QBE's appetite is, what Munich Re's appetite is in terms of the risks and how they think about risk. Let's say they use an RMS tool and the client uses RMS and some other tools, how do you translate that and how do you make sure there is a clear understanding? So for us to be effective we need to cover both ends of the pitch and now we need to also expand out to understand the investor community, particularly in the capital markets. Where we do have an advantage is that we do understand that full range.

Peter Grove: It is very important that you have got somebody in between both parties to negotiate. It is not always simple, it does help if you do have somebody representing you, it does make it easier. Of course it is important that there is a direct relationship as well, client and reinsurer must know each other very well, but as a client I find it easier having a broker representing us and seeking cover on our behalf.

Jeremy Brazil: I think the role of the broker has changed. Peter and ourselves may have a very good relationship but you may want a broker who is going to be very hot on service, administration and claims paying where you are not so interested in their broking prowess. I think you have to decide between that class of business in that role and that broker to what you actually want out of it, where you get the most value and, as David was saying, brokers are looking at other services they can provide, like risk management and data modelling, so that they can fill any gaps that you have got in your armoury or buying process. I think all three are working much closer together but I don't think the broker is going to disappear. It is a valuable role but I think that it is changing as the market gets more sophisticated.

Helen Yates: We were talking earlier about the value of relationships, do you think with more use of technology that this might start to change the nature of the relationship?

Thomas Blunck: It may change the administrative process behind it but I would continue to believe that relationships and trust are very essential.

Peter Grove: I think there could be a risk with placement technology moving on that then rating becomes an even more important part of it all.

Marcus Rivaldi: Technology can enhance the flexibility of organisations, possibly free them from physical constraints with regard to their location. It can allow them to potentially conduct business elsewhere, taking advantage of differing tax and regulatory environments globally to benefit the bottom line.

Helen Yates: One last question. In the run up to the 1 January renewals what would you identify as your main challenges?

Rupert Boswell: Well I think we will see ourselves being much more built into assisting on programmes. Particularly on international programmes that we talked about where we have a network of firms who we work with around the world to make sure that things do actually link up and the fact that things are in a foreign language isn't an issue. We are getting involved in some of the alternative products as well and where you have got that hard-nosed insurance claims angle you really stress test them. So that is the business as usual for us really.

Matthew Grant: Well, a lot of it depends on how active our hurricane season is. If it is a very active season, if there are a lot of unusual events, then it is going to put a lot of onus back on us to make additional changes to models if required - if we see things that are different than before. If it is a consistent or a standard type of event then there will be a lobby of focus on the placement process - helping our clients to place their risks. We have seen a lot of requests for support for alternative risk type transactions and on this whole issue of data as well. We'll therefore be busy helping people understand how they can better access information and focus on where that is going in order to make a difference to the transaction.

Thomas Blunck: For Munich Re I see more opportunities than challenges. We have a very good and reliable value proposition for the market. Being a large globally diversified reinsurer allows us to better absorb big losses in the balance and continue offering the same amount of capacity to the market - of course, subject to risk adequate prices.

Jeremy Brazil: Not a challenge as such but to ensure that we are sure of our data quality, sure of our exposure management and control of exposures. A lot will depend on what happens this year with the wind storm season or, heavens forbid, an earthquake. But our main challenge is to have a model where we can treat 2004 as being typical not atypical. We feel we want to make sure we have a model that accounts for that and we can still come in on where we expect to be.

Peter Grove: Not a challenge but most time will be spent focusing on exposure, then focusing on exposure and focusing on exposure.

Marcus Rivaldi: I think again it is just a continuing challenge of understanding this patchwork quilt of reinsurance or exposure offsets that people have, whether it be from traditional reinsurance, which is increasingly greater degrees of co-insurance, a more specific type of coverage that is broad, and greater use of some of the more traditional products which cover all the basic risks attached to that. So it is just getting an understanding of that.

David Priebe: Using how Peter likes to phrase things, our challenges are capacity, capacity and capacity. This means we need to have as much available capacity to meet our clients' needs as we can get, and I am glad to hear Munich Re is poised to provide lots of capacity and I am sure everyone else will be. So it is really building our capacity and then through that helping our clients understand exposure, exposure, exposure and how to manage that. And making sure we can deliver the right tools to assist them, be it with RMS or our financial modelling tools, but it will be a challenging renewal season.

Thomas Blunck: Can I say one more thing, it has been addressed a couple of times. Many people say, "Let's cross our fingers that we don't have a storm or an earthquake this year". We will only become a sustainable industry if we don't have to say that.