Love it or loathe it, the Monte Carlo Rendez-Vous is once again upon us. Helen Yates takes a look at the biggest conference in the reinsurance world and dusts off her crystal ball.
Ask a few Monte Carlo veterans to describe the Rendez-Vous de Septembre and you quickly get an impression of organised chaos. The gathering, which was originally intended as an opportunity for cedants, reinsurers and their brokers to begin discussing renewal terms, has lost some of its meaning. When it started in 1957 it was easy to discuss renewals in September. “We don’t have those big pro rata treaties much anymore and with excess of loss,” explains Peter Middleton, managing director of the specialty division at Markel, “September is right in the middle of the hurricane season… so it’s much too early.”
Yet year after year in early September everyone still turns up. “I first went to Monte Carlo 31 years ago in 1977,” reminisces Jim Bryce, CEO of IPC Re. “It’s a unique event but the numbers have definitely dropped.” He puts this down to consolidation and adds that there are now more service providers attending, though “in the old days nobody would dare waste time talking to lawyers or stockbrokers.” Last year over 2,500 delegates descended on the tiny Principality (and those are just the official numbers – not everyone bothers to register). Each year they come armed with schedules chock full of meetings and dressed in the preferred attire of chinos and golf shirts.
Scrum at the café
“The Monte Carlo Rendez-Vous is an enormous collection of overfed people looking to discuss trends in the market,” quips a broking executive. The favourite venue to discuss such trends and conduct their meetings remains the Café de Paris in Casino Square. Directly opposite the Hotel de Paris in the full glare of the blazing Riviera sunshine, every half hour the Café becomes a scrum as delegates rush to find their next appointment. “On the half hour you basically can’t find anyone unless they are very tall or they’re wearing a bright colour,” explains Middleton.
“Someone made the comment that Monte Carlo is a bit like reinsurance speed dating,” offers Dirk Turley, chief underwriting officer at Glacier Re, to describe the half hourly swap over. “You can have up to 16 or 18 meetings a day and if you do that for all three of the days it can be quite exhausting.” In recent years it has become marginally better organised. The air-conditioned lobbies of the Hotel de Paris, the Metropole, Fairmont and the Hermitage are a less anxious meeting point and significantly less sweaty.
The shrinking of the Café de Paris last year led to angry complaints. “It’s even worse now because half of the area is now for selling souvenirs,” says Bryce. “I avoid the Café de Paris at all costs.” The environment is tough enough without having to join the early morning mêlée for tables, explains one Monte Carlo veteran. “The underwriters normally compete among themselves to see who can organise the latest cocktail party in the evening which means you’re quite often starting quite jaded in the morning and then you sit there sweating uncontrollably in the Café de Paris while trying to make sensible conversation to an important client and balancing on the edge of a chair with various pieces of paper flying all over the place. From that point of view it is quite stressful.”
“People have got smarter over the years and the brokers now have specific areas where they have their meetings so I think it’s better organised now,” says Turley. Benfield books out tables on the roof of the Café de Paris, whilst others conduct meetings on the balcony of their hotel suites, at tables in the various hotel bars and restaurants or even aboard the company yacht (the GE yacht had given way to those owned by Deutsche Bank and friends – although these capital market toys may be less prevalent as the big banks tighten belts post credit crunch). Bryce quips that they may turn up this year in submarines.
“Before they refurbished all the hotels it was a real problem getting a room,” reveals Bryce. “People would read the obituary columns to find out who had died so they could get their room.” He also remembers one particular Rendez-Vous around 15 years ago, which he describes as “Monte Carlo and the three dead bodies”. Cars had apparently hit two and another delegate had a heart attack in the Café de Paris. “People were stepping over his body going to their next meetings.”
Champagne and canapés
“There were a number of Rendez-Vous events which were memorable,” says Turley. “Sometimes more for the negative things that happened around that time.” Nobody will ever forget being in Monte Carlo in 2001, everyone agrees. News came through of two planes hitting the World Trade Center in New York on the Tuesday afternoon of the conference. Many insurance and broking executives lost colleagues that day and as eyes were glued to television screens and meetings cancelled; there was also a rush to get back home. “In Monte Carlo everyone is very positive and energetic and then something like this happens and the whole things stops immediately,” says Turley.
In 2005 Hurricane Katrina had just hit New Orleans and press briefings heaved as loss figures were continually revised upwards. Other years are memorable because of other loss activity or significant rating agency downgrades. Despite dramatic years in the past, one of the constants is the cocktail parties and extravagant dinners. Many delegates complain they are sick of champagne and canapés by the end of the conference and desperate for a normal meal.
But even this may be about to change, warns one broker. “In the past the wine would flow freely but of course we’ve been subject to budget cuts and expense reviews.” None of this is obvious to Roger Sellek, AM Best Europe’s managing director of global financial services. “The purse strings are being tightened but there doesn’t seem to be any sort of fall off in the money that’s being thrown around down there,” he observes. “It’s an indication of how important everyone sees Monte Carlo to be – if there have been cut backs they haven’t been very obvious.”
Last year’s big show-off – the company determined to flaunt the size of its wallet – was Scor. Having returned from the brink of downgrade disaster, the French reinsurer was not only in good health but its acquisition of Swiss reinsurance company Converium had seen it become the world’s fifth largest reinsurer – and it wanted everyone to know. “From a broker’s perspective what we’d be interested to see is who is flying the flag,” admits the broking professional. “Last year it was SCOR of course with their mummies walking up and down the street and their hieroglyphics on the wall. I’m not sure that anyone has got the budget this year to do something similarly exciting.”
Some years, there really isn’t much to talk about. Which rather begs the question, why bother? Is the Rendez-Vous just one big nostalgia trip? Despite its changing role and poor timing in the run-up to renewals, Sellek doesn’t see the Rendez-Vous going away – or even going anywhere else. “If we held it somewhere else would it work? There’s a little bit of magic about Monte Carlo and the Riviera.” He points to the increasing presence of reinsurance executives from around the world – emerging markets like the Middle East as well as Bermuda and the US – as a sign of its continuing and growing importance.
Of course, Monte Carlo plays directly to the strengths of the industry. The opportunity to see so many people in such a short space of time appeals in a relationship business. Despite improvements in technology reinsurance remains a relationship business, insists Middleton. “We all play to our preferences so we like to trade with people we know, like and trust. Trust is a very important part of the reinsurance formula.” It may not be the business it was ten years ago, but it’s “still very important to have face to face contact” agrees Turley.
“It really starts on Saturday and now quite a few brokers have pre-Rendez-Vous dinners,” says Bryce. “Then they have the formal reception starting on Sunday – and then Monday and Tuesday is like a machine gun going off with meetings and then you have the lunches, dinners and breakfasts and by Wednesday afternoon you’re pretty much gutted. You’ve got to crawl across the finish line at dinner on Wednesday. But you accomplish more in those three and half days than you probably would on a two-week business trip travelling around Europe.” He adds that you’ve got to be seen to be there. “If you’re there on an annual basis and you don’t show up – it’s probably more damming than if you show up with bad results – because at least bad results you can explain. I won’t call it a necessary evil; it’s a necessary good.”
Helen Yates is a freelance journalist.
Crystal ball gazing
“Monte Carlo is very much more a meeting for shining a light down the tunnel to see where things are going long term,” explains a broking executive. “Of course, every single year the people brave enough to forecast what’s going to happen are proved wrong.” But there’s no harm in giving it a stab. So what will everyone be talking about this year? The softening market remains a big topic. The impact of the credit crunch – particularly on investment returns as first half results prove disappointing – will also keep senior managers occupied.
“This year the discussion will be around the softening rates as reinsurers get it on both sides of the balance sheet,” predicts Sellek. “The general softening of the capital markets is hitting everything and unfortunately it has happened at a time when the reinsurance cycle is soft.” This has been described as a “push-me-pull-you” effect.
Middleton says there are indications that some lines of business “are not going down as much as they were”, adding, “even saying ‘stabilise’ would be too positive a comment.” With the investment side also being hit, he believes this should put more pressure on underwriting for profit – although “there are not enormous signs of it yet”.
Other topics of conversation are likely to include the industry buzzwords of the moment – enterprise risk management being an important one. Because an increasing amount of the business is being modelled and underwritten in a more scientific way, “that should all point to a time when people start to say ‘no further’,” argues Middleton. “There should be some proximate line in the sand where people say ‘this is now too cheap for me’ in a more scientific way than in the past.”
“Large companies are more aware now of how their exposures can aggregate and lessons will have been learned,” says Sellek. As a result, the impact of any major hurricane losses may be less extreme than they were in the aftermath of Katrina in 2005. “Everybody says that you’re going to have to have an increasingly large hurricane [to impact the direction of rates] because post Katrina everybody increased their deductibles,” adds Middleton. Nevertheless, journalists and delegates alike may turn to activity in the North Atlantic in the absence of anything else to discuss.
Diversify, diversify, and diversify
“The Bermudian reinsurance market will descend on the conference as they have done for a few years now,” predicts one broking executive, “but with the word diversification ringing in their ears.” He thinks a combination of rating agency pressure and an effort to reduce their catastrophe exposures will see Bermudians continuing to look for new opportunities. “I wish I had a pound for every time I had an email from a Bermudian company saying we’d be very interested to see some business from Central and Eastern Europe.”
One major trend over the past year has been the number of Bermudian reinsurers – particularly post-Katrina start-ups – buying up Lloyd’s insurers. Validus bought Talbot, Ariel bought Atrium and most recently Argo bought Heritage Underwriting. “Bermuda companies still have quite a lot of cash sitting on their books,” says Sellek. But he does not anticipate M&A activity to continue at the same rate.
But mergers are still on the menu for some. At the time of writing, Max Capital had confirmed its buyout of Imagine Lloyd’s, while Advent was busy fending off Fairfax, and Swiss Re had announced its Admin Re takeover of Barclays Life. M&A in the broking sector could also produce a few headlines in Monte Carlo. “On the broker side there’s a good chance that something might happen,” confirms one industry insider. “I can’t see on the reinsurance side it slowing down particularly.”
Rating agency decisions are another popular discussion point. “The week before you usually get your yearly downgrade,” reveals Jim Bryce. “There was Gerling, Converium and Scor – you’d almost think it was timed, this nasty piece of news before the Rendez-Vous.” Sellek hastens to add that we should not expect any dramatic downgrades on the eve of the Rendez-Vous this year.