Adrian Leonard looks at the run-up to the renewals season, as the industry prepares to gather in Monte Carlo for the 2004 Rendez-Vous de Septembre

Talk of mounting competition and softening rates is on the rise as the 2005 renewal season gathers pace. Many major reinsurers on the European market are forecasting price cuts, especially in property lines, as the cycle turns. For some, the boom period is ending before the cost of soft-market underwriting and the equity crash have been repaired. Others are approaching the market with renewed vigour, ready to build their market position.

Global Reinsurance asked several top ten European reinsurers to reveal their plans for the renewals ahead. Here is a preview of what brokers and buyers can expect to hear from their major markets around the tables of the Cafe de Paris this year.

Munich Re: Dr Michael Sparberg, Senior Executive Manager responsible for Region France, Belgium, Luxembourg, Italy and Malta.

"Reinsurance treaties are rather tailor-made, and depend on the market, the client's portfolio and the claims experience of each treaty, so it is difficult to state general points on the underwriters' agenda. However, one general point for Munich Re is to maintain risk-adequate prices. This year in virtually all the insurance and reinsurance markets, discipline was largely maintained by market players, enabling prices to be kept at a risk-adequate level. Conditions were further refined, with the aim of limiting risks and dividing them appropriately between the contractual parties. We expect this discipline to continue, as market participants have learned that the re/insurance business has to be profitable on a stand-alone basis, independent of investment results.

"Despite this, there may be some changes in the reinsurance conditions in the coming renewal season, depending on the market and, of course, the terms and conditions of individual treaties. One example: in the French market, we need to increase our knowledge of the risk exposure of the client portfolios we reinsure. Comparing the availability of risk and claims profile data with those of other European markets, there is much room for improvement, and, contrary to some beliefs, improved portfolio knowledge does not necessarily increase reinsurance rates.

"Understanding the composition of reinsured portfolios becomes even more important when looking at the dynamic development of French legislation and jurisdiction on liability awards: motor bodily injury, medical malpractice, technical disasters, and professional and public liability. Munich Re and the French insurance market are still evaluating the impact of these developments on risk exposure. As far as necessary, we will adjust our underwriting and pricing strategies accordingly."

Hannover Re: Jurgen Graber, Executive Board Member responsible for Non-life Reinsurance

"We will continue to write more excess of loss and less pro-rata, achieving more profit from less. We will try to move continuously into more low-frequency, high-severity business, and to write more personal accident catastrophe business. We still wish to grow our natural perils catastrophe book, we will write more workers' compensation catastrophe covers in the US, more casualty clash, and more high-layer facultative in both property and casualty, high-layer marine total loss coverages, and high-layer aviation.

"Our business position is to compete with the best in each class: with Lloyd's for speciality, and with Bermuda for catastrophe business. We might consider increasing the capitalisation of our Bermuda operation prior to 1/1/2005, clearly committing ourselves to this strategy. In Germany we have a clear growth strategy through our German company E+S Ruck. We would like to acquire business from two more loyal customers each year, and so far we have been successful. We still look at central and eastern Europe as a growth area for Hannover Re.

"We had a hard market portfolio; we are now in a transition period. US business will not grow any more, and Europe will become stronger. Most of our business will be excess of loss, except for German motor quota-share treaties. We cannot compromise on prices and technical underwriting, and we won't. So although we have some growth in our strategy, we expect to lose between EUR250m and EUR400m from the top line, but we will not lose in terms of profitability. We know that, from 2005, we can theoretically afford a 2% higher combined ratio and still deliver the same ROE. That isn't much room to manoeuvre.

"We will attempt not to widen coverage at all. Requests to include terrorism exposures and widen covers will not be granted unless an extra premium is paid. And we want an open discussion on loss cost trends. To discuss terms and prices, you have to know about them. We are happy to support increased retentions of ceding companies, and offer financial reinsurance products to reduce volatility.

"After the three-year hard market, I estimate 90% of programs worldwide have positive balances. Cedants will be asking for discounts. But the remaining 10% probably have massive negative balances - this is the discrepancy that most likely we will have to face."

GE Insurance Solutions (formerly GE ERC): Tim Carroll, Global Markets Leader

"We see ourselves as a middle market reinsurer, that means covering domestic companies around the world and regional companies in the US. By line, clearly we have a strong presence in marine and aviation, which we intend to maintain. Overall, we want to make the book more short-tail, with more property and more short- and medium-term casualty. We have a strong facultative book - we like to look at each individual risk - which we will maintain.

"We also expect to stay in excess of loss reinsurance, but we will see our proportional book decline. We have a substantial proportional book globally, but it is difficult to price properly. We asked ceding companies to give us data on primary price to build into our pricing model. Where we can expect to make money, we will stay, but where we see rate adequacy slip, we will retreat. If it doesn't stack up, we won't stay with it.

"In Continental Europe, Inga Beale's team is looking at how we can expand our presence by grow existing relationships, by looking at business we may have been on and have come off, and by looking at the services we offer to see what added value we can provide.

"We see our reinsurance top line of $4bn falling by around $500m over the next two or three years. At the moment our bottom line is very good, but we are looking hard at the mix of the portfolio. If the market really does start to move, our bottom line may have to contract as well, but it has to stay on the plus side. We are determined not to go back to the situation we were in at the end of the 1990s."

SCOR: Patrick Thourot, Chief Operating Officer

"Unfortunately, SCOR does not have a marvellous French recipe to cook up a nice dish. Last year we tried to provide a rating to retain commercial links with traditional ceding companies and large industrial risks in which our competence as a leader and technical underwriter is recognised: in energy, space, construction, engineering and similar lines. We have succeeded in maintaining the long-term relationship links, but reduced our shares of some treaties and our share of large risks.

"Now our basic goal is to try to regain shares lost during the last renewal period, although we will not regain lost shares at any cost. We will be a very cautious underwriter, and very attentive to what is happening to market prices in our three core businesses: worldwide treaty, large risks and life treaty. We know where we would like to make efforts, and which cedants we would like to increase, but we will be very prudent.

"In emerging market countries in Asia, Latin America and Middle East we are traditionally strong, and have lost comparatively little premium after exchange rates. We will try to increase or maintain these positions.

Eastern European countries are traditionally good customers of ours, and we have maintained our shares. We will look very precisely into France and southern European countries. We have some technical questions, and we want to be very precise on the ROE for various lines of business.

"UK and northern Europe are traditionally very rating-oriented. If we are upgraded, we hope to recover business from those customers with whom we have a long-term relationship. We will be very prudent in Canada and the US, where we will certainly enforce our present underwriting policy: small, regional, short-tail and proportional only if necessary.

"All of this relates to a proper upgrading of the company. We have been working on this for a year, and hopefully our contacts with S&P and AM Best will convince them that our basic business is sound, our legacy issues more or less addressed, and our solvency problems behind us. I think we have demonstrated this. Overall, the balance sheet strengthening is done.

We have substantially increased our capital base, and we have the conditions of an S&P 'A' rated company. If you are an optimist you should forget reinsurance, but we are working toward an upgrade."

XL Capital: Henry Keeling, Chief Executive - Reinsurance Operations

"With XL Re Europe our objective was to transform a small, global reinsurer into a larger, focussed, local continental European reinsurer. We reduced its territorial responsibility, and increased its capacity, expertise and financial strength to 'A+'. We rebranded it XL Re Europe, and radically changed some of the underwriting aspects, notably from a predominantly proportional base to an excess of loss and non-proportional book.

"We want to be seen as a strong alternative to the established reinsurers in continental Europe. We had to improve the balance between short- and longer-tail risks. We now have a dedicated team of casualty underwriters led by Dieter Kohl, and a strong engineering team under Xavier Touze.

We have also developed credit business in continental Europe with underwriter Damien Berteloot.

"We have been able to expand our product offering through increased capacity, expertise and a dedicated team, and plan to continue to do so through 2005. We are conscious there may be some pressure on short-tail lines, but pricing is still acceptable, and we are looking to develop in casualty lines and in property, and to continue the shift from proportional to non-proportional, targeting growth in conjunction with strong combined ratios.

"We have strong positions in France, but would like to grow more there. We would like to develop in central Europe, Germany, Austria and Switzerland, and are currently recruiting a new underwriter for the Italian portfolio. We have been very successful in Spain and Portugal, with a strong team in Madrid, and have had recent success in Scandinavia, particularly on the liability side.

"We are looking to continue our growth in life reinsurance. XL Re has a very successful UK life reinsurance operation, and a short-term accident and health business. With XL Re Europe, alongside the short-term book, we are looking to develop long-duration life business, particularly in France, Germany, Spain and Italy, over the next six to twelve months."

Lloyd's: Russell Merrett, Reinsurance Underwriter, Hiscox plc, and Chairman, Lloyd's Market Association Reinsurance Business Panel

"While we don't see dramatic changes in our reinsurance portfolio over the next twelve to 18 months, we have more actively targeted continental Europe in recent years, and are beginning to see more business that previously wasn't placed in London. Hiscox is particularly optimistic about the prospects for French reinsurance, and we have hired a French underwriter, Michel Jordan, to develop that book. To support him, we have formed an underwriting service company through which local clients can easily access us.

"The task of marketing Hiscox in Europe is made much easier by our presence in Paris, Munich and Brussels writing niche insurance business, especially high net worth. A number of other Lloyd's businesses are expanding in Europe, too. As at Hiscox, these efforts are usually focussed on the involvement of specific people. The ability to work with an experienced individual or underwriting team can create opportunities appear.

"The stable security rating of Lloyd's plays very well relative to the rating movements of household names in all continental European markets.

At the same time, Lloyd's is becoming much more transparent. As everyone knows, Lloyd's and its constituents continue to work hard on reforms to improve service. We value being a leading player in the Lloyd's market, and the co-operation within Lloyd's to handle very large risks. Hiscox is inextricably linked to Lloyd's, and is manifestly committed to making it work."

Since Lloyd's is a market comprising more than 65 syndicates and over 100 independent broking firms, no single strategy can be attributed to Lloyd's as a whole. Mr Merrett's comments may not represent the entire Lloyd's market.