Around this time of year, the property catastrophe underwriter's gaze turns to the Atlantic. As thoughts of Andrew, Georges and Floyd flit across the mind, there is always the question of whether this will be the season for the next big one. Hurricane Andrew, which left an unprecedented trail of devastation across the Bahamas, Florida and Louisiana, cost the re/insurance industry $16bn in 1992 (closer to $20bn in 2003 terms). It was - and still remains - the largest natural catastrophe to hit the industry, and led to an immediate flight of capacity from the sector. It also spawned new investment in the class, however, as a group of new property catastrophe writers, the 'cat pack', set up in Bermuda in the wake of the terrible storm (see Global Reinsurance, June 2003). These new companies eschewed more traditional underwriting methods, turning instead to the hitherto overlooked modelling companies to help them assess the true risk, and therefore the true cost, of such perils. At the time, many of the established reinsurers took a somewhat disdainful view of this path, despite the fact that many of them had withdrawn from the business. A decade on, though, and those cat packers look like they had the right idea. As Nicola Stacey, global products leader for property cat business as GE Frankona Re pointed out, everybody is now using models. "It brings stability to prices," she observed, and has tempered the rapid rises and falls in the market of yesteryear. "It is difficult to see a rapid fall in the market now," she added.

New Bermudian capital
Although there have been some withdrawals in property cat capacity in the recent past, this has been more than made up for by new capital into Bermuda and Lloyd's in particular. But, according to Ms Stacey, the market is proving "very disciplined" and the hardened conditions which started manifesting themselves in 2001 are, at least for the time being, remaining.

There is, in addition, a newer source of risk capital for extreme weather events. The catastrophe bond market reached an all time high last year, and the signs are that it will continue to flourish as it becomes a more accepted, and standardised, way of transferring risk from the reinsurance sector into the capital markets. Although some reinsurers continue to be wary of the mechanisms, finding them too time-consuming and unwieldy to make them worth pursuing, for others, notably Swiss Re, they are becoming almost run of the mill. Swiss Re's aptly named Pioneer bond, issued last year to the delight of the capital markets, was the first shelf offering, allowing Swiss Re to issue on an as need basis, and with a regularity that has grabbed the attention of investors. According to some experts in the field, the only constraint on the cat bond market is the continuing buoyant reinsurance market.

So far, none of the cat bonds issued since Winterthur issued its notes in 1997 for $6m of Swiss hail has had any of its principal affected by a loss. From those early days just six years ago, when cat bonds were seen as an exciting innovation yet still viewed with a certain amount of mistrust, today large pension funds and their ilk are routinely becoming involved in the market. Ironically, both these investors and the property cat reinsurance community now rely heavily on the modelling companies to provide assessments of risk, and one can speculate over the possibility of reducing differentiations as both communities base their opinions on the same body of data.

Windstorm exposures and modelling will form one of the items covered in this year's Global Reinsurance TV, to be broadcast at the Rendez-Vous de Septembre in Monte Carlo. Once again,

Global Reinsurance has teamed up with XL Re to offer delegates the opportunity to hear the views of market leaders and opinion formers, as the industry completes its annual migration to Monaco. This year's broadcast will include some new features, including the presence of Peter Morgan, for many year's the BBC's business correspondent and one of the leading lights in business journalism, as an anchor to the programmes. The broadcast will again be piped into delegate rooms on dedicated TV channels in the main hotels in Monte Carlo, with one hour programmes being shown continuously and changed on a daily basis from Sunday 7 September to Wednesday 10 September.

Global Reinsurance is delighted to be working again with XL Re, which in 2002 took the brave step of partnering in a highly ambitious project. The huge success of that broadcast has paved the way for an even bigger production in 2003, and for those unable to attend the Rendez-Vous - or too tied up in meetings while in Monaco to see the complete broadcast - the four programmes will be available for view at after the event. With one delegate last year describing the broadcast as "the event of the event", it has to be recommended viewing.

By Sarah Goddard

Sarah Goddard is the editor of Global Reinsurance