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Reinsurers hazard big money outside Monaco casino
Real estate news By Douwe Miedema
Tue Sep 18, 2007 11:03am EDT
The annual gathering of the global reinsurance industry in Monaco is an arcane, 50-year-old ritual of lavish parties and secret tete-a-tetes where the industry negotiates renewal contracts for the coming year. But this year's get together, held around September 9 to 11, showed clear signs that the reinsurance industry, in a state of change since the attacks of September 11, 2001, and Hurricane Katrina in 2005, is waking up to modern times. Reinsurers -- which take on large risks of primary insurers -- have changed their industry in the last few years, fighting a reputation of volatile earnings and poor risk management.
Companies like Swiss Re and Munich Re have set up huge databases and employed dozens of doctors, geologists, climatologists and aviation professionals, turning themselves into research centers. They have also solemnly pledged to avoid the boom-and-bust cycles that have in the past plagued their business by making sure their underwriting business is profitable, instead of trying to smooth earnings out with investment income. "The forthcoming renewal season is shaping up to be the most symbolic faced by reinsurers since 2002," rating agency S&P said in a report issued ahead of the meeting. "How the sector behaves will be critical to its prospects for long-term success."
Reinsurers have often been prone to sell business below the cost of capital just to maintain top-line growth when start-up rivals based on Bermuda flooded the market with capacity when premiums were high after major disasters. In Monaco, the behind-the-scenes industry lends itself a touch of glamour, setting up office in spacious hotel suites overlooking the jet-set's yachts in the port. Many of the participants flew in by helicopter.
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