The recently concluded Reinsurance Rendezvous 2000 in Monte Carlo confirmed the somber state of the industry. Although the delegates heard some good news, the consensus opinion was that the problems the industry has had since the mid 90’s – excess capacity, competition from ART’s, changing market conditions- continue to depress premiums.
A report from Moody’s Investors Service, issued just before the annual meeting, warned that the squeeze on premiums would result in economic pressure on smaller reinsurers, as larger companies continue to price reinsurance at minimum levels to maintain market share.
While some premium rates have actually firmed recently, most analysts attribute this to 1999’s catastrophe losses, the 2nd highest on record. Higher premiums also tend to make alternatives, such as self retention, captives and ART’s, more attractive.
Rendezvous President, AGF CEO Antoine Jeancourt-Galilgnani, noted that some rates had fallen by as much as 65 percent in the last five years, and warned that if this trend continued while claims remained at a high level, it would inevitably lead to the weakening of reinsurers reserves, and could threaten some companies with insolvency.
The bright spots; while few, gave the delegates some hope. Integrating new technology and taking advantage of e-business initiatives can drastically reduce operating costs Swiss Re’s Rudolf Kellenberger told the Conference. Developing programs to cover e-commerce risks will become a promising new source of premiums, and as emerging markets increasingly participate in global commerce their insurance needs will also rise.
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