Monte Carlo games

Via Reuters, here are highlights of the reinsurance Rendez-Vous in Monte Carlo:

  • Reinsurers say they will remain disciplined, meaning they won’t keep lowering rates. Brokers are skeptical.
  • The industry has $13 billion more in capital than it needs, which is what is driving rates lower. (Remember reinsurers rent their capital. If there’s too much capital, the old supply-demand curve predicts prices will fall.)
  • A big capital event (Katrina was around $50 billion) would drive rates higher.

I recall Katrina drove rates higher for cat coverage because a lot of people got out of that business. However, they moved into other insurance lines – like GL in the Midwest – keeping rates there flat or lowering them.

If you’re interested in Monte Carlo shenanigans, I will be retweeting stuff that catches my fancy. The tweets appear on the upper left hand corner of this blog.

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