News


he big talking points on the cocktail terraces of Monte Carlo this year will


revolve around rumours as to which brokers might move firms and which companies may next merge or acquire each other, according to Tad Montross, chairman and chief executive of General Re Corporation. “Rumours about which brokers are next to


13.09.15 SUNDAY


Reinsurers fear being single after the party T


impossible, there is the hope that one plus one will equal more than two and the expectation of significant expense savings.” General Re’s own strategy has been defined


by this. Montross said that for the past 24 months, the company has not sought top line growth. “In this market it is very difficult to grow,”


jump ship will be a big talking point—they are switching firms faster than the captain of the Costa Concordia abandoned ship,” he said. “Everyone has been talking about all the M&A activity. It’s been frenetic out there. Everyone is looking for a partner and everyone is scared they’ll be left single at the party.” This flurry of both corporate consolidation


and individuals seeking better deals, has been driven by the numerous challenges facing the market.


Montross lists these as being the influx of


capital and reinsurance alternatives such as cat bonds and hedge funds; a benign cat period with insured cats in both 2013 and 2014 over a third below the 10-year average; and seven years of record-breaking low interest rates. Specifically, on the point about benign


cat losses, he points out that it has been nine years since a hurricane has made landfall in Florida—the longest stretch since 1851.


He also highlights another challenge that


is emerging for the industry: that of uncertain loss trends. “We’ve had negative frequency and modest severity in many classes of business, much like the mid-1990s. There are a number of indications that we are seeing a reversion to the mean.” “All this has driven frenetic M&A activity,” he said. “With organic top line growth near


Tad Montross


he said. “Financial markets have become increasingly short term-oriented. The average holding period of a stock on the New York Stock Exchange is less than 11 months. “Investors in reinsurance start-ups often


want exit criteria that allow them to get out in as little as 18 months. Reinsurance is a long- term business. Losses and recoverables will be outstanding for years. In some cases, decades. Gen Re is going to be there for our clients.” As such, he said, it is General’s Re strategy


to approach every deal on its own merit. “We don’t speculate about the market. We approach every client and transaction on its own merits. The biggest pricing challenge


the primary


industry faces is good loss experience in the face of increasing exposures. The world is warmer and wetter and sea levels are rising,” he said. “We are constantly working with clients and


prospects to demonstrate the benefit of a direct reinsurance partnership.” n


M&A and the capital markets to dominate Rendez-Vous talks M


ergers and acquisitions (M&A), capital markets, technology and the movement


of property rates will be the biggest talking points at this year’s Rendez-Vous. That is according participants in an Intelligent


Insurer online survey, who were asked to list the top talking points ahead of the event. One participant listed multiple points, which


as well as capital markets, included the lack of major insurance natural


catastrophes,


manmade catastrophes, releasing of reserves and cyber in general. Several participants highlighted the topic


of M&A. Just one week before the Rendez- Vous, Mitsui Sumitomo Insurance Company announced that it will acquire Amlin Insurance for ¥634.7 billion (£3.4 billion). On this topic, another that following large-scale


participant industry, namely the XL/Catlin deal, talks


might centre around the increasing influence of Bermudian companies in the market. Other probable topics included exchange-


traded risk, the soft market and the sharing economy and impact on insurance. “Disruptive technology and how the industry


should embrace will be a big topic. Should we change ourselves to survive?” asked one. As the reinsurance industry continues to


face tough conditions, the reshaping of the market is also likely to generate conversations. “The future


of ‘traditional’ reinsurance


will continue to be a top point for discussion as reinsurers grapple to find their place in the market,” said another. Another said: “The movement of property


said mergers in the


rates and the question of whether a pricing floor has materialised will be key talking points.” n


10 | MONTE CARLO TODAY | DAY 1: Sunday September 13 2015 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com


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