Guy Carpenter & Company, LLC sponsored this extended roundtable discussion that considered the progress made by (re)insurance as the Solvency II regime approaches. Held in London, it was attended by a number of UK and continental Europe industry leaders, including Guy Carpenter Managing Director and European Solutions Group Leader Eric Paire. We present the text of the roundtable discussion here as it appeared in Reinsurance Magazine. 

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Peter Zaffino, President and CEO
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At this time last year, the reinsurance market was vastly different. A financial catastrophe and major hurricane occurred and changed the way (re)insurers viewed risk. As both events receded, our industry was left with profound uncertainty. More than being concerned about the direction of reinsurance rates at the January 1, 2009 renewal, carriers worried that a widespread capital shortage was imminent, impairing their abilities to assume and transfer risk. Despite the severity of the financial and natural catastrophes the reinsurance market proceeded in an orderly fashion, with property-catastrophe rates up 10 percent to 15 percent on average and other segments not significantly impacted.

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David Priebe, Chairman of Global Client Development
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A tumultuous market is beginning to show signs of calm. After more than nine months of financial market volatility — and uncertainty as to reinsurance rates — we are looking back on three relatively stable renewals and a full quarter of financial results. Many forecasted the worst last September, and now, we’re seeing that insurers and reinsurers have been able to adapt to a capital-constrained environment. Slowly, earnings are recovering, and capital is becoming available — both of which are keeping reinsurance rate increases under control. This is the result, however, of a precarious balance between supply and demand, one which could be disrupted by a shock to the marketplace.

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Nick Frankland, CEO of European Operations
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Few casualty risks are one-dimensional. They tend to be linked, reflecting the interconnected nature of today’s business relationships. Liability risk can follow the links among businesses as well, giving regional exposures worldwide reach. One event thus could impact a large number of insureds representing many lines of business in several countries. A rise in the number of claims as the casualty contagion spreads has the potential to deplete balance sheets and possibly threaten a carrier’s solvency. Advances in casualty catastrophe modeling technologies, however, may help you protect your portfolio from “hidden” exposures.

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Peter Zaffino, President & CEO
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All eyes will be on January, 1 2009. As we approach the next renewal season, another round of rate decreases seems likely. The pace should be slower than it was through 2008, thanks to greater underwriter discipline than in previous downturns. Thus, even though the market has not been catastrophe-free, it has been able to absorb the losses, as the industry is well-capitalized. Fears of a mega-catastrophe and pressure from broader economic conditions should keep underwriters from assuming inadequately priced risk.

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