Challenging market conditions due to abundant capacity, the ongoing influx of new capital and limited loss experience, continue to put pressure on the reinsurance sector, while recent M&A activity is adding a new dynamic to the mix. This is according to the panel of speakers at the eighth annual press briefing held at the Reinsurance Rendez-Vous 2015 in Monte Carlo, by Guy Carpenter & Company, LLC, a leading global risk and reinsurance specialist and a wholly owned subsidiary of Marsh & McLennan Companies.

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Alex Moczarski, President and CEO, Guy Carpenter and Chairman, Marsh & McLennan Companies International, provides concluding remarks at the Guy Carpenter press briefing at the Monte Carlo Rendez-Vous in this GC Capital Ideas videocast.

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Assessing the impact of the continuing influx of capital into the reinsurance sector,  David Priebe, Vice Chairman, Guy Carpenter, commented on ILS pricing levels. He said: “We believe current price levels for ILS could be a ‘golden compromise’ in which protection buyers perceive good value for fixed-price multi-year cover and investors continue to broaden and diversify their portfolio of holdings. With costs of issue falling and time-to-market shortening, this equilibrium could provide a substantial boost to the market that the record issuance of early 2015 portends.”

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Alex Moczarski, President and Chief Executive Officer, Guy Carpenter & Company, and Chairman, Marsh & McLennan Companies International, introduces the Guy Carpenter press briefing at the Monte Carlo Rendez-Vous in this GC Capital Ideas videocast.

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Focusing on the Asian market, James Nash, CEO of Asia-Pacific Operations, Guy Carpenter, highlighted the increasing flow of capital from the region into Europe, Lloyd’s and the US. He said: “Asia is perceived as a growth opportunity and is attracting capital from mature markets, but it is actually Asian capital seeking opportunities overseas which is the headline story this year. In 2015, Asia-Pacific has been a net exporter of insurance and reinsurance capital through M&A, with Japan and China leading the charge into Europe, Lloyd’s and the US. In the year to September 2015, outbound deals totaled USD20 billion compared with inbound deals of only USD849 million.” Looking ahead, he added: “We expect the M&A trend to continue as insurers, reinsurers and funds in the region pursue growth and diversification by going West, but we also anticipate a larger number of intra-region deals and also capital from the West coming East.”

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Looking at developments in the EMEA region, Nick Frankland, CEO of EMEA Operations, Guy Carpenter,  described the last 12 months as a “testing period” for the market. Commenting on renewal expectations, he said: “Following another benign loss year, clients will continue to seek improved terms, yet reinsurers are beginning to get near to technical minimums, which will not allow enough scope for firm orders to be easily won.” Another influencing factor, he added, will be the impact of recent M&A activity and the interplay between the new combined groups and the existing markets. “Such a dramatic tension should work to clients’ benefit as they try to find the greatest value available and construct the most responsive panels,” he concluded.

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A key feature of GC Capital Ideas is its Videocast series. Here we review recent video posts: 

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Eric Paire, Head of Strategic Advisory EMEA, Guy Carpenter, presented the sixth part of the Holistic Balance Sheet Management series describing the “multi-layer” approach that Guy Carpenter and Mercer will adopt when working exclusively with insurance clients to holistically manage capital and strengthen balance sheets. The approach includes an extensive evaluation of the investment and reinsurance portfolios to understand client needs, an assessment of the rationale for freeing-up and/or moving capital and a consideration of  modeling aspects such as the Solvency II standard formula, internal models or rating agency models.

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In the fifth installment of the Holistic Balance Sheet Management series, Russell Lee, Insurance Consultant, Mercer, shares his thoughts on how a holistic approach to capital management can benefit insurance companies in the face of challenging investment and underwriting conditions.

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Andrew Cox, Capital Optimization, Guy Carpenter, and Niall Clifford, Financial Strategy Group, Mercer, explore a number of reinsurance solutions available to insurance companies in the fourth video installment of the Holistic Balance Sheet Management series.

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