Monte Carlo outlook

Stephen SearbyCredit analystStandard & Poor's:Cycle management will be a key topic for discussion this year. Some reinsurers have already publicly indicated that they will reduce their level of exposure to those lines of business that have peaked, for example, in global property/catastrophe, aviation hull, and big-ticket US property risks. This is critical in order to avoid a repeat of the severe damage done to reinsurers' financial strength in the last soft cycle. However, the level of success achieved by the market in its rebalancing of business portfolios is likely to vary between companies, depending on the sophistication and accuracy of price-monitoring tools as well as the ability of management to resist pressure to maintain current underwriting volumes.We'll be having a number of client meetings and we're also publishing our annual Global reinsurance highlights, listing the top 40 global reinsurance groups, and giving our outlook on the market for 2005. We're hoping to get an indication that reinsurers are changing their strategies to meet the changing market dynamic. We're also interested in how reinsurance is being bought and the extent to which cedants are changing their buying habits - a trend that is becoming increasingly evident.As for the rating outlook, rates will vary by line. Overall pricing discipline is expected to remain, although those lines of business that have already shown signs of weakening are expected to continue their gradual decline.

Callum StewartManaging directorHeath Lambert Reinsurance:The main topics of conversation are likely to be the usual - rates and the potential downgrading of reinsurers' security following problems at Converium and Fairfax/Odyssey Re. Interesting to note that Lloyd's was recently upgraded. Our focus is pretty much business as usual - meeting both newer and long-standing clients, discussing issues and sorting plans for renewals. We will also be seeking to build on existing relationships with potential clients and will be seeking to further grow our new business book. Monte Carlo is an excellent forum for meeting those people we don't often get the chance to visit.Our outlook for rates is that on short-tail business (primarily affecting the newer reinsurers) they are under downward pressure following good results. While Hurricane Charley is being billed as the second most costly hurricane behind Andrew, much of the insured damage was done in lower income areas, which are covered by the federal pool or fund, and is thus unlikely to have a significant effect on pricing. Charley may temporarily halt the slide in rates, but barring another major event, 1/1 renewals are likely to further reduce.On long-tail business, rates are beginning to stabilise, having increased heavily in recent years, but further reserving is still required for 'older' reinsurers. Further rating downgrades of major reinsurers may see rates begin to harden again.

Andrew HubbardPartner and head of Lloyd's insurance group, Mazars:There has been much talk as to whether the industry can maintain its nerve and discipline in the face of pressure on terms, conditions and rates following undoubtedly profitable years and we would expect this to continue in Monte Carlo, especially as underwriters and brokers commence renewal discussions.The continuing changes and increasing burden of regulation within the sector are also matters of concern and will no doubt be a subject of debate as companies seek to get to grips with the practical implications and looking to their advisers for help and guidance. The combined effect of these pressures on overall profitability will inevitably be a cause for concern. Consolidation within the sector, capital support and the implications of the new capital adequacy requirements are also likely to be popular topics of conversation.This is a major event in the reinsurance calendar ,where we are able to meet with clients, contacts and other professionals from all over the world. As a major player within the sector, the Monte Carlo Rendez-Vous is an important opportunity for us to network and exchange views on the key issues facing the industry, enabling us to keep up to date with the matters affecting our clients and therefore to provide them with focused, practical advice on current commercial issues affecting their businesses.

Ian Dilks, Chairman,European Insurance Group PricewaterhouseCoopers:The question of when the reinsurance cycle will really start to turn, how far it will turn and in which lines it will be most marked will be high on this year's agenda. We also expect the industry to debate whether there will be a return of more capacity to the casualty reinsurance market.The concentration of credit risk into a smaller number of A-rated players and the possible implications that this may have on commissions payable to placing brokers will also be on the minds of the industry.For those companies with books of business, the developments in bringing finality to those book of business in run-off and extracting value for the benefit of all stakeholders is also of increasing interest. This is also something very much on Pricewater-houseCoopers'agenda. Once again, PricewaterhouseCoopers will be hosting a number of events, including a breakfast briefing with XL Capital chairman Michael Esposito.We will also be releasing our annual London market survey, this year looking at capital, reinsurance and operating costs, three of the key operational drivers in today's fast-evolving market.We don't think that rates will soften as much as cedants want, given that reinsurers have become more sophisticated in their modelling and pricing in the last few years. Hurricane Charley will help property underwriters to some extent.