"It feels a bit like Groundhog Day", said Alex Moczarski, President and CEO of Guy Carpenter and Chairman of MMC International, as he kicked off this year's Monte Carlo Rendez-Vous at the Guy Carpenter presentation in the Hotel de Paris. "I'm in the same room; I even found a cufflink that I left behind," he joked.
He noted that prices had again been falling significantly, and that "even in the aviation sector, with this year's prominent and tragic losses, abundant capacity is expected to mute upward repricing."
He said that against a tough background Guy Carpenter "continues to deliver excellent results".
In the US, "Guy Carpenter's largest geography, (income) was effectively flat. This was a good achievement given heavy rate decreases, especuially in the catastrophe segment."
David Priebe, vice chairman, said that "the market continues to be challenging, essentially a continuation of the themes that have dominated us for the past two or three years – in the US, excess capacity, the influence of alternative markets, and lower loss activity all continue to drive pricing down".
He said that, as the industry headed into the June and July renewals there was little doubt that prices would continue to fall. But the size of the decrease was less clear. Priebe observed that many programmes saw substantial reductions in 2013, with the double-digit decreases mid-year in 2013 being partially offset by firmer conditions at the start of the year. That situation was not repeated in 2014, with falls at the start of 2014 as well.
There was about a full-year decrease of about 7% cat rate online last year, while the year to date 2014 for the same product has seen a fall of about 17%.
Priebe noted that prices were not the only things that changed; the range of products offered and multi-year options "continued to give companies the opportunity to better arrange their cover according to their needs."
This meant that companies often took advantage of the fall in the core pricing to add to the cover around the edges.
"Yet, while the amount of cat limit bought overall increased, the actual dollars paid in the market decreased as savings exceeded new spending".
Priebe also noted that the increased coverage obtianed was insufficient to mop up the excess capacity, with lower prices outweighing higher coverage levels.
Nick Frankland, Guy Carpenter chief executive EMEA, noted that theregion, which should on the face of it present many opportunities, was in fact "a particular challenge to growing our business". It differed from the US, Asia-Pacific or global specialties in that it was less reactive to external factors such as catastrophes and excess capacity, and there was a continued dominance of the larger professional reinsurers, the big players.
Although their direct share of the world reinsurance market had decreased steadily over the years, their combined position in EMEA remained strong in every segment.
Frankland said that in recent years Guy Carpenter had experienced "increased collaboration with the major reinsurers", to the extent that its "top five" achieved something in the region of 70% overall market share.
Frankland also observed the emergence of new reinsurance hubs, referring specifically to Zurich, "making a trip there as important as flying to Bermuda". He also referred to Dubai, where the arrival of the major brokers, plus many European reinsurers, and the imminent addition of Lloyd's, established it as a hub. Also, bringing people together into a single market had created a real feel of a proper marketplace.
Finally James Nash, CEO of Asia-Pacific, said that his region offered great prospects, as well as challenges. Nash noted that Asia Pacific in 2013 was home to 64% of the world's population but only 30% of global earned income. "
Moczarski concluded by telling a tale of innovation. The cotton markets in the US of more than a century ago had a need for a particular type of cover that did not then exist. From that need, Excess of Loss cover emerged. He said that similar opportunities existed today.