Reinsurers flock to Monte Carlo as market storm brews

Sat Sep 13, 2014 8:10am EDT
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By Jonathan Gould

MONACO (Reuters) - For a financial sector posting a double-digit rise in earnings and boasting large cash piles, reinsurers sure see a lot of storm clouds on the horizon.

That's because they are facing what many see as an unprecedented problem: an abundance of reinsurance supply coupled with a lack of demand from insurance company clients that is driving up competition among reinsurers and driving down prices for all of them.

The gloomy outlook has pressured the share prices of the world's top reinsurers this year and the frustration of normally staid industry executives - who gather this weekend at the Mediterranean resort of Monte Carlo for their annual jamboree - is palpable.

"I am disappointed, exasperated, and even rather appalled by what is happening in the market," said Nikolaus von Bomhard, chief executive of the world's biggest reinsurer, Munich Re.

"I've been in the business long enough to be able to say: this is bad news," he told a news conference last month.

Looking at reinsurers' current profits, things might seem fine.

The world's 31 top reinsurers - whose business is to help insurers pay big damage claims for disasters like hurricanes or earthquakes in exchange for part of the premium - posted a 12 percent rise in net income to $14 billion in the first six months of this year, compared with the same period last year, according to insurance broker Aon Benfield.

Unusually low payouts for natural catastrophes in recent years have also bolstered the bottom line, contributing to a rise in the amount of capital available for reinsurers to act as insurance companies to insurance companies - which Aon Benfield said increased by 6 percent to $570 billion at the end of June from the end of December.   Continued...

The logo of German Reinsurer Munich Re is pictured before the company's annual news conference in Munich March 20, 2014. REUTERS/Michaela Rehle