News Analysis - The market divide sees 'Old Europe' come into its own.

(From Reinsurance)

So who won and who lost the battle of this year's renewal season? This is the inevitable question that comes up as the last of the renewal briefings draws to a close and the cover notes go in the post.

This year the answer should come as no surprise to anyone - who always wins in a tough market? Munich Re and Swiss Re, of course. But this time the victory is all the sweeter because it is that much more pronounced. Market participants who have made statements - and my own sources all confirm that the world's number one and number two were right in the thick of it this renewal season - and away from the Gulf of Mexico, they were increasing market share at the expense of some of their younger and hitherto more nimble rivals.

How is this? The cost of capital is having the most impact. Aon has estimated that the overall cost of capital for well-diversified reinsurers is probably up by 10%-15% - and the cost of capital for mono-line catastrophe players is up by a stomach-churning 50%. And who are the best-diversified players, most likely to suffer the smallest increases in overall capital cost? Silly question! It's our old friends again.

So, the big two have been handed the means to reassert themselves - but merely having the capability is of no consequence if you don't have the will to press your market advantage home. Well, this time we are seeing an aggressive fight back from the big guys on an unprecedented scale.

This year the market divided into those that sought to increase rates across the board and those that were able to look at rates on a case-by-case and territory-by-territory basis.

The result? Well, we all knew that the Gulf of Mexico marine energy rulebook was going to be completely rewritten (see the interview with Nick Bonnar of Aspen Re on page 18 for full details) and that US catastrophe-exposed property was bound to get a re-rating, but we also knew that there was nothing particularly wrong with technical prices in classes or territories anywhere else in the world.