Baden-Baden Preview - Food for thought.

(From Reinsurance)

Byline: Eric Alexander.

Once again it is time to head to Baden-Baden for the latest round in the reinsurance renewal process. While all renewal negotiations ultimately revolve around the price of buying cover, and this year will be no different in that respect, there are also other important issues likely to occupy the minds of those attending.

Foremost among these will be the matter of security of reinsurers. An almost universal downgrading of this sector by the rating agencies has left the reinsurance market looking far less solid than before and made the task of choosing the right reinsurer for stability and continuity that much harder for ceding companies.

Considering the much lighter toll of losses during 2002 it is surprising that so many reinsurers are reporting such poor results. It seems they are still making good the deficiencies of the last five to 10 years and are not able to fully enjoy the improved conditions that now exist.

Against this background Russell Merrett, treaty underwriter of Hiscox's Lloyd's syndicate 33, believes that the forthcoming renewal season is really just going to be about price. He said: "I am feeling more comfortable that any softening tendencies are going to be arrested by the fact that the world's major reinsurers have problems to deal with. Whereas some might have thought that we were looking at a softening market I really think there is going to be enormous resistance to that. I am more optimistic now than I was even a month ago; everyone seems to have a different issue that is going to keep them focused on the need not to give up margin at this point."

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