Monte Carlo RVS preview (Part 2): Specialty risk at the forefront of conversations

The specialty market often takes a back seat at Monte Carlo. Not because it’s not important – 1.1 is still a significant renewal date for the specialty market – but rather because there are several other times throughout the year when deals get done.

However, a number of high-profile events this year – including the Francis Scott Key Bridge collapse, the CrowdStrike IT outage, and geopolitical conflicts and civil unrest in several countries – have made sure that specialty risk will be a key focus of discussions.

In part two of The Insurer TV’s Monte Carlo Preview, deputy news editor Ryan Hewlett, Cyber Risk Insurer editor Michael Loney and North American associate editor Christopher Munro discuss the key conversation points likely to arise around some of the specialty classes at Monte Carlo.

Michael believes cyber will likely remain a buyer’s market when it comes to reinsurance.

"The cyber market is an exciting, growing space, and over the past year, reinsurers have significantly ramped up their interest. Supply is strong. According to reports from the January, April and July renewals, buyers are securing improved terms," he explained.

He noted that reinsurers are eager to expand their market share in the sector because the underlying business remains highly profitable, especially in the US.

"Supply from reinsurers is strong, and they are hungry for this business. Much of that is because the underlying business is highly profitable right now – cyber insurers, at least in the US, have been posting loss ratios in the 40s, which makes it very attractive for reinsurers," he added.

Michael also anticipated that discussions at Monte Carlo would touch on the ongoing softness of the market, particularly in light of high-profile incidents such as the CrowdStrike outage. He suggested that if these events begin to significantly impact loss ratios, they could shift momentum in the underlying business, driving up reinsurance rates.

“If losses from incidents like CrowdStrike start to filter through and affect loss ratios, that could create pressure for rate increases on the primary insurance side.

“Further down the chain, as these losses impact the reinsurance market, we could see similar upward pressure on reinsurance rates as well,” he explained.

Marine reinsurance market reacting to major losses

The marine market has faced significant losses this year, in particular the Baltimore bridge collapse and the Lürssen shipyard fire, which Christopher expects will dominate discussions in Monte Carlo.

"There have been two notable losses this year. The Francis Scott Key Bridge collapse in Baltimore is being talked about as potentially the largest marine insurance loss on record, surpassing even the Costa Concordia disaster. Then there's the Lürssen shipyard fire," Christopher explained.

He noted that the Baltimore bridge loss is being widely felt by P&I clubs, which could lead to tough conversations at Monte Carlo, with current estimates suggesting marine liability reinsurance rates could rise by 10 to 15 percent.

"A loss of that magnitude, given the nature of the incident, is expected to heavily impact the P&I clubs and, ultimately, the P&I groups’ XoL contract with the International Group,” he said.

"As a result, the marine liability reinsurance market – the reinsurers that support that giant marine reinsurance contract for the International Group – will likely push for price increases in response to the significant loss.”

Political risk and violence market eyeing US transition of power

Hidden exposure to strikes, riots and civil commotion within property policies was one of the breakout topics at last year's Rendez-Vous, and Ryan believes political risk violence risks will once again be a key point of discussion, especially after recent unrest in the UK and the possibility of an unpeaceful transition of power in the US.

“In the UK, we've obviously had recent riots. That does play into the overall loss picture. Also, it just creates a more uncertain, more risky environment, not just for insurers, not just for reinsurers, but also for their policyholders and their investors,” said Ryan.

“Then, of course, eyes will still be thinking about the US election towards the end of the year. I think it does play on the industry’s mind.”

Watch Part 2 of the RVS Monte Carlo Preview to learn more about how events that have impacted the specialty market will play a role during 1.1.25 discussions.