Is the reinsurance pricing cycle close to the bottom?

That is one of the most discussed questions at the Monte Carlo Rendez-vous event in Monte Carlo, where scores of reinsurance executives, including many from Bermuda, are meeting this week for their annual get-together at which discussions over 2016 pricing traditionally get under way.

In an interview with AM Best, Albert Benchimol, the chief executive officer of Bermuda-based Axis Capital, said: “I believe the theme for this year’s Rendez-vous is the search for the inflection point.

“We’ve had a couple of very difficult years in the reinsurance industry with regard to pricing. It started in catastrophe. It expanded into professional lines and casualty.

“I think we all believe that we are approaching the floor but I think that the industry is looking to see where we are in terms of our position vis-à-vis that floor.”

A combination of factors have put downward pressure on pricing in recent years. These include the rush of third-party capital rushing ibnto the reinsurance space in the form of insurance-linked securities such as catastrophe bonds, insurers holding onto more risk so buying less reinsurance, and a relatively quiet period for major loss events.

However, brokers have noted a slowdDennis Kessler, chairman and CEO of European reinsurance giant Scor, can see higher rates in the industry’s future.

“Even after one day lots of people talk about the let’s say stabilisation of the market, two or three years of softening maybe will come to an end,” Mr Kessler said.

“Maybe the market will stabilise and eventually rates will pick up next year. That’s what we hear. I believe it’s true. Interest rates are still very low to compensate financial returns by taking the profitability.

“In time we believe that the price levels that we’ve reached today we cannot go below. So many players in the reinsurance industry, on the supply side, on the reinsurance side say now the time is right for the market to turn and go up after years of lots of reserve releases by many of us.

“Therefore it’s not possible to go forever doing reserve releases. So yes, maybe the time is right for market stabilisation.”

One executive was banking on superstition.

“I was at a meeting this afternoon and I was told that tradition holds that when it rains during the Monte Carlo meeting, that the market will turn,” Tad Montross, chairman and CEO of General Re, told AM Best. “So I’m hoping it rains all week long.”

Kathleen Faries, CEO of Bermuda-based Tokio Solution Management, said she believed the theme of this year’s Rendez-vous was connected to the changes within the industry itself.

“I think it’s really about evolving,” Ms Faries said. “All the traditional reinsurers, whether it’s merging or new technology or being more efficient, even on the brokerage side. It’s really about how is everybody going to react to really what’s a challenging market.”

The wave of merger and acquisition activity — and whether there is more to come — is another popular topic of discussion.

“We’ve seen a lot in the reinsurance space. We’ve seen it a lot in the insurance space also,” Kurt Karl, chief economist at Swiss Re, said.

“These come in waves. We think we’re in the third wave of the last 40 years. They’ll be increasing. There is plenty of capital in the markets to purchase other companies.

“Valuations are not so rich that they can’t be afforded. We think there’s a lot of pressure, particularly on the small to medium size players, for them to get larger and more diversified.”