Reinsurance executives discuss market risks at Monte Carlo Rendez-vous

At the Rendez-vous event in Monte Carlo, reinsurance executives discussed market trends and risks. Munich Re management expressed caution regarding certain alternative capital solutions, specifically sidecars that focus heavily on generating high returns from the asset side. Executives Thomas Blunck and Stefan Golling noted that taking significant risks on both the insurance and investment sides of the balance sheet is not within their appetite, as asset underperformance could compromise the ability to pay claims.

Stefan Golling also highlighted potential deterioration in U.S. liability loss ratios and noted that some longer-tailed casualty sidecars featuring U.S. liability business may include automatic commutation clauses after five or seven years.

Separately, the reinsurance industry is seeing record levels of capital driven by retained earnings and inflows from catastrophe bonds and insurance-linked securities (ILS) funds. This surplus of capital, combined with a period of lower-than-average loss ratios, is shifting negotiating power toward primary insurers, potentially leading to lower prices and more generous contract terms for the 2027 renewal cycle.