The great and the good of the insurance and reinsurance industry are currently meeting in Monte Carlo for the pow-wow that is the annual Reinsurance Rendezvous, and pundits are tipping a calmer event than 2011 with more stable market conditions and fewer catastrophes to occupy market minds.

Rather than re-examining the catastrophes of 2011, this time the results of last year – rate rises and changes to insurance and reinsurance modelling – are likely to be of more interest in Monte Carlo.

To date, 2012 has been relatively benign, with the only billion dollar-plus losses so far this year involving US crop reinsurance following the record US drought and the recent impact of Hurricane Isaac. But despite a modest hardening in rates on the back of last year’s catastrophes, several negative factors remain.

The global economy is still in the doldrums, with little light at the end of the tunnel and demand for reinsurance remaining flat. Capital is sure to be a talking point, with several reports out ahead of Reinsurance Rendezvous trumpeting record levels of reinsurance capital in the market, with capital replenished after 2011’s payouts and new entrants into the market.

The entry of new capital is a trend driven out of the low interest rate environment, with few opportunities globally for attracting a decent return on investment creating a surge of interest in the high risk/high return property catastrophe market.

With an abundance of capital competing for the same risks, some reinsurers have noted that the new entrants and non-traditional forms of reinsurance are no longer confining themselves to the higher layers of cat cover but are now looking to fill their coffers by getting involved in lower levels of cover.

This has led traditional players to remind brokers and cedants – particularly to those who had claims paid out in 2011 – about the importance of relationships and loyalty.

Some of the bar room talk in Monte Carlo will, no doubt, include subtle warnings that those who switch out of traditional reinsurance may not be so warmly welcomed when they return to the market, as they inevitably must.

Jostling for position aside, the coupling of excess capital and a year of benign market losses will drive a bigger debate about whether the recent rate rises can be maintained. With reinsurers also suffering from impaired investment returns in the low interest rate environment, they need to maintain pricing discipline to avoid damaging their balance sheets.

But while reinsurers will certainly be beating the drum for higher rates and talking the market up – especially in non-cat affected classes – brokers and cedants may be unwilling to play along to that tune.

Which side prevails may not become clear until the same parties sit down in the German spa town of Baden-Baden in another month to nut out the January 1 renewal deals.