Hopes for a festive mood at the annual Monte Carlo Rendez-Vous de Septembre have been doubly dashed this year, with the event cancelled due to the coronavirus pandemic and reinsurers facing tough times despite long-awaited rising rates.

The traditional annual gathering in Monaco, which typically attracts nearly 3000 industry professionals and is one of the most anticipated events on the insurance calendar, would have been taking place this week for the 64th time before it was cancelled due to COVID-19.

Meetings at the Mediterranean principality’s cafes and bars are not happening, and there are no diversions around poker tables or roulette wheels. But there are plenty of reports and virtual briefings on the state of the industry circulating.

Assessments highlight firming prices, while noting COVID-19 has thrown up new challenges for claims and investment returns, as the sector also faces rising pressures from more common catastrophe and casualty risks.

Moody’s Investor Services last week downgraded its reinsurance outlook to negative from stable, while S&P Global Ratings affirmed its negative view after assessing the sector again won’t earn its cost of capital this year.

“Entering 2020, the expectations were that this year the reinsurance caravan was set on the right route and reinsurers would improve their results,” S&P says. “However, COVID-19 losses and the ensuing market volatility became the straw that broke the camel’s back.”

The extent to which the coronavirus pandemic will affect reinsurance remains an unknown, particularly with the pandemic resurgent in some countries and the level of claims in certain lines unclear. But it is contributing to the upward pricing trend.

“Even before the COVID-19 crisis, most major markets were operating at below-average profitability,” Swiss Re CEO Reinsurance Moses Ojeisekhoba said. “To be able to address the growing need for insurance protection in a sustainable way, further price increases across all lines of business are clearly needed.”

S&P says the Top 20 global reinsurers have reported about $US12 billion ($16.5 billion) in COVID-19 losses so far this year, and it expects that top cohort to generate a combined operating ratio of 103-108% this year.

The ratings firm says if insured catastrophe losses this year reach about $US60-70 billion ($82-96 billion), which is an average level, at least eight of the Top 20 could suffer a “capital event”.

“The investment impact of COVID-19, combined with pandemic-linked losses, have eroded the Top 20 global reinsurers’ combined catastrophe budget and earnings buffer for a severe catastrophe event in 2020 to about $US14 billion ($19.2 billion), from about $US32 billion ($44 billion),” it says.

Nevertheless, AM Best maintains a stable outlook for the sector as challenges arising from COVID-19 and offsetting positive factors create an “equilibrium of sorts”. It says pandemic-related challenges have been below stress-tested thresholds.

Reinsurance broker Guy Carpenter points to a firmer outlook for catastrophe and casualty pricing for the January 2021 renewals and highlights the industry’s ability to access to additional capital.

Global Head of Distribution Lara Mowery told a media briefing last week that in the property arena economic uncertainty has generated a “heightened cautiousness to deploy capacity unless pricing and other terms met specific thresholds”, and sees increased differentiation in renewals.

“There is an expectation that renewals will be more complicated and that negotiations will take longer than the norm,” she said.

In casualty, hardening in the overall market is expected with limit and attachment point strategies in place following corrective action in response to greater claims frequency and severity in recent years.

GC Securities President Shiv Kumar says momentum is strong in the catastrophe bond market, with more reinsurers accessing it as a substitute for retrocessional capacity, while reinsurer capital raises have seen strong equity participation.

“We believe strongly that alternative capital will continue to grow over the long term,” he said. “The reinsurance sector provides diversification and yield, and both are in great demand by pension and sovereign wealth funds. We are already seeing the formation of new funds by highly credible management teams.”

Guy Carpenter Chairman David Priebe offers a positive perspective, noting the reinsurance industry has a strong track record of responding to periods of change.

“Putting capital to work to create new coverages and meet evolving demands will be crucial in securing the reinsurance sector’s long-term relevance,” he said. “It is important to remember that transformative events have led to product innovation many times before We expect a similar playbook this time round.”

There will be plenty to consider over the next 12 months when it comes to pricing, results, the industry’s pandemic response and the continuing emergence of climate change and cyber crime as major risks. The only certainty is that many people are already looking forward to returning to Monte Carlo next year.