The Reinsurance Rendezvous in Monte Carlo has wrapped up for another year, with major reinsurers talking the market up before the crucial January 1 renewal period.

Swiss Re forecasts “moderately increasing” reinsurance prices, Munich Re expects “prices, terms and conditions will largely remain stable” and Hannover Re anticipates “further price increases” at the renewals.

With no major catastrophes so far this year, reinsurers have focused on the economic outlook, the low interest rate environment and solvency capital requirements as drivers for price rises.

Munich Re warns of a challenging year ahead despite the market’s strong capital base.

“More than ever our industry faces the challenge of achieving stable earnings in its core business and further reducing its dependency on the investment result,” CEO of Reinsurance Torsten Jeworrek said.

“The key question will be how quickly and to what extent insurers and reinsurers will succeed in factoring the low interest rate level into their price calculations.”

Swiss Re is singing from a similar hymn sheet. “Upwards pressure on prices for (re)insurance is likely to rise as low interest rates continue to depress running yields and drag return-on-equity levels down, significant reserve releases will not go on forever and solvency rules are tightening all over the world,” CEO of Reinsurance Christian Mumenthaler said.

Unsurprisingly, Australia and New Zealand are tipped to continue paying for last year’s events.

Hannover Re says it booked “vigorous rate increases” in Australia and NZ at the July 1 renewals, especially for loss-impacted programs. “The positive price trend should be sustained and reinsurance prices can be expected to at least remain stable.”

Prices in Japan are expected to hold steady or rise, while the Thai floods have signalled the potential for large losses in some Asian countries, with prices rising across the region.

But Hannover Re says the momentum of rate increases “is slowly flagging, not least owing to a moderate major loss burden in 2012. Nevertheless, it is to be expected that prices for natural catastrophes will remain on a high level going forward.”

Munich Re expects the improvement in primary insurance prices in the US – plus those in motor liability in some parts of Europe – to have a positive impact on reinsurance rates. It says further rate adjustments for windstorm cover in Europe may result from new models lifting claims expectations.

Swiss Re anticipates increased demand for natural catastrophe capacity, frequency protection cover and capital relief transactions at the renewals, plus higher demand for external run-off transactions.

In the absence of natural catastrophes, liability pricing gained increased attention in Monte Carlo.

Munich Re says prices will stabilise, with a trend towards slight increases, particularly in the long-tail classes, because the low interest rate environment is “squeezing future profitability”.

Hannover Re says the move towards a hardening market set in some quarters ago, particularly in the US. “We are now seeing the first positive signs – including in the United States – of an improved climate overall in the casualty lines,” CEO Ulrich Wallin said.

Before the rendezvous, Swiss Re said reserve releases from old underwriting years were dwindling and action on liability rates would be needed in the next six to 12 months. But reinsurers concede primary liability rates must continue to rise for reinsurance rates to follow suit.

With Monte Carlo over, the posturing and positioning in the countdown to January 1 has certainly begun. But, as Hannover Re says, the year is far from over.

If the last few months of 2012 bring any major catastrophes, all bets could be off.