Market consolidation and falling prices will continue for some time, last week’s Reinsurance Meeting in Baden-Baden was told.

Optimistic whispers of a turnaround at last month’s Reinsurance Rendezvous in Monte Carlo seem to have fallen by the wayside, as a more practical state of affairs was outlined in Germany.

The traditional gathering sees reinsurers thrash out strategies before the January 1 contract renewals.

Nick Frankland, CEO of Europe Middle East and Africa Operations at Guy Carpenter, which hosted a symposium at Baden-Baden, says capacity remains bountiful and buyers continue to enjoy choice.

“This will weigh on the discussions that take place during the coming week and we expect some interesting manoeuvres as reinsurers seek to hold or grow their share of signings,” he said.

“Indeed, the early signs are there may be greater savings available to buyers than were perhaps being envisaged at Monte Carlo, and the trend towards combining coverages and multi-year placements will undoubtedly continue.

“We don’t anticipate an early end to the latest wave of merger and acquisition (M&A) activity, nor the current pricing environment.”

CEO Pacific Tony Gallagher told insuranceNEWS.com.au the Australian market will benefit.

“There’s still a lot of capital out there,” he said. “There was talk of rates bottoming out but I don’t see it. The M&A activity will continue as well.

“These guys don’t want to go backwards, and in a competitive market it’s hard not to go backwards if you don’t do deals.

“It is good news for the domestic market because reinsurance costs for catastrophe will fall.

“I can’t see a turnaround in the near term, certainly not this year,” Mr Gallagher said.

XL Catlin Deputy Chairman Stephen Catlin believes it is important to have a strategic reason other than scale underpinning M&A.

Companies that see consolidation as inevitable should take the initiative, he told the symposium.

“If you believe consolidation is going to happen, why wouldn’t you get on the front foot, be proactive and choose your partner?”

Everest Re Chief Underwriting Officer John Doucette says consolidation is not the only response to changing market dynamics.

“Despite the promised benefits, the costs and risks of M&A indicate that it is not the panacea,” he said. “Global reinsurers are well positioned to build off their internal strengths with scale, diversification, and expense and capital efficiencies.”

The German spa town has a soothing ambience at this time of year – which is just as well, Lloyd’s Director of Performance Management and Baden-Baden veteran Tom Bolt says, because these are stressful times.

“I can’t think of another time in my career when there have been so many difficult issues present at once,” he said. “There’s excess capital, increasing broker concentration and reduced purchasing by the original insureds.

“It is the first soft market in my lifetime that has no meaningful investment income.

“While people made a little money in the first half of the year, I think they will give it back in the second half. Looking at published results, it’s going to be challenging.”