Mid-September saw the great and good of the international reinsurance market converge on the Cote D’Azur for the annual Monte Carlo Reinsurance Rendez Vous, the greatest networking event of the year and one where the champagne industry receives a significant boost to its yearly turnover.

Yours truly was there, and I thought it might be interesting to reflect on how what was being said might impact the UK market going into 2014.  I know, I know, you’re thinking- what does, US catastrophe insurance and the Insurance Linked Securities (ILS) market really have to do with me?

Well, as you know, our market is far less discrete than one might think. The reality is, and has been for some time, that capacity allocation by the major European cedants on a property programme in Thailand can and will affect their decision with regard to pricing in the UK market.

Why?  Because capacity allocation isn’t a bottomless pit.  There’s only so much capacity to go around and the decision to target certain markets is a complex one governed by a combination of opportunities elsewhere, reinsurance pricing, the availability of alternative capital, and regulatory requirements both on a national and European level.

And from what we gather from the Rendez Vous, this could turn out to be a very interesting time indeed for the UK market, thanks in no small part to the superabundance of alternative capital at the moment, a trend which it was universally agreed will have a profound effect on the wider (re)insurance market for the foreseeable future- or at least until interest rates rise again and the bubble deflates.

Put simply, the reinsurance market is awash with capital at the moment and it isn’t going away in a hurry. The ILS market is hovering up much of the US property cat market at the moment, but this will affect other markets: at forthcoming renewals there should be more reinsurance capacity available to meet the needs of the UK Commercial, and even personal lines, markets.

This is potentially great news for brokers and more importantly their clients, as it means prices can and should be very competitive for some time to come.  And if they aren’t ask the insurers why.  After all, they should now see their reinsurance programmes significantly drop in price – up to 10 percent if the rumours are true.  If they aren’t passing that saving on, there’s a mismatch there.

Just a thought.