A Break in the Clouds.

Reinsurers gathering in Monte Carlo next month hope to hear good news after late-season storms turned 1999 into an unprofitable year.

Improvement in the reinsurance market and price firming will likely be the hot topics at this year's Rendez-Vous de Septembre in Monte Carlo.

The annual conference--coming on the heels of the worst year for reinsurers in 15 years--draws a congregation of who's who in reinsurance--insurers, reinsurers, retrocessionaires, brokers and consultants.

Clem Booth, member of the board of management for Munich Re, said he hoped to hear about the extent of the improvements in global reinsurance. "Monte Carlo is one of the few occasions when the reinsurers and retrocessionaires get together and talk about the market," Booth said. "For me, the key thing I need to find out is how is the market turnaround. I know what I'm doing with my firm, but I like to find out what other companies are doing, what the trends are."

Roughly 2,500 people from about 80 countries are expected to attend the conference, where private tete-a-tetes between conference attendees can be more important that the formal presentations.

Last year, representatives of about 545 insurance companies attended, along with 142 consultant companies and 224 brokers. French and U.. companies dominate the lineup, and the United States ranks as No. 3 in attendance, followed by other European nations such as Germany, Switzerland and Italy, said Thierry Auger, general secretary of the conference's organizing committee.

The conference was started in 1957 by the chairman of Assurances Generales de France and has grown to become the annual must-attend event for the reinsurance industry. Monte Carlo, the capital of the tiny city-state of Monaco, is nestled between the Southern Alps and the Mediterranean along the French Riviera, just a few kilometers from the Italian Riviera. It is fitting that a town known for car racing and high-stakes gambling has become the epicenter of reinsurance leaders, who are accustomed to measuring and taking risk.

Monte Carlo is known for its warm, sunny weather, but the market's poor performance in 1999 may be a dark cloud over this year's conference.

A survey showed that 32 U.S. property/casualty reinsurers wrote $21.2 billion in premiums during 1999, a 12.2% increase over 1998. But those companies posted an underwriting loss of $2.8 billion, according to the Reinsurance Association of America. A.M. Best Co. said the industry posted a combined ratio of 114.8 for the year, more than 11 points higher than in 1998. The industry was hit hardest in the fourth quarter, when it posted a combined ratio of 125.8 following several major storms in Europe. A combined ratio of more than 100 represents an underwriting loss.

Because the storms hit in late December, companies didn't have time to adjust their rates for the January renewals, said Hoyt Wood, executive vice president of ERG Group.

"We went to Monte Carlo last year with a message that things had to be different, that we would be seeking better terms at renewal," Wood said. At that time, the company met with a great deal of resistance from customers and intermediaries. "They told us, 'You're ahead of time, we don't see any hardening of the market,'" he said.

But that was before the storms-- Lothar and Martin--struck, leaving an estimated $9 billion in insured damage industrywide.

"This year, we expect it to be entirely different," Wood said. "We think there will be a lot of discussion about catastrophe pricing. The industry is in horrible shape. We knew pricing was going downward, and it was just a matter of time before it improves...that time has come."

ERG is prepared to walk away from unprofitable business, even if it means having a smaller piece of the market in the future. "If we are smaller in 2001, that won't bother us at all," Wood said.

Wood said he didn't expect in-depth discussions on pricing at Rendez-Vous--small groups of attendees will spend only a half-hour to an hour together before shifting tables to meet new people--but he said "it will set the tone for the next renewal season."

Ralph Bergne, managing director of Guy Carpenter & Co., agreed that pricing will be an important issue at the conference. "Reinsurers have to be given a chance to make money," Bergne said.

But reinsurers should not get greedy, he said. "If pricing hardens too much, then it will be a fantastic opportunity for banks and other financial-services companies," Bergne said.

Eric Paire, chief executive officer of Axa Re Finance S.A., Paris, said the French market, where the December storms hit primary insurers the hardest, show the fastest signs of reinsurance prices firming.

"Not only did many direct insurance companies get hit, but many realized they weren't buying enough coverage," Paire said. "The need for more capacity may be a question that other insurance companies are asking."

Munich Re's Booth is hoping for an update on the workers' compensation reinsurance business, which all but dried up after problems with a reinsurance pool managed by the former Unicover Managers Inc.

"We're not involved, but we like to keep our finger on the pulse," Booth said. "We don't want to take pleasure at someone else's discomfort, but we like to learn from it."

The availability of workers' comp reinsurance and retrocessional coverage became extremely limited this year following industrywide disputes over workers' comp business generated through a pool run by Unicover, now known as Cragwood Managers LLC. The underpriced workers' comp business generated gross losses of more than $1 billion industrywide.

Others said the Unicover pool would not be an issue at Rendez-Vous, since it has been resolved.

As for formal discussions, Hugo Andersen, chairman and CEO of Tryg Baltica International Insurance Co., will host a debate titled "What Is the Winning Strategy?" Also, Yves Mansion, chairman of Non Life Insurance Plenary Commission FFSA, will host a roundtable discussion on "The U.., Germany, France: The Evolution and Trends of the Non-Life Markets."