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Groundhog day

Dear Friend,

Greetings from Monte Carlo, where two-and-a-half thousand people are doing exactly the same things they did last year — and the year before, and the year before that.

All is well in the world, and the meetings are a great contrarian indicator of the state of the market. All you have to do is assume the opposite of the developing consensus view, and you can’t go far wrong.

For example, in last year’s post-Katrina environment, the wishful thinking of reinsurers produced an amazing contradictory theory: “prices are going through the roof, but there will be no class of 2005”.

In this business, if you ask someone’s opinion, people say what they want to happen — and not necessarily what they really think will happen. What the phrase actually meant was, “I’m going to be hard hit, and my prices are going to have go up, but I don’t want there to be a pesky band of start-ups capitalising on my bad fortune.”

No one likes competition, so no one goes around predicting it. But ten start-ups and goodness knows how many sidecars, catastrophe bonds and exotic structured deals later, and we know to take what everyone says with a pinch of salt.

Well, this year, ask anyone what’s happening and it’s all about stability. According to everyone here, nothing is happening. Ratings are stable; capacity is stable; apart from the burn-out, pricing is stabilising; and client expectations are stable. No news, nothing to report. Everything is peachy.

What a load of rubbish! If nothing is happening, what are we doing here, and why is everyone running around so frenziedly?

If people are saying that the market is stable, it is because the market is anything but.
What they really mean is that they desperately want everything to return to stability.

Here is what’s happening:

The retro crunch is driving more start-up activity — there will be plenty of new players on hand come year-end. Their capacity is needed and welcome, and if the wind doesn’t blow, these guys are going to make an absolute fortune.

Europe is going to go soft this renewal. Reading between the lines, we are being psychologically prepared for it.

Everyone is pointing to how underlying direct European prices are softening — coded language for “we are under severe pressure to drop prices this renewal”. Brokers are also noting massive interest from Bermudians looking to diversify. Since there is no shortage of capacity in Europe, this must come at the expense of a cheaper deal.

But what seals the deal is that other classic justification for price reductions: “Terms and conditions are holding up well”, which really means: “Okay, prices are going to come down, but at least terms and conditions are holding up okay for now — we’ll probably be easing them next year.”

In the square outside the Café de Paris, the sun is shining. A tall Bermudian squints hopefully at random passers by, secretly dreading that he has been stood up by his blind date. The guy next to him smiles suggestively, with a look that says, “please be my three o’clock appointment.” It’s a bit stressful.

A middle-aged lady turns visibly pale as it dawns on her that her three o’clock is long gone. Her round head drops as she gazes forlornly into her Blackberry, praying for divine intervention.

A short, red-faced broker curses his PA for lack of organisation — “Why the hell don’t I have this guy’s number in my agenda?” His companion is calmer, accepting his own responsibility for small failures.

In front of me a mobile phone runs out of batteries at a bad moment. “I left my charger at home,” a man explains to no-one in particular with limp resignation and a newly acquired Gallic shrug.

A lawyer stands perplexed. I imagine what he is thinking: “Now, was it the Café de Paris or the Hotel de Paris? And whose idea was it to give the two main meeting places right opposite each other almost identical names?”

It’s not just the unloved singletons who are having a hard time. Other pairings have already met their partner for the next half hour, but are now having trouble finding anywhere to sit.

Everything is just the way it should be. Nothing is happening indeed. Nothing ever does!

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