The end of the year is usually a frenzy with the 1/1 renewals looming. This year the frenzy seems at a fever pitch because of the downward premium pressure on reinsurance rates and the increasing pushback from reinsurance buyers. Reinsurance brokers, who sometimes seem to serve as the canaries in the coal mine, have noticed this pushback. 

Aon Benfield has an initiative to broaden terms on property cat placements initially targeted seven A+ rated carriers and though Aon says that the "new" terms would make traditional reinsurance more competitive with ILS coverage a number of large reinsurers have declined to change.

When you add to the mix the burgeoning strength of the ILS market --that shows absolutely no sign of letting up --the traditional reinsurance market seems to be experiencing undue tension at year's end.

As if all of this is not enough "news" to digest let's throw in; the return of Grahame Chilton; the naming of Inga Beale to succeed Richard Ward and the reappearance of Brian Duperreault in Bermuda and one comes suddenly close to a news "overload" threshold.  What next?

                                                                       Byrne

As we were wrapping up this issue we learned that Mark Byrne is back in the game with his Haverford Group having made a sizable investment in the Lloyd's syndicate Sportscover 3334.  According to press reports Byrne is understood to have concluded an agreement which would ultimately permit him to obtain control of the syndicate in the future. As readers of this publication know Mark Byrne has been interested in acquiring a Lloyd's platform for years.

There are still a few hours left in 2013.  Who else will reappear? What more will happen?  Let's look at the details before we start predicting.

Inga Beale, formerly the CEO of Canopius and Zurich Insurance, was named to succeed Richard Ward as CEO of Lloyd's. By last week rumors were circulating around the London market about the possibility of the first woman CEO of Lloyd's. On December 13th the rumors became a reality and Ms. Beale is readying her office on the 12th floor at One Lime Street.

Richard Ward leaves after nearly seven event filled years to become the chairman of Brit Insurance. It's hard to be the CEO of any group that has so many constituencies to please and be universally popular. Let's face it, at Lloyd's between the syndicates, the giant markets outside Lloyd's, the brokers, the clients represented by the brokers, the innumerable binder coverholders, the EU in Brussels, UK regulators, global national insurance authorities, the stake in Xchanging Insurance Services, preserving the Central Fund, measuring the market performance of members as well as dealing with the hundreds of rank and file Lloyd's employees worldwide, it does seem to be a pretty thankless job.

                                                                        Ward

We've always been Richard Ward fans and think he did a better job than most people credit him for. He emerges after the storm of the 2008 global recession and the 2011 annual claim losses, which set a record, with Lloyd's possessing an A+ rating. The inroads Lloyd's made during his time into South America and Asia will be paying dividends for years.

There were also a considerably larger number of brokers around back then and when you're a broker market like Lloyd's that number is real important. Lloyd's thrived when Ward was CEO. Was it because of Ward or, as some say, in spite of Ward? Who can say but we remember a quote Bill Clinton used to use when opponents scoffed that the US economic growth of the 1990s would have occurred even without him. Clinton would bring up an old line from an anecdote told by a farmer. He would say "If you see a turtle sitting on top of a fence post, it didn't get there by accident." We'll leave it at that on judging Richard Ward's tenure.

Now Inga Beale steps into the role. For all the talk about her being "the first woman to be the Lloyd's CEO" one does have to recognize that it is, unfortunately, a really big deal. Any visitor to Lloyd's would recognize in an instant that it's a long overdue move. The market became coed long ago and Beale's appointment, while a clear signal that Lloyd's has recognized so called "gender reality", is clearly an effort by the Lloyd's Council to place the best person in the job. We wish her well --her success will be to the benefit of us all.

The announcement that Grahame Chilton is returning to set up and expand the reinsurance broking operations of Arthur J. Gallagher UK, by establishing a joint venture called Capsicum Re, is very interesting. Although the news broke just before the holiday season began in earnest it hardly seems to have been digested yet by the market.

Remember who Chilton is.  After the tragic death of Matthew Harding in 1996 it was Chilton who pushed Benfield to acquire Greig Fester, Bates Turner and EW Blanch before finally taking the company public. And it was Chilton who engineered the sale of Benfield to Aon in 2008 for $1.43 billion.

Since then Chilton, and his long time associate Rupert Swallow, seem to have been involved primarily in Formula 1 racing through the Capsicum Private Office set up to manage the interests of the Chilton family. Anyone who follows the sport knows that the British racecar driver Max Chilton is Grahame Chilton's son and that the father is a rabid supporter and sponsor of the sport.

                                                                   Swallow

Now he is back --as is Swallow who was a long-time broker with Grieg Fester, Benfield and Aon -- and they are firmly housed within the structure of AJG, one of the US's biggest brokers.  Make no mistake about it. Chilton's return means that out at AJG Headquarters in Itasca, Illinois a careful calculation has signaled that there is money to be made in reinsurance broking. Chilton apparently feels the same way. If you think back to how far companies like Tiger Risk have come in only 5 years  imagine how far Chilton could come endowed with all the advantages that AJG can provide.

Remember that AJG processes a huge amount of commercial business that could and does end up in the reinsurance market. This could mean that we will soon see the likes of Chilton and Swallow extolling the virtues of choice offered by smaller, more specialized brokers in comparison to the Big Three.

As far as Brian Duperreault is concerned his Hamilton Re entity has already been granted an A- rating by A.M. Best. Most observers believe that Duperreault and his underwriters plan to follow the successful model of Third Point Re and plan to grow by reinsuring risk underwritten by hedge fund investors. Given that several of Hamilton's investors are hedge funds this seems to be a logical idea and it seems that Duperreault, like Third Point's John Berger, have figured out the best hybrid yet to match capital market investors with professional underwriting.

Watch this space...Karl is alluding to many studies predicting an explosion in the growth of cities during this century especially in the developing world. According to the UN "Asia in particular, is projected to see its urban population increase by 1.4 billion, Africa by 0.9 billion and Latin America and the Caribbean by 0.2 billion by 2050. Population growth is therefore becoming largely an urban phenomenon concentrated in the developing world."

We won't discuss the problems such a massive increase in the number of global city dwellers will present, such as scarcity of rural population to grow food or the near certain disastrous infrastructure problems endemic to nearly all Third World "mega-cities", but you need to appreciate what people like Karl see ahead.

Ultimately, one of the building blocks of any urban growth is insurance. Apartment buildings, train stations, airports, office complexes, water treatment facilities and power generation plants all will require some type of financing. Financing means that the lender will want to ensure that there is insurance in place before the first shovel is turned.  This is the big piñata in the developing countries and it is the one that has everyone's attention.

Of course there will be a corresponding increase in personal lines coverage as populations gain economic affluence and seek to protect their own assets but that growth, with all due respect to the carting business, is in fact the cart after the horse in this case. The infrastructure development needs to occur before rises in individual incomes can be realized.

Still not sure of the prospective demand from these coming mega-cities? Read this quote from the UN report then: "Of the more than 450 urban areas with 1 million inhabitants or more in 2011, 60%, or more than 890 million people, were living in area of high risk of exposure to at least one natural hazard."

And that was in 2011. Look at the report to see what the UN expects those numbers to be in 2050 and you'll understand the focus of the reinsurance industry on urbanization and emerging markets. There will be an untold amount of capital investment that will need to be protected.