The 57th Reinsurance Rendez-Vous in Monte Carlo, which begins with registration on Saturday, promises to be somewhat less stressful than many previous Monaco gatherings. A mass of warm air, combined with significant amounts of dust from North Africa, has meant that so far there have been no hurricanes in the Atlantic. That could change of course, but at least no massive catastrophe will dominate the Rendez-Vous this year—unless??

That doesn’t mean there aren’t a number of topics that those attending the annual conclave will be interested in discussing, but at least the cocktail parties will be a bit cheerier. The discussions will be wide ranging, as the Rendez-vous has become a truly international event with more than 3500 people attending.

It started out as a cozy get together where reinsurance companies could talk to reinsurance brokers in a central location to determine the rates/premiums for the next year. A bit of that will certainly be discussed, but most of those talks now take place in October in Baden-Baden, a more discreet location.

The company executives and the brokers have been joined by virtually the rest of the insurance world—lawyers, consultants, catastrophe modelers, accountants, claims people, rating agencies, economists, a lot of PR people, and last, but not least, a number of journalists.

There have been catastrophes. Swiss Re’s sigma report, released at the end of August determined economic losses at $56 billion for the first half of 2013, with insured losses at $20 billion.

European floods ($4 billion), floods in Canada and elsewhere ($4 billion), heavy rains in Australia and many parts of Asia totaled over $1 billion. The tornadoes that ravaged several states in the U.S. Midwest in May led to $1.8 billion in claims. However, while these amounts aren’t insignificant, they pale in comparison to the disasters in 2011, when the floods in Thailand alone resulted in losses of $16 billion.

Ironically, however, it’s not the loss figures that are of concern for the reinsurers; it’s the capacity figures. There is too much capacity. In 2011 and 2012 the reinsurers were wondering why, after some fairly expensive natural catastrophes, rates weren’t going up across the board, only in those areas—Japan and Thailand—that suffered from the catastrophes.

This year they still aren’t likely to increase—quite the opposite; they will probably be going down. There is a new villain to blame for this—the capital markets. After years of trying to tap those markets, the reinsurance industry has succeeded a little too well.

Insurance-linked securities like cat bonds, as well as sidecars, loss warranties and related hybrid instruments now provide the market with more capital than it can absorb—$510 billion as of June 30, 2013, according to the Aon Benfield Aggregate (ABA) report.

In an interview with Bloomberg, Nick Frankland, European head of Guy Carpenter, stated: “We estimate that secondary capital sources supporting the likes of insurance-linked securities and industry loss warranties make up a little less than 20 percent of the catastrophe limits purchased. This may represent a paradigm shift, and we can see that percentage build to anywhere above 50 percent over time.”

That latter statement refers to the types of institutional investors that have turned to the reinsurance industry for better returns on their investments than the current very low interest rate environment can offer. Historically very conservative pension funds are investing heavily in the ILS market, and they won’t be leaving any time soon. Investment banks, hedge funds and private equity firms continue to invest as well.

The additional capital may be arriving at a propitious time, even though in the near term it depresses rates. Studies from the Geneva Association and the soon to be released report from the UN’s International Panel on Climate Change (IPCC) both stress the reality of climate change, and examine the probable effects it will have.

A report from Guy Carpenter singled out rising sea levels as the greatest threat from climate change. Not only does the increase in temperature cause seawater to take up more volume, which raises sea levels, but it is also a factor in melting polar ice caps, which then further increase the volume of water in the seas.

As has been frequently reported, climate change will also cause a shift in weather patterns with more rainfall in some areas, which causes floods and landslides, and less rain in other areas, increasing the likelihood of bigger and more destructive brush fires. There will certainly be discussions on climate change at the Rendez-Vous.

There are also ongoing concerns centered on the definition of systemic risk, and to what extent it will be applied to major multinational insurers and reinsurers. Coupled with this are all of the new regulations, including Solvency II and the IAIS standards that insurers and reinsurers are expected to deal with. According to estimates from Deloitte, published by Bloomberg, the industry spent $6.5 billion in 2012, just on regulatory compliance.

Cyber risks could be described as the remaining elephant in the room. Primary carriers, brokers and reinsurers are all busily developing products to cope with them, but questions remain. How well do they work? Should the emphasis be focused on pre-event preparation, as Kidnap & Ransom coverage does? Or should it focus more on repairing the damage and paying the costs resulting from cyber attacks? Or both?

So there are many concerns on the minds of the participants, even though no really significant catastrophic event has yet convulsed the reinsurance market in 2013.

Carrier Management will be reporting on highlights and insights from the Rendez-Vous.