They had heard some good news. On Sunday the news had come over their Blackberries that the US government was taking over troubled mortgage lenders Freddie Mac and Fannie Mae and that share prices were picking up. Insurers and reinsurers have a big exposure to Freddie and Fannie so the news went down very well indeed on the terraces of the Monte Carlo Rendez-Vous.

Insurance CEOs – like everyone else – hope that what stands to be the largest bail-out in US history will prop up the country’s plunging housing market and ultimately stop the credit crunch going out of control.

President Bush said the two firms had posed “an unacceptable risk” to the economy: between them Freddie Mac and Fannie Mae finance or guarantee nearly half of the outstanding mortgages in the US, and have lost billions of dollars during the US housing crash.

“Of course we knew they would get on to it eventually – they had no choice,” one reinsurer told me. “But how nice to hear the news here.”

The rescue could cost the Federal government $200bn as it injects fresh capital into the limping mortgage giants to keep them solvent.

That’s one less thing to worry about then. But as reinsurers keep reminding one another here, we are in a softening market at a time of stock market troubles and an overall deteriorating environment. Add to that the spectre of nat cats (anyone got the latest on Ike?).

Without Ike, insured losses up to September 1 2008 increased by 20% compared to the same period in 2007. So, CEOs keep telling us, we are seeing an uptick in nat cat losses against a background of meagre investment returns thanks to low interest rates. It is not like the late Nineties. Your investment portfolio won’t compensate for claims costs. Get used to it.

But don’t stay too focussed on nat cats and property business. Delegates here keep returning to their fears for the liability lines of business and the background to that is inflation. Increasing medical and social costs especially, spell trouble for all. We’re sort of used to it in the US but according to Jacques Aigrain, CEO of Swiss Re, Europe is experiencing an acceleration in long tail line claims costs.

Like his peers, Aigrain espouses underwriting discipline (a phrase you hear a lot in Monte Carlo). The Swiss Re boss impressed everyone with his repeated claim that they will leave money on the table rather than write business that stresses their margins. At the halfway point, Swiss Re has cut or replaced 21% of its total traditional portfolio, he said.

“That’s good,” said one investment analyst, “But if this market persists, you won’t have any business left.” But Aigrain had an answer for that saying that reinsurers should be preparing for the hard market – and you don’t do that by writing too much in the soft cycle.