Analyst: ‘Bermuda Remains Viable’
Bermuda’s reinsurance market is down but not out after taking beating a heavy beating from this year’s string of global catastrophes including the Japanese earthquake and tsunami [pictured] industry journal “Property Catastrophe 360″ reported this week [Dec. 1],
“The Bermuda market is predominantly a catastrophe-driven model — and you would expect that when there are catastrophes, it’s Bermuda that will take a big chunk of that,” Julia Mather, head of advisory-service Miller Bermuda, told the publication
Catastrophes are the island’s stock in trade , she added. They are “the whole reason Bermuda is there. [Reinsurers] just have to hope their chunk isn’t greater than they expected.”
But despite the heavy losses, the island remains resilient, with enough capital to absorb the blows.
“When you look at the market in total, the losses were significant, but certainly manageable,” Robert DeRose, vice president of A.M. Best Co., told the publication.
The Bermuda market “is still very viable and certainly is a strong place to do reinsurance business. Its proximity to the US is a significant strength,” DeRose adds.
Frederick J. Kohm Jr., a partner in the Economic Advisory Services division at advisory-service Grant Thornton LLP in Philadelphia, said Bermuda reinsurers “will have to continue to get creative” in 2012.
“You still have that flat return that everybody needs to improve upon. Reinsurers will have to [create new] products and innovate to increase their bottom line. This will in turn identify the new market leaders out of Bermuda,” he said.
Since the first quarter, Bermuda reinsurers have been in an underwriting loss position.
But over the course of the year, as earned premiums have come through, the combined and loss ratios have started to improve.
Bermuda companies saw a combined ratio of 135 as of March 31, but the figure is now down to 108, compared to 97.3 at this time last year.
“Obviously earthquakes can happen any time, but if the trend continues the way it’s going, it’s conceivable [Bermuda-based reinsurers] could be at break-even by the end of the year,” he added. Even if they don’t see an underwriting profit, “it would be just a small underwriting loss.”
