Bermuda M&A To “Combat Competitive Stress”

January 28, 2015

According to Fitch Ratings, the Bermuda market is seeing increased consolidation activity in 2015 as “several companies have recently jumped into the merger and acquisition [M&A] forum to combat the competitive stress in the re/insurance market” and the ”trend is driven by challenging market conditions that are limiting organic growth potential.”

Fitch said, “These Bermuda deals include PartnerRe Ltd.’s recently announced merger with AXIS Capital Holdings Ltd., XL Group plc’s expected acquisition of Catlin Group Limited, and RenaissanceRe Holdings Ltd.’s agreement to acquire Platinum Underwriters Holdings Ltd.

“This trend is driven by challenging market conditions that are limiting organic growth potential. Record capitalization among traditional  re/insurers along with the growing capacity provided by alternative capital providers are softening reinsurance pricing, with no catalyst for a reversal in sight.

“Favorably, Bermuda re/insurers will report a second year of solid operating results in 2014, driven largely by continued low catastrophe losses.

“Fitch expects the full-year 2014 combined ratio for the group of 15 large publicly traded Bermuda re/insurers that it actively follows to remain near the 86.4% posted through the first nine months of 2014. However, continued softening market conditions and a potential return to more normal catastrophe losses will create earnings pressure in 2015.

“Alternative forms of risk transfer are now a permanent fixture in the reinsurance sector, principally in property catastrophe risk, with most Bermuda re/insurers providing and/or using alternative forms of risk transfer.

“Fitch observes that Bermuda re/insurers have a greater potential threat from this added competition, particularly those that have a more limited diversified earnings profile.

“Fitch expects that the Bermuda Monetary Authority will achieve Solvency II equivalence in 2015, with the implementation date for the Solvency II regime set for Jan. 1, 2016.

“Bermuda is also taking advantage of more relaxed collateral rules for non-U.S. re/insurers, with Bermuda recently granted qualified jurisdiction status by the National Association of Insurance Commissioners.”

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Comments (5)

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  1. Jus' Askin' says:

    I wonder how many people will understand this ;-)

    • umok says:

      If you feel that way, why don’t you break it down into layman’s terms for the those that might not understand it.

      Being sarcastic isn’t helping or contributing to society.

      • Noncents says:

        @ umok

        I think the point is that our largest and most important industry for Bermuda is consolidating which ultimately will lead to jobs losses. While there are several perks of working in the private sector, job security is not one of them.

        • umok says:

          Thank you Noncents. I’m sure the readers will appreciate your explanation.

      • Jus' Askin' says:

        I shall