Best: Bermuda Market Remains ‘Resilient’
The Bermuda insurance and reinsurance market continues to report resilient financial results despite challenging conditions that include heavy catastrophe losses, a new report from A.M. Best Co. finds.
The Bermuda market composite followed by A.M. Best produced an underwriting loss as of September 30, 2011, and appears poised for meager bottom-line profit in 2011.
However, the market has weathered pressure on its capital base from devastating 2011 catastrophe losses, a prolonged soft market and low investment returns, positioning companies for a potentially difficult yet promising renewal season.
The full report is available to subscribers at the international ratings agency’s website.
Key findings of the analysis also include:
- Elevated global catastrophe activity and increasingly conservative cat models have rewritten the risk equation, especially for U.S. primary companies; meanwhile, reinsurers are rethinking pricing and capital requirements amid growing demand for capacity.
- Catastrophe pricing has improved in certain loss-hit regions, but some companies are reducing exposures rather than pursuing greater market share.
- Casualty classes appear to have hit bottom as deteriorating investment yields hinder economic profitability on longer tail classes of business.
- Both primary and reinsurance companies have been harvesting favorable loss-reserve development from casualty business written in the early 2000s, but this flow of earnings is running dry, and a market turn for casualty business seems to be nearing.
- The market’s annualized return on equity (ROE) for the first nine months of 2011 was -0.8%, but adding back 6.7 points of favorable loss-reserve development drives the accident-year combined ratio to 114.5 and puts the ROE well under water.
