Fitch: Re/Insurers Not Affected By Downgrade
“While insurance industry concerns factored into Tuesday’s downgrade of Bermuda, Fitch Ratings does not expect Bermuda (re)insurers to be affected,” a statement issued today [June 28] by Fitch Ratings said.
“A majority of the assets and liabilities of Bermuda (re)insurers are diversified globally, and thus we do not have concerns regarding a concentration of risk in the country,” said Fitch.
“Insurers operating under Solvency II will likely be required to hold more risk capital, which may boost reinsurance demand. Bermuda is one of the first three jurisdictions seeking Solvency II equivalent status (Japan and Switzerland being the other two), and the Bermuda Monetary Authority is optimistic that implementation could be achieved by 2014,” continued Fitch’s statement.
The full statement from Fitch follows below:
While insurance industry concerns factored into Tuesday’s downgrade of Bermuda, Fitch Ratings does not expect Bermuda (re)insurers to be affected, as all our ratings of Bermuda (re)insurers remain below the new sovereign rating, which also has a Stable Rating Outlook. The country ceiling remains at ‘AAA.’
In addition, a majority of the assets and liabilities of Bermuda (re)insurers are diversified globally, and thus we do not have concerns regarding a concentration of risk in the country.
We do expect that Bermuda, as a nimble market with close U.S. proximity that rapidly adapts to fit capacity needs, will continue to remain an important global (re)insurance market and should be well positioned to take advantage of recent improvements in the underwriting environment.
Furthermore, Bermuda (re)insurers overall weathered the recent heightened catastrophe losses seen in 2010 and 2011, although some companies experienced more strain than others.
That said, we believe a shifting regulatory landscape continues to present both opportunities and threats, as the island faces competition from other jurisdictions, tax-status scrutiny, and changing collateral rules.
Insurers operating under Solvency II will likely be required to hold more risk capital, which may boost reinsurance demand. Bermuda is one of the first three jurisdictions seeking Solvency II equivalent status (Japan and Switzerland being the other two), and the Bermuda Monetary Authority (BMA) is optimistic that implementation could be achieved by 2014.
With that, we feel Bermuda’s regulatory framework will, at a minimum, become less flexible as a function of its seeking equivalence, thus reducing its appeal as the preferred location for start-up companies. However, its overall market reputation should improve, with further enhancement of the island’s solvency protection standards.
solvency II reduces Bermuda’s appeal as a preferred location for start-up companies….Did not Bob say that last week and get heckled by the intelligencia on the other side? just sayin…
NJ is a lot smarter than his name implies. Richards may come off as smug, patronizing and condesending, but his been right. Our government is setting us up to fail…..and they have over 6 months to do it. I hope FCO tells Paula that she cannot borrow any more or raise the debt ceiling any higher.
Swing Voters are watching.
The fact is, many Reinsurance companies make more profit in 3 months than this country ever will from 1998 until the 12th of Never.