Bermuda Re/insurers Raised $7.7B Of Capital

January 23, 2021 | 0 Comments

“Fitch-monitored Bermuda companies raised approximately $7.7 billion of capital in 2020/2021, including common and preferred equity, various debt securities and drawdowns on credit facilities,” Fitch Ratings said.

A statement from Fitch said, “The U.S. property/casualty [P/C] insurance and global reinsurance markets, including Bermuda [re]insurers, are positioned to benefit from recovering market conditions in 2021, with higher-than-expected catastrophe losses and coronavirus-driven claims driving premium rate increases, Fitch Ratings says.

“[Re]insurers’ underlying profitability should improve in 2021, as rate rises across almost all business lines outpace loss cost inflation and the impact of reduced investment income from persistently low interest rates.

“Tighter underwriting of commercial lines and normalizing catastrophic losses will support underwriting profits; however, adequate or improved capital returns will continue to be challenged by competitive pressures, lower investment income from persistently lower interest rates, and deteriorating asset quality.

“The pricing of the January 2021 reinsurance renewal season, while improving for the third consecutive year, was somewhat disappointing for reinsurers. However, price increases have gained momentum through the various renewal seasons since the onset of the pandemic, with the market expect to continue to harden through 2022 as premium rate increases take hold.

“The sector’s capital strength remained largely unscathed despite substantial pandemic-related underwriting losses in several segments. [Re]insurers saw sizable new capital issuance in 2020 following the onset of the pandemic, as firms took advantage of the low rate environment and accommodative markets supported by unprecedented government stimulus to raise capital amid market uncertainty and liquidity concerns exacerbated by the pandemic fallout. Fitch-monitored Bermuda companies raised approximately $7.7 billion of capital in 2020/2021, including common and preferred equity, various debt securities and drawdowns on credit facilities.

“M&A has been subdued amid improved organic growth opportunities given the hardening market. However, if price improvement is not sufficient to offset the added strain of coronavirus losses, weaker companies could become acquisition targets.

“Fitch maintains a stable rating outlook on both the U.S. P/C insurance and global reinsurance market sectors, with ratings headroom supported by solid business profiles, capital strength, reserve adequacy and effective risk management processes.”

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