It could take several years for Bermuda-based insurers and reinsurers to recover from the record investment losses suffered in 2008, an industry report said Tuesday.
According to a survey by New York-based Deloitte L.L.P., which compiled financial data from 24 of the island’s largest insurers and reinsurers, participants reported $13 billion in aggregate realized and unrealized investment losses in 2008. The declines led to a 15% contraction in aggregate capital and surplus for the group at year-end 2008 compared with the prior year, the report said.
And although the market experienced higher-than-expected catastrophe losses from Hurricanes Ike and Gustav, survey participants reported an average combined ratio of 90%, representing relatively good underwriting performance, the report said.
While significant economic pressures persist for 2009, Bermuda-based insurers are well-positioned and are likely to benefit from several positive factors, including hardening reinsurance prices and an ongoing focus on enterprise risk management, the report said.
In addition, the market still enjoys strong levels of capital adequacy and strong liquidity, and the conservative investment strategy exercised by most Bermuda-based firms should help mitigate potential further investment losses, the report said. Strong results in 2006 and 2007 helped build substantial levels of excess capital for companies entering 2008, the report added.
Deloitte said it expects the market to recover from 2008 investment losses in the next two years, assuming it experiences normal levels of catastrophe exposures during that time, the report said.
However, the report said a large catastrophe event—defined as losses of greater than $40 billion—is the greatest risk to the Bermuda market in the short term.
Also, due to financial turmoil, it’s not certain that all companies would be successful in replenishing their capital bases, the report said.
The full report, "15th Annual Deloitte Bermuda Insurance Survey 2009," can be read online at www.deloitte.com.
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