Bermuda insurers, reinsurers withstand 2012 catastrophe hits: Fitch
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Insurers and reinsurers in Bermuda withstood another year of sizeable catastrophe losses thanks to strong capitalization and good risk management, according to a report by Fitch Ratings Ltd.
In the report, released Tuesday, rating agency Fitch said that while Superstorm Sandy will affect Bermuda companies' fourth-quarter earnings, the 17 publicly traded insurers and reinsurers with operations in Bermuda that Fitch follows likely will post a combined ratio for the year of about 95%, compared with 107.1% for 2011.
Recent information suggests that rates for property coverage have remained stable, according to the report, while in some lines, such as U.S. property catastrophe and marine reinsurance business, saw rate increases in the wake of Sandy.
Fitch said Bermuda-based insurers and reinsurers continue to lead the way as both providers and users of alternative forms of risk transfer, including catastrophe bonds, sidecars and insurance-linked securities.
While there were several merger and acquisition deals involving Bermuda companies during 2012, those deals were opportunistic and potential buyers are more likely to favor share repurchases in the near term, Fitch said.
Fitch noted that the long-term future of the approach adopted by some hedge funds in setting up startup reinsurers with aggressive investment strategies and focusing on lower risk underwriting lines will depend on the ability of such companies to manage their exposures to both underwriting and assets over an entire market cycle.
Fitch said that the delay to Europe's Solvency II risk-based capital rules for insurers and reinsurers until at least 2015 gives Bermuda more time to achieve third-party country equivalence. However, it also means that the realization of benefits of the regime, such as the predicted increase in demand for reinsurance, will be delayed.
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