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Member, Beacon International Group, Ltd.
Rating agency Fitch Ratings Inc. has maintained a positive outlook for Bermuda reinsurers despite the impact of hurricane Sandy, which will have a considerable impact on Q4 earnings.
The agency said that Bermuda led the way in convergence of the reinsurance market as both a provider and user of different forms of alternative risk transfer to supplement the traditional balance sheet. This has resulted in a gradual transformation of several reinsurers into risk asset managers, seeking to leverage third-party investor capital for underwriting purposes and to profit from reinsurance premiums. Convergence structures such as catastrophe bonds and sidecars have enabled the reinsurance market to expand capacity as and when needed, eliminating the need for more complex full reinsurer startups. Meanwhile, some reinsurers entered into partnership with, or acquired stakes in, more traditional asset management vehicles to maximize the more traditional investment returns. The rating agency said that despite the damage caused by hurricane Sandy, Bermudian reinsurers are well capitalized and are expected to report an improved combined ratio of around 95% in 2012, compared with 107% in 2011.