Bermuda re/insurers back to underwriting profit in 2021, says Fitch

Bermuda re/insurers 2021 results should show a return to underwriting profitability, according to Fitch Ratings. Combined ratio improvements and continued premium rate increases will more than offset increased catastrophic losses, according to its analysis. And 2022 looks promising.

Market pricing increased at the January 2022 reinsurance renewasl continued the trend of rising rates from early 2018. The ratings agency expects pricing to continue to rise at the midyear 2022 renewals, albeit at a declining rate and with continued “material differentiation based on loss experience”.

“The 2022 fundamental sector outlook for global reinsurance is improving, while the sector outlook on U.S. property/casualty (P/C) insurance is neutral. The improving outlook for global reinsurers reflects better expected financial performance from higher prices in a hardening market environment and a strong economic recovery, depending on the evolution of coronavirus variants,”  its analysis reports.

“The hardening market is supported by heightened catastrophe losses, climate-risk concerns, continued record low interest yields and deteriorating loss-cost trends, as well as rising economic and social inflation, declining casualty reserve adequacy and growing cyber claims.”

Across the eight Bermuda re/insurers actively followed by Fitch, the average full-year combined ratio will be slightly below the 99.1% posted through the first nine months of 2021, it reports and down from the 103.4% in 2020. Global re/insurance catastrophe losses were $120 billion in 2021, up from $82 billion in 2020, according to Munich Re’s NatCatSERVICE, it notes, and cat losses will represent 13-14 points on the 2021 combined ratio compared to 13.6 points for cat losses (6.9 points of it from coronavirus losses) in 2020.

It also reiterated its  earlier assessment of the impact of moves to a 15% minimum tax on Bermuda reinsurers, stating that its advantageous tax status will be reduced “at the margin”. Near-term rating actions for Bermuda re/insurers are not expected, it confirmed,  “although long-term implications remain to be seen”.