24 January 2013ILS

Re/insurers ‘transforming into risk asset managers’

In its Bermuda 2013 Market Update, rating agency, Fitch argued that certain Bermuda players are becoming ‘risk asset managers’ as the market takes an increasingly prominent role in the convergence space. The report noted that the Bermuda market is blazing a trail in both the use and provision of alternative reinsurance.

Fitch said that the low interest rate environment has meanwhile encouraged traditional players to pursue more aggressive investment strategies, as well as prompt the formation of a number of hedge-fund backed re/insurers, which now call Bermuda home.

The report painted a positive picture for the market, with Bermuda re/insurers performing strongly in 2012 in spite of catastrophe losses. Average combined ratios improved to 95 percent, from a troubled 2011 average of 107 percent. Fitch said “strong capitalisation and favourable risk management” had led to the improved position of Bermuda players. Superstorm Sandy had raised the prospect of major losses for the market, but Fitch indicated that it had proved an earnings, rather than a capital, event for the Bermuda industry.