AM Best sees positive outlook for US-Bermuda re/insurers
AM Best’s composite of US and Bermudian reinsurers recorded an improved underwriting margin in 2021, with a minimal number of COVID-19-related claims and larger contribution from investment results.
In its Market Segment Report, US-Bermudian Reinsurers Benefit as Market Conditions Improve, US-Bermudian reinsurers produced a combined ratio of 95.8% last year, which is a six percentage-point year-on-year improvement.
Gregory Dickerson, associate director, AM Best, said: “Optimism regarding reserve redundancy for recent accident years should be tempered by recognising that the current spike in inflation could continue for a prolonged period, which could undermine projections for severity trends in long- or short-tailed business lines.”
Capacity remains ample in many business lines, although underwriters remain particularly cautious about Florida exposure, due to concerns about long-term structural issues in the tort system that appear unlikely to be resolved in the near to medium term. Nevertheless, the pricing environment for property catastrophe risks is improving, according to the report.
Net written premiums rose by 20% in 2021, partly thanks to significant rate improvements, and AM Best expects the trend to continue this year on resilient demand and rising rates in most key business lines. This expectation is supported by a quiet Atlantic/Gulf Coast hurricane season so far this year, and assumes that catastrophe losses in the second half of 2022 are not excessive.
US and Bermudian re/insurers are focused on growing their specialty and casualty portfolios, the rating agency noted, particularly in the excess and surplus markets.
