The market for Bermuda-based re/insurers is continuing to grow and generate long-term underwriting profits, according to Fitch.
This is the conclusion of Fitch’s newly published report, which focuses on GAAP results from 2009-13 for a universe of 21 Bermuda domiciled underwriters.
This group of class 4 Bermuda re/insurers wrote $39 billion of net premiums and had $76 billion in shareholders' equity as of year-end 2013. In aggregate, these re/insurers are characterised by strong balance sheet fundamentals, with operating and net leverage ratios within the 'AAA'/'AA' range of Fitch's reinsurance sector credit factors.
Fitch said that the group's five-year average net income return on equity (ROE) of 12.2 percent compares favourably with a 7.9 percent GAAP ROE over the same period for Fitch's overall universe of North American insurers.
Despite periodic volatility tied to catastrophe losses the group in aggregate reported a five-year average combined ratio of 89.7 percent 2013 and posted an 83.2 percent ratio in 2013.
The rating agency said: “A considerable amount of underwriting activity is tied to U.S. risk exposures, as well as property reinsurance. Competition from the alternative reinsurance market, continued low interest rates and the volatility of earnings in property catastrophe-focused business may dampen profitability going forward.”
“Bermuda re/insurers have demonstrated loss reserving strength for over a decade. Favourable reserve development to net premiums earned (NPE) over the last five years has benefited the combined ratio on average by 7.1 percentage points and by 6.8 percentage points in 2013. Given relatively stable loss-cost trends, moderate but declining reserve releases are anticipated in the future.”
Bermuda, Fitch, GAAP