Bermuda reinsurers results deteriorating, claims Fitch

A new report from Fitch Ratings claims that Bermuda based (re)insurers have generated favourable financial performance over the long term, but results have deteriorated recently.

According to the report, titled "Bermuda Market Long Run Operating Performance", operating return on equity declined to 7.4 percent in 2016 for a group of large organisations with substantial Bermuda-based operations as underwriting and investment returns weakened, according to a new Fitch Ratings report.

“Insurers will continue to struggle to produce double-digit returns, a level that almost all Bermuda-based companies consistently achieved a decade ago,” said Brian Schneider, senior director at Fitch. “We saw a shift from reinsurance to insurance as reinsurance margins declined, but they have yet to produce consistent favourable insurance underwriting results.”

According to the report underwriting income from reinsurance business segments accounted for 87 percent of group aggregate total non-life underwriting income from 2007 to 2016, much greater than the 49 percent of total gross premiums written from reinsurance over the same period.

The report also claimed that reinsurance total gross premiums written declined to 44 percent of the 2016 aggregate from 53 percent of the 2007 total, with the insurance segment increasing to 51 percent in 2016 from 43 percent in 2007.

The companies with the highest total gross premium compound annual growth rates were driven less by organic growth than by acquisitions.

Fitch compiled and analysed consolidated GAAP financial results for organisations with large Bermuda-based operations for the 10-year period of 2007-2016 for a group of 15 companies, of which four are no longer active. The underwriting data covered four segments: insurance, reinsurance, life and health, and other.