Bermuda re/insurers are positioned to benefit from recovering market conditions in 2021, according to Fitch Ratings, with higher-than-expected catastrophe losses and coronavirus-driven claims driving premium rate increases.
Re/insurers’ underlying profitability should improve in 2021, Fitch predicted, as rate rises across almost all business lines outpace loss cost inflation and the impact of reduced investment income from persistently low interest rates.
Capital strength has proved resilient, with new money coming into the sector, Fitch noted. Fitch-monitored Bermuda companies raised approximately $7.7 billion of capital in 2020/2021, including common and preferred equity, various debt securities and drawdowns on credit facilities.
Meanwhile tighter underwriting of commercial lines and normalising catastrophic losses will support underwriting profits, Fitch predicted. However, it warned of competitive pressures that will challenge capital returns, while persistently low interest rates continue to drag on investment income.
While pricing for the January 2021 reinsurance renewal season was somewhat disappointing despite improving for the third consecutive year, Fitch predicted that the market will continue to harden through 2022.
Fitch maintains a stable rating outlook on both the US property and commercial insurance and global reinsurance market sectors.