Bermuda’s resilience to cat events improved in 2017

04-12-2018

The Bermuda insurance sector’s resilience to potential catastrophe events further strengthened in 2017 as the market’s exposure to cat losses dropped and the industry’s capital and surplus increased, according to a new report by the Bermuda Monetary Authority (BMA).

The report, called ‘Catastrophe Risk in Bermuda’ showed that, compared to 2016, this year’s net catastrophe exposure slightly decreased by about 2 percent while its insurers have increased their statutory capital & surplus by 12 percent.

The report also reviewed cyber risk stress testing and the analysis shows that the insurers’ own defined worst impacts from cyber risk would have a minimal effect on their statutory capital.

The report noted that Bermuda is predominantly an insurance-based International Financial Centre specialising in the niche of catastrophe reinsurance. With such a relatively high concentration of catastrophe risk in Bermuda’s market, a broad understanding of the potential adverse impacts, including identification of any concentration risks and catastrophe modelling practices in Bermuda is central to the BMA’s supervisory framework.

The report stated: “Overall, the 2017 Cat underwriting stress test results demonstrated that the Bermuda insurance market is resilient to potential adverse impacts from various global Cat underwriting loss scenarios, and that there is a variation in reliance on reinsurance by insurers.

“The results also establish Bermuda insurers’ ability to absorb these unlikely potential large losses and still have capital remaining to settle policyholder obligations. Same as last year, insurers will retain, on average, 76 percent on a gross basis (before reinsurance) of their statutory capital & surplus after the largest single Cat underwriting loss event.

“On a net basis (after reinsurance), insurers will retain approximately 92 percent of their statutory capital & surplus, an increase of 3 points from last year, after the largest single Cat underwriting loss event. These results highlight the industry’s overall resilience.”

It also noted that the results also show that there was no significant impact from the standardised terrorism stress scenario and cyber risk worst-case annual aggregate loss scenario carried out by insurers.

Bermuda insurance, Cat losses, BMA, Bermuda Monetary Authority, Catastrophe Risk

Bermuda Re