Bermuda re/insurers should expect to see more consolidation in the coming months, according to rating agency Fitch.
In its latest report, which examines the results and current trends of 20 Bermuda-domiciled underwriters over the last four years, Fitch explained that the increased merger and acquisition (M&A) activity already seen has been focused on Bermuda and this is expected to continue.
The rating agency added that unutilised capital and the threat of alternative reinsurance providers, along with slowing premium growth and sagging investment yields increases the likelihood of consolidation between Bermuda-based re/insurers.
“The Bermuda market's recent strong operating performance, however, is giving way to some deceleration. Premium growth flattened from 2013 to 2014 due to pricing competition and persistent reductions in rates,” added the rating agency.
“Future underwriting performance will be affected by less attractive premium rate levels and an anticipated reduction in the magnitude of favourable loss reserve development.”
According to Fitch, the strength in the Bermuda market over the last few years is highlighted by the property/casualty (P/C) underwriting gains among Class 4 Bermuda re/insurers, which reached a record of $5.8 billion in 2014.
“Results have been aided by below-average catastrophe losses since 2011. The group's average combined ratio was just 84.5 percent over the three-year period ending in December 2014, striking a five-year low of 82.2 percent last year,” said the rating agency.
Fitch Ratings, Bermuda