BMA figures show mixed picture for Q4 2018

Bermuda had a mixed end to 2018, according to the latest figures released by the Bermuda Monetary Authority (BMA).

In its latest regulatory update covering the October-December period of 2018, the BMA said that there was a higher level of claims activity in the last quarter of the year, due to catastrophe activity including the California wildfires, Hurricane Michael and the adverse reserves development of prior catastrophe events including losses from Typhoon Jebi.

The BMA said that for Q4 2018, the combined ratio increased by 3.5 percent standing on average at 109.0 percent due to higher losses despite decreases in the aggregate expense ratio. The loss ratio increased by 6.8 percent while the expense ratio dropped by 4.2 percent. Bermuda (re)insurance groups improved their asset base by 2.6 percent in Q4 2018 compared to Q4 2017.

However, the BMA added that Bermuda (re)insurers produced an almost zero gross profit. The aggregate combined ratio stood at 109.0 percent compared to 105.3 percent in Q4 2017.

In Q4 2018 reserve leverage increased by 1.0 percent and financial leverage increased by 0.6 percent compared to a year earlier. Total equity increased by 2.0 percent while reserves increased by 2.9 percent, thus increasing the reserve leverage. The faster increase of assets by 2.6 percent compared to the slower increase of equity increased the financial leverage.

Net Written Premiums to Equity, which is a very rough inverse measure of solvency, increased by 7.5 percent reaching 64.3 percent.

The BMA also reported that the investment portfolios of Bermuda (re)insurance groups produced a 0.6 percent Return on Investment and a -1.0 percent Return on Equity in Q4 2018. As a proxy for liquidity, the sum of cash and high quality “AAA”-rated securities represented 137.0 percent of claims for Q4 2018, a decrease of 6.6 percent compared to Q4 2017.