Wildfires and typhoons have no material impact on Bermuda’s solvency: BMA

27-03-2020

Wildfires and typhoons have no material impact on Bermuda’s solvency: BMA

BMA Wildfire and Typhoon Survey

The Bermuda market incurred $9.2 billion gross claims in the last three years in relation to wildfires in California, and $9.6 billion in the last two years related to typhoon losses in Japan, according to a report published by the Bermuda Monetary Authority (BMA). 

On a net basis, the losses were $5.4 billion and $5.1 billion, respectively.  

The report summarises the key results from the BMA’s Wildfire and Typhoon Survey, which collected claims and other data for California Wildfires 2017-2019, Australian Wildfires 2019 and Japan Typhoons 2018-2019. It captures a material portion of the Bermuda general insurance market, including non-commercial classes such as special purpose insurers (SPIs). 

The findings reveal that, from a solvency perspective, none of the surveyed perils had material impact on the financial position of the Bermuda market. The historic annual gross losses have only been a fraction of the market’s total capacity, the BMA said, with the 2018 Japan Typhoon gross loss to limit ratio the most severe, at 16.5 percent. 

The highest observed net loss to capital and surplus (C&S) ratio was also from the Japan Typhoon loss, at 2.5 percent. The event generating the most substantial gross loss was Typhoon Jebi, at $4.1 billion, with Typhoon Hagibis at $2.6 billion and Camp Fire, at $2.5 billion, representing the next most significant losses. 

On a net of reinsurance basis the catastrophes ranked in the same order. Typhoon Jebi resulted in an estimated loss of $2.3 billion, with the ceded reinsurance ratio generally hovering between 35 percent and 55 percent. 

The report shows that the Californian wildfires of 2019 were relatively mild compared to those of 2018 and 2017, as evidenced by the relative size of losses incurred by the Bermuda market between these three years. In 2019 Californian wildfires losses amounted to $148 million gross in aggregate, with a ceded ratio of 53 percent. In 2018 they were $5.66 billion, with a ceded ratio of 50 percent, while in 2017 they were 3.36 billion, with a ceded ratio of 36 percent. 

Australian wildfires in 2019 caused losses of 255 million, with a ceded ratio of 54 percent. 

The survey involved a total of 91 participants, including 14 groups and 77 legal entities.

Bermuda Monetary Authority, Wildfire and Typhoon Survey, Typhoon Jebi, Typhoon Hagibis

Bermuda Re