View this article online: https://www.insurancejournal.com/news/international/2004/09/14/45826.htm
A.M. Best Co. has issued a report on Bermuda’s insurance and reinsurance industry, timed to coincide with the Reinsurance Rendezvous, currently being held in Monte Carlo.
Best reported that in the “first six months of 2004, the majority of Bermuda insurance and reinsurance companies have enjoyed excellent earnings and robust capital growth amid continued favorable business opportunities. During this period, the Bermuda market has further entrenched its position as a ‘market of choice’ among brokers and ceding companies alike.”
The rating agency noted that the island’s success has reached the point where “of the top 35 global reinsurers, 11 now call Bermuda home, up from seven just two years ago. As U.S. and European reinsurers continue to deal with the lingering ramifications of legacy issues associated with the prior soft market, asbestos losses and investment meltdowns, the financial capacity of Bermuda’s reinsurers has soared. The so called ‘flight to quality’ by reinsurance buyers is now more than ever necessitating a visit to Bermuda.”
Best found that the flow of “primary business to Bermuda is also on the increase, generally via onshore subsidiaries. While Ace and XL Capital tout the largest primary insurance operations, Allied World, Axis Specialty, Arch Capital, Endurance Specialty and Renaissance Re also have significant primary platforms, which have demonstrated robust premium growth through the hardest phase of the insurance cycle.”
Bermuda is so popular for a reason. Best said the “growth and enhanced market position are the result of the island’s now-legendary operating platform, which enables Bermuda companies to set up shop quickly and allows them to operate with substantial competitive advantages over their U.S. and European competitors.
“These advantages include no income taxes and few restrictions as to how Bermuda companies can invest their assets and deploy capital, not to mention the island’s close proximity to the largest insurance market in the world, the United States. These factors, along with the current favorable market conditions, have contributed to the robust financial performance of the Bermuda insurance and reinsurance market.”
Best asked the rhetorical question, however, “how long can this trend really last? Gross written premiums for the top 15 Bermuda-domiciled reinsurance companies increased 55.2 percent in 2003 to $25.3 billion.” The rating agency estimates that “this composite comprises more than 90 percent of Bermuda’s reinsurance business. This growth in gross written premiums was essentially across the board for the top 15 Bermuda reinsurers.”
There are some dark clouds on the horizon, however. Best explained: “Since 2002, Bermuda insurers and reinsurers have, to varying degrees, credited their strong earnings to the absence of a major catastrophe loss. This trend continued for the first two quarters of 2004 but abruptly ended August 13, when Hurricane Charley became the first major hurricane to make landfall in Florida since Hurricane Andrew hit in 1992. Based on early estimates of the total industry losses, there is no doubt that the cost to the Bermuda insurance and reinsurance market alone will be in the $1 billion range.”
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