Fitch Report ‘Remains Negative’ on Bermuda Insurance Market

February 13, 2009

Fitch Ratings stated in a Special Report today that its Rating Outlook for the Bermuda (re)insurance market remains negative, “reflecting uncertainty tied to the continued highly volatile investment markets and a more severe economic recession than those experienced in past business cycles.”

The Special Report indicates that Fitch “expects downward rating activity globally and across all of its insurance ratings in 2009, Bermuda market (re)insurers are less likely to face widespread rating downgrades than other insurance sectors, primarily because of their comparatively lower asset leverage and higher-quality investment portfolios.”

The report also discusses several key challenges facing Bermuda market (re)insurers including, “the effect of anticipated ongoing pressure on asset valuations, uncertainty surrounding the market’s ability to recapitalize if a major catastrophe event were to occur and ongoing threats to tax advantages provided by a Bermuda domicile.”

Fitch also said it “identifies several opportunities for Bermuda market (re)insurers who historically have taken advantage of periods of heightened risk to provide new underwriting capacity.

“These opportunities include relative advantages provided by the Bermuda market’s generally conservative investment portfolios and capital structures, and strong positions in business lines that are experiencing improving market conditions.”

The report’s publication coincides with Bermuda market (re)insurer’s fourth-quarter 2008 earnings season. Fitch indicated that it expects “fourth-quarter 2008 earnings will be poor reflecting significant realized and unrealized losses on fixed income and equity investments.” A summary of the earnings reports that have been released so far (See IJ web site) has done nothing to contradict that assessment.

Upon the conclusion of the earnings season, Fitch said it “plans to publish separate commentary that focuses on the Bermuda (re)insurance market’s fourth-quarter and full year 2008 earnings.”

The Special Report, ‘Review & Outlook 2008-2009 Bermuda (Re)insurance Market’ is now available on the Fitch web site at:

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