The Bermuda reinsurance market emerged relatively unscathed from the unprecedented hurricane and typhoon landfalls in 2004, according to the most recent quarterly report compiled by leading independent reinsurance intermediary and risk advisory business Benfield.
In its Bermuda Quarterly report, Benfield noted that the average return on equity for Bermuda reinsurers was a respectable 13.3% in 2004, though down from 19.1% the year before, as the impact of the storms was softened by a high degree of retention and disproportionate losses in the primary insurance market.
Total losses for the 18 reinsurers reviewed were US$3.5 billion, whilst net income was virtually unchanged, down only 3% to US$5.7 billion.
The average combined ratio was 96.4%, up from 90.7% in 2003 the report indicated, although only three companies reported combined ratios in excess of 100% and only one company reported a net loss.
Balance sheets increased by 14% to US$45 billion against a background of slower premium growth rates. The largest reductions were among the post-9/11 reinsurers, which experienced an average reduction of year-to-year quarterly growth from 151% to 18%.
While the Bermuda reinsurers as a whole performed well despite an extremely active hurricane season, the Benfield report noted that post 9/11 investors continue to "ease out" of the market.
Chris Klein from Benfield's Industry Analysis and Research team, observed that:
"With clear evidence of the market softening, the challenge for underwriters is to maintain attractive returns on a buoyant capital base. We have seen some evidence of the Bermudians returning capital to shareholders and turning away from unattractively priced business in order to achieve this."
"In the absence of any major market loss, the challenge for Bermuda and the market as a whole in 2005 will be the extent to which they are prepared to sacrifice premium to maintain profitability," he concluded.
A comprehensive report in our Intelligence Report series examining the offshore insurance sector is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report11.asp
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