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Bermuda (re)insurance market remains resilient

Deloitte 2013 Bermuda Insurance 
Survey released


Against a backdrop of catastrophic losses, decreasing investment income, increasingly competitive pricing, a tepid economic recovery in the US, and the Eurozone crisis, Bermudian Property and Catastrophe (“P&C”) (re insurers remained strong in 2012. The island continues to be a P&C underwriting hub, with these lines of business representing about 35% of Bermudian gross premiums written in 2012. Excess liability, general liability and professional liability continue to contribute to top line growth and strengthen the Bermuda (re)insurers’ value proposition.

Deloitte’s 19th Annual Bermuda Insurance Survey, with analysis from Standard & Poor's, is published in the Bermudian Business magazine and examines how Bermuda’s (re)insurance market faired in 2012 through a review of the financial statements of 21 companies. Deloitte Bermuda is grateful to all survey participants for providing us with data requests during the survey compilation process.

 

Key findings

  • Survey participants generated strong operating performance with a combined ratio of 91.7% and a return on average equity of 11.2%, compared with 104.1% and 1.0% respectively in 2011.
  • Underwriting capital was $116 billion and net premiums written were $58 billion for 2012.
  • The level of share repurchasing in 2012 was $3.8 billion, 33.7% more than in 2011.
  • Total invested assets plus cash and cash equivalents reached $240.5 billion, a 6.6% increase from 2011.
  • Insured losses amounted to $77 billion, making 2012 the third most costly year on record. The most costly year on record was 2011, when six of the most costly events of the past 40 years occurred, resulting in insured losses of $105 billion.
  • Economic losses from natural catastrophes and manmade disasters reached $186 billion. Hurricane Sandy had limited impact on the participants’ underwriting results, and a stabilizing effect on market prices, with overall changes in the reinsurance market remaining somewhat flat during 2013 renewals.
  • Bermudian (re)insurers had virtually no exposure to the European periphery countries' sovereign debt in 2012 or in 2011.
  • Investment yields (net yield on invested assets and cash and cash equivalents) declined from 4.4% in 2008 to 2.9% in 2012.
  • The geographic distribution did not change significantly from 2011: about half of Bermuda (re)insurers’ growth in premiums written was from North America in 2012.

 

Outlook

  • P&C (re)insurers face dwindling investment yields, diminishing reserve balances, and limited growth opportunities in developed markets in 2013.
  • Participants’ top business issues include renewal rates, investment returns, regulation, cost control and growing market share vs profitability.
  • Enterprise Risk Management (“ERM”) frameworks are viewed as a real differentiator between winners and losers and Bermudian companies are expected to continue to enhance their ERM programs as their risk profiles continue to evolve.
  • Insurance-linked Securities (“ILS”): The convergence of capital market and traditional reinsurance could enhance (re)insurers' operating results and strengthen their competitive positions, if executed properly.
  • There is increased interest in expanding into non-catastrophe-exposed short tail classes of business such as accident and health, crop and surety.

 

For more information on our ERM and ILS services and in general, please contact our Bermuda insurance team leaders.

 

John Johnston
Principal
+1 441 299 1301
john.johnston@deloitte.bm

Stephen Kuzyk
Principal
+1 441 299 1370
stephen.kuzyk@deloitte.bm

Mark Smith
Principal
+1 441 299 1314
mark.smith@deloitte.bm

Anna Burns
Principal
+1 441 299 1396
anna.burns@deloitte.bm

James Dockeray
Tax Director
+1 441 299 1399
james.dockeray@deloitte.bm

Nicole Valadao
ERS Director
+1 441 299 1393
nicole.valadao@deloitte.bm

Brett Henshilwood
ERS Senior Manager
+1 441 299 1395
brett.henshilwood@deloitte.bm

Liz Cunningham
Actuarial, Risk & Analytics Senior Manager
+1 441 299 1323
liz.cunningham@deloitte.bm