Bermuda re/insurers saw moderate net income improvement in 2018 despite heightened catastrophe losses, and look set to boost earnings further this year, according to analysts at Fitch Ratings.
The sector returned to underwriting profits last year with a combined ratio of 99% recorded for the 22 companies in Fitch’s sample.
This was a strong improvement from 108% in 2017, but significantly higher than the 93% ratio average over the prior five years.
Results were impacted by cat losses from Hurricanes Michael and Florence, Typhoon Jebi and the California wildfires, despite being lower than 2017 losses from Hurricanes Harvey, Irma and Maria.
“Earnings are poised to improve in 2019 as pricing trends shift across the market and catastrophe losses through the third quarter revert toward historical norms,” said Ryan Ostrowski, Analyst at Fitch Ratings, adding that premium rate increases appear sustainable into 2020.
Fitch noted that the underwriting turnaround was partly offset by significant realised losses on investment due to weaker equity market performance in 2018. The group’s return on equity improved but remained below-average at 3.4%.
Bermuda re/insurers continue to maintain a strong capital position, and Fitch expects capital management within Bermuda to remain conservative in future.
On the other hand, the shift in net premium allocation for some companies toward US affiliates may lead to corresponding capital reallocation over time.
M& activity appears to be having relatively little influence on the sector, with no major deals announced in 2019 so far, Fitch observed.
Instead, re/insurers appear to be focused on organic growth as price increases, terms and conditions get a favourable uplift.
