The Bermuda insurance and reinsurance market could payout $25 billion or higher of the estimated $100 billion in aggregate insurance and reinsurance losses from hurricanes Harvey, Irma, and Maria, according to the Association of Bermuda Insurers and Reinsurers (ABIR).
Bermuda, a global hub for insurance, and both traditional and alternative reinsurance business, expects its insurers and reinsurers to fund 25% or more of the overall insured losses from the three events, based on a preliminary combined loss estimate of $100 billion.
The storms impacted parts of the U.S. and the Caribbean, where many Bermudian players are extremely active. For the Bermudian firms, the share of the overall losses will come from commercial insurers and reinsurers, captives, catastrophe-focused managing general agents, and alternative capital funds and pools.
Kevin O’Donnell, ABIR Chair and President and Chief Executive Officer (CEO) of Bermudian reinsurer, RenaissanceRe Holdings Ltd., said; “Bermuda’s global insurers and reinsurers first and foremost express their sympathy to those suffering from the loss of life, property, food and water from the recent storms.
“At this time, we are helping in the best way we can—by forwarding billions of dollars to help begin and sustain recovery in Texas, Florida, Puerto Rico, the US Virgin Islands and the rest of the affected Caribbean and Southeast US.
“Going forward, we are committed to helping our clients and their communities rebuild more resiliently, and supporting continued innovation to help close the insurance protection gap. By diversifying the financial risks of these disasters to a willing global private market, we can best reduce financial burdens on exposed communities, taxpayers and policyholders,” continued O’Donnell.
The ABIR explains that not long after the hurricanes, Bermudian reinsurance firms started writing hundreds of millions of dollars to primary players that were impacted by the storms.
Brad Kading, President and Executive Director of the ABIR, underlined the importance of reinsurance protection.
“The value reinsurers provide is three-fold. First, advancing cash for liquidity so insurance clients can pay consumer claims; second, transferring risk around the world and diversifying it, so the cost of hurricanes is not solely paid by policyholders and taxpayers in the affected area; and, third, by providing balance-sheet protection so while insurers are liquidating assets to pay claims, additional funds provided by reinsurers allow them to continue selling new insurance contracts daily and still meet regulatory capital targets.
“That helps consumers get repairs made faster and helps local economies to recover, rebuild and return to productivity,” said Kading.
The association explains that since the year 2000 Bermuda domiciled companies have contributed over $50 billion towards catastrophe losses in the U.S., which includes 10% of the loss from the attack on the World Trade Center, and roughly a third of the loss from the devastating hurricane Katrina.
“To successfully underwrite insurance for property exposed to natural and man-made disasters, global reinsurers pool risk to achieve a diversified portfolio. Risk is accumulated from potential events around the world, and since such loss events are uncorrelated, global insurance groups can achieve and share with customers the benefits of diversification,” continued Kading.
