Fitch Ratings has issued a stable outlook for the Bermuda re/insurance market for 2021 on the basis that accelerating premium rate changes are expected to offset negative factors.
Collectively, the nine Bermudian re/insurers assessed by Fitch posted a combined ratio of 103.1% in 2020.
Of this, 7.4 percentage points were driven by catastrophe losses, primarily from Hurricanes Laura, Sally and Isaias; Western U.S. wildfires; and the Midwest derecho, and an additional 6.8 points were from the pandemic.
But underlying underwriting results for this group actually improved, with the accident-year recorded at 89.4% when excluding catastrophes and pandemic losses, down from 91.8% in 2019.
Reserve strengthening also increased the Bermuda re/insurers’ aggregate combined ratio by 0.5 points in 2020.
Notably, this is the first instance of annual adverse development for the group since 2003, as liability reserves weakened and more than half of the firms tracked by Fitch reported overall adverse development.
Of these re/insurers, Fitch found that Everest Re posted the biggest reserve addition amount, mostly in reinsurance long tail lines, adding 4.6 points to its 2020 combined ratio.
However, Bermuda re/insurers reported strong premium growth last year, with group net written premiums increasing by 8% on the back of favourable pricing conditions.
According to Fitch, Arch and RenRe posted the most sizable NPW growth at 23% and 21%, respectively, due to both acquisitions and attractive organic growth opportunities available to well -positioned companies in the improved market environment
A further consideration in Fitch’s stable outlook is the increase in M&A activity in the Bermuda market, particularly among hedge-fund backed reinsurers, which have struggled to produce profitable writing results and higher risk-adjusted investment returns.
This activity included Third Point Re, which combined with Sirius International Group last month to form SiriusPoint. Similarly, Arch is set to acquire Watford Holdings and will own approximately 40% of the total return reinsurer following the deal.
