Bermuda reinsurers have entered the year strong, withstanding natural catastrophe losses in 2012 well because of “strong capitalization and favorable risk management,” reports Fitch Ratings.
While companies will take a hit to their fourth quarter earnings from 2012, October’s Hurricane Sandy was an “earnings event and not a capital event” for the 17 large publicly traded companies with Bermuda operations that Fitch follows, the company says.
Those reinsurers will still report a combined ratio of about 95% for 2012, compared with 107% the previous year, the ratings company says.
Many of those companies are “providing and using alternative forms of risk transfer to supplement the traditional balance sheet,” with several of them “transforming into risk asset managers,” Fitch says.
Fitch also notes that the Bermuda market saw several mergers and acquisitions (either completed or announced), but that was “more opportunistic, as most Bermuda (re)insurers continue to trade at a discount to book value, increasing the relative attractiveness of share repurchases over M&A.”