Benfield reports poor Q1 growth in insurance sector

First quarter results for Bermuda’s primary insurance and catastrophe reinsurance rates reflect a drastic softening within the sector, according to Benfield Group Ltd.’s recent Bermuda Quarterly report (BBQ). Trends toward increasing selectivity and targeted marketing defined the quarter.
Bermuda’s leading reinsurers saw an overall growth of a mere 2% to $16.4 billion in Q1 2005. Benfield reports however, that most catastrophe reinsurers experienced lower premium income, new multi-line companies particularly in non-catastrophe segments recorded advances.
The report attributes the poor results to two catastrophes that struck during the first week of January 2005 Windstorm Erwin in Scandinavia and the Suncor Energy oil plant fire in Alberta, Canada, which sent total net down 9% to $2 billion. The groups combined ratio increased 3.4% points to an average of 90.9%. All companies reported positive results and combined ratios below 100%. Capital management exercises by AWAC, Montpelier Re and Axis were responsible for a 10% fall in the combined capital of this group.
“Capital management remained a key issue during the first quarter of 2005. Companies endeavored to ensure that their capital was geared at levels that would produce attractive returns as market conditions continued to soften,” the report stated. “The issue was particularly acute for the younger companies established in the immediate aftermath of 9/11.”
Benfield says property catastrophe prices continue to weaken with only the Florida mid-year renewal offering a “bright spot” in a generally downbeat market. Several companies expect to write less business in 2005 as underwriting discipline continues to be tested.
“The losses sustained right at the beginning of the year have dented earnings prospects for some, whilst the large catastrophe loss that would be necessary arrest the decline in prices suggests that acute pain might have to be inflicted before the market can turn,” the report says.