Bermuda P&C companies reducing exposures rather than pursuing market share: AM Best report

Catastrophe pricing in Bermuda’s insurance and reinsurance market has improved in certain loss-hit regions, but some companies are reducing exposures rather than pursuing greater market share, an A.M. Best Special Report has found.
“Similar to what occurred after the Chilean earthquake and the Deepwater Horizon oil platform disaster in 2010, catastrophe-torn areas and related lines of business have seen pricing improve in 2011,” says the report, Resilient Bermuda Market Faces Persistent Challenges. “However, the difference in 2011 is that some companies are reconsidering catastrophe limits exposure for what are considered non-core geographic areas.
“Generally speaking, these non-core areas have more uncertainty in the models, and, by extension, price adequacy can be questionable. So while catastrophe pricing has improved in certain regions, companies are reducing exposures as opposed to crowding into a market for a larger share.”
The report notes further that this strategy will have some impact on a company’s strategy to diversify risks. “While diversification can be beneficial to a company, diversifying to low-margin lines of business can be problematic when the larger losses come, as was the case for some companies in 2011,” the report says.
Overall, the report concludes, the Bermuda insurance and reinsurance market has weathered pressure on its capital base from devastating 2011 catastrophe losses, a prolonged soft market and low investment returns, positioning companies for a potentially difficult yet promising renewal season.