Canadian Underwriter

Bermuda (re)insurance M&A likely to persist, ratings outlook for U.S. p&c and global reinsurance stable

January 28, 2016   by Canadian Underwriter

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The pace will slow from 2015, but mergers and acquisitions (M&A) activity and consolidation in the Bermuda insurance market will continue in 2016, notes a new report issued this week by Fitch Ratings.

Pace of consolidation to slow for Bermuda insurance market in 2016

“Organic growth options are limited and scale and diversification are driving a rapid pace of M&A activity for Bermuda insurers and Fitch expects industry consolidation to continue,” Brian Schneider, senior director of Fitch Ratings, says in a company statement.

The fragile conditions in the global (re)insurance market – characterized by falling prices and weakening terms and conditions – are working to pressure earnings for Bermuda (re)insurers, notes the new report, Bermuda 2016 Market Update.

Despite global market challenges, the rating agency reports that “the Bermuda insurance landscape remains strong in Fitch’s view as the island adapts to changing market conditions,” citing favourable tax status and strengthening regulatory framework as among the features that help Bermuda compete on the global (re)insurance playing field.

Fitch Ratings maintains a stable rating outlook on both U.S. property and casualty insurance and global reinsurance – which includes Fitch’s coverage of Bermuda market (re)insurers – but its “reinsurance sector outlook is negative as premium prices are expected to fall further in 2016 while investment yields will remain close to historic lows,” the rating agency states.

“The U.S. property and casualty insurance sector outlook is stable as a shift towards sharply inadequate premium rates or profit levels approaching operating losses is not anticipated,” it adds.

Fitch Ratings further reports that it does not expect the hedge fund reinsurance market to accelerate in 2016, but does expect to see captive reinsurers and hedge funds partner in the market.