Bermuda reinsurers show tale of two dramatically different results

The Bermuda reinsurance market wildly fluctuated between fantastic results in 2006 and brutal results in 2005, according to an A.M. Best report.
In 2005, the Bermuda market reported a devastating combined ratio of 119.4%. However, in 2006, the combined ratio was only 83.7% a vastly significant improvement.
Underpinning this dramatic improvement was the robust level of price improvement attained in 2006 relative to U.S. catastrophe-exposed business, the report states. That, combined with the absence of major catastrophe losses and favorable loss-reserve development emerging from the 2003 and 2004 underwriting years, set the stage for one of the most favorable earnings years on record.
The composite return on equity (ROE) of Bermudas reinsurers in 2006 was 19.3%, with net investment income totalling US$7 billion. Underwriting activities generated earnings of US$6.9 billion and net income was US$11.6 billion.
A.M. Best said Ace, XL Capital, Everest Re and Partner Re in 2006 were leading the pack in terms of net premium volume in 2006, while property-catastrophe-oriented companies are reporting the lowest combined ratios in the sector.
Also of note is the flow of capital to Bermuda, which began in 2005 when US$7 billion in new capacity was sent for the formation of new reinsurance and insurance companies. In 2006, 20 sidecars were created with US$4.5 billion in capital. All of this capital was poised to reap the benefits of the hardest property cat market since just after Hurricane Andrew in 1992, A.M. Best reports.