Bermudian reinsurers post US$11.6-billion profit in 2006

What difference the year makes: Bermudian reinsurers posted a collective profit of US$11.6 billion in 2006, compared to a US$2.1 billion loss in 2005.
2006 was a record year for the Bermudian reinsurance market, with companies reporting bumper earnings and bulging balance sheets as the predicted hurricanes failed to materialise, according to a press release announcing the publication of the latest Benfield Bermuda Quarterly report.
Total capital of the Benfield Bermuda Quarterly group grew by 24% in 2006 to US$64 billion, a record amount that has almost doubled in size since 2002.
Strong retained earnings were the key driver, representing over three-quarters of the increase in capital in 2006, Benfield announced in a release. The aggregate combined ratio decreased from 116.6% to 86.3%, with the very light catastrophe burden complemented by favourable development of prior years loss reserves.
Total premium income was 3% lower, at US$58billion, reflecting an underlying mixed trend [Half of the Benfield Bermuda Quarterly group reported increased premiums]. Lower catastrophe exposures, higher retentions, decreased reinstatement premiums and the non-recurrence of two large life transactions were significant factors, Benfield said.
Along with the record results came a word of caution from Benfield.
The record returns of 2006 will be difficult to sustain, said Chris Klein from Benfields industry analysis and research team. Results in 2007 will be challenged by either decreasing rates or increased claims if predictions of greater hurricane activity are fulfilled. It is not surprising that capital management remains firmly on the agenda.