Fitch gives Bermuda (re)insurance market a ‘stable’ rating

Fitch Ratings has given the Bermuda property and casualty insurance and reinsurance market a ‘stable’ outlook, drawing attention to the challenges the market will face in the near future as a result of the current soft market.
“Scenarios that could lead Fitch to change its Bermuda market rating outlook to negative include evidence that the current soft-market conditions are likely to deteriorate further beyond those experienced in the 1997-2002 soft market, especially if they are accompanied by ‘shock’ catastrophe-related losses or investment-related losses similar in scope to those experienced in 2002-03,” Fitch noted in a press release.
The ratings agency noted North American exposures dominated the business mix of Bermuda-based (re)insurers. Almost 66% of the Bermuda insurance market is derived from North-American-based exposures.
“Fitch views this as a reasonable geographic spread of risk but believes that the North American exposures are overweighted and that Asia/Australia (4%) and Latin American (2%) exposures are underweighted in comparison to insurable exposures in those regions,” Fitch says.
Perhaps the key challenge for Bermudian (re)insurers is managing expansion strategies, Fitch says.
Several Bermuda reinsurers went after excess and surplus lines business in the United States that has not been available historically available to Bermuda. And some Bermuda insurers have recently purchased or established Lloyd’s syndicates.
These expansion efforts do carry start-up costs, Fitch notes, and are “unlikely to see meaningful premium growth from this business in the near term given broadly softening market conditions.”