Bermuda Insurance Sector Remains Resilient to Catastrophe Scenarios

The Bermuda Monetary Authority's (BMA) fourth annual Catastrophe Risk Report released at the end of last year reviewed the Bermuda insurance sector's capacity to absorb shocks from catastrophe risk events and assessed if Bermuda insurers are adequately capitalized to withstand severe, but remote, underwriting losses from possible catastrophe events. The report also looked at the level of reliance and sufficiency of reinsurance and pricing dynamics, as well as catastrophe modeling practices in Bermuda.

In looking at 2018 data, the BMA report found that the "Bermuda insurance market is resilient to potential adverse impacts from various global [catastrophe] underwriting loss scenarios and that there is a variation in reliance on reinsurance by insurers. The results also establish Bermuda insurers' ability to absorb these unlikely potential significant losses and still have capital remaining to settle policyholder obligations."

The report said, "Insurers are expected to retain, on average, 71.0% on a gross basis (before reinsurance) of their statutory capital & surplus after the largest single Cat underwriting loss event, a decrease of 5 points compared to [the prior] year. On a net basis (after reinsurance), insurers are anticipated to retain approximately 92.0% of their statutory capital & surplus after the largest single Cat underwriting loss event. These results highlight the industry's overall resilience."

Findings also showed no significant impact from the standardized terrorism stress scenario and cyber-risk worst-case annual aggregate loss scenario carried out by insurers. The gross estimate global share of catastrophe perils (combined) assumed by Bermuda insurers increased by around 1 percent with the most exposure to an Atlantic hurricane over any other peril.

"The use of reinsurance is generally more pronounced for lower frequency return periods for Atlantic Hurricane and North American Earthquake," according to the report.

Full details may be found in the report at www.bma.bm/publications/bma-surveys.