Bermuda Insurers, Reinsurers Set To Return to Underwriting Profitability

Bermuda insurers and reinsurers should show a return to underwriting profitability for 2021, with combined ratio improvements and continued premium increases more than offsetting increased catastrophe losses, according to Fitch Ratings.

Fitch said it expects insurance and reinsurance pricing to continue to rise but at a declining rate through midyear 2022 renewals. Market pricing increased at the January 2022 reinsurance renewals, Fitch noted, continuing the rate increases that have been occurring since early 2018.

Fitch said the 2022 fundamental sector outlook for global reinsurance is improving, while the sector outlook for US property-casualty insurance is neutral.

"The improving outlook for global reinsurers reflects better expected financial performance from higher prices in a hardening market environment and a strong economic recovery, depending on the evolution of coronavirus variants," a Fitch statement said.

The rating agency said market hardening is supported by heightened catastrophe losses, climate-risk concerns, record low interest rates, and deteriorating loss-cost trends. Other factors contributing to market hardening include rising economic and social inflation, declining casualty reserve adequacy, and growing cyber claims, Fitch said.

"Bermuda's advantageous tax status will be reduced at the margin under the multilateral agreement to establish a 15 percent global minimum tax rate under Pillar Two of the [Organization for Economic Cooperation and Development] Inclusive Framework on Base Erosion and Profit Shifting (BEPS)," Fitch said. "Near-term rating actions for Bermuda (re)insurers are not expected as a result of the agreement, although long-term implications remain to be seen."