Bermuda’s international Property and Casualty (P&C) re/insurance sector saw significant improvements in combined ratio and net income in 2023, driven by continued price improvements, stricter terms and conditions, limit and aggregation management, and favourable investment returns, according to the Bermuda Monetary Authority (BMA).
Despite this progress, the BMA highlighted ongoing global economic uncertainties, including persistent inflation, fewer expected interest rate cuts (especially in the U.S.), and rising claims costs. While fears of a recession have eased, slow growth raises concerns about stagnation.
Although global catastrophe losses are estimated to exceed $100 billion, Bermuda’s re/insurers saw improved profitability, aided by fewer severe disasters, increased retentions, restricted coverage, and restructured programmes to manage premium budgets.
The BMA continues to monitor market trends and risks, particularly Bermuda’s high exposure to catastrophic events. Stress testing and risk assessments are integral to evaluating the ability of Bermuda insurers to withstand financial shocks and natural disasters.
The BMA affirmed that “Bermuda insurers remain well capitalised to absorb any unlikely and potentially significant losses.”
Key findings from the BMA’s 2023 Cat Risk Return and Schedule of Risk Management results include a 2.69% increase in gross loss exposure assumed by Bermuda insurers, reaching $204.51 billion in 2023, compared to $199.11 billion in 2022. The Bermuda market also maintained 23% of the global market share year-over-year, with Cat exposure remaining stable after market hardening in 2022.
Bermuda insurers are most exposed to the Atlantic Hurricane peril, with modeled average losses ranging from $930 million for 1-in-50-year events to $1.76 billion for 1-in-1,000-year events. Other perils show lower modelled losses for similar events, with some variation across firms. Reinsurance usage is widespread, particularly for lower-frequency return periods for the Atlantic Hurricane and North American Earthquake perils.
The BMA concluded, “The stress test results demonstrated that the Bermuda insurance market is resilient to potential adverse impacts, including the financial market, Cat and other underwriting loss scenarios. These results highlight the industry’s overall resilience and establish Bermuda insurers’ ability to absorb these unlikely and potentially large losses while still having capital remaining to settle policyholder obligations and meet regulatory capital requirements.”
