Fitch: Bermuda Market Remains Strong Entering 2013

CHICAGO--()--According to a new Fitch Ratings report, Bermuda (re)insurers withstood another year of sizable industry catastrophe losses supported by the group's strong capitalization and favorable risk management.

Fitch views Hurricane Sandy as an earnings event and not a capital event for the group of 17 large publicly traded (re)insurers with operations in Bermuda that Fitch actively follows. While companies will suffer a sizable hit to fourth-quarter earnings, Bermuda (re)insurers will still report an improved combined ratio of approximately 95% in 2012 compared to 107% in 2011.

Bermuda continues to lead the way as convergence of the reinsurance market and capital market persists. Many (re)insurers on the island are involved in both providing and using alternative forms of risk transfer to supplement the traditional balance sheet, with several Bermuda (re)insurers transforming into risk asset managers.

The protracted low yielding investment environment has not pushed Bermuda (re)insurers overall to stretch for yield and significantly increase portfolio risk. However, Fitch has witnessed a few companies that have made modest changes as a means to enhance investment returns, including partnering with asset management firms.

Further delay in the implementation of Solvency II until at least 2015 provides more time to achieve unqualified third-party country equivalence. However, it also postpones Bermuda reinsurers from realizing the potential market benefits from increased reinsurance demand under the new regulatory regime.

Several merger and acquisition (M&A) transactions were completed or announced in the Bermuda market sector in 2012. However, this activity was more opportunistic, as most Bermuda (re)insurers continue to trade at a discount to book value, increasing the relative attractiveness of share repurchases over M&A.

The full report, 'Bermuda 2013 Market Update' is available on Fitch's website at 'www.fitchratings.com' under 'Insurance' and 'Research'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Jan. 11, 2013).

Applicable Criteria and Related Research: Bermuda 2013 Market Update

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=699027

Insurance Rating Methodology ¬タヤ Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698731

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Contacts

Fitch Ratings
Brian C. Schneider, CPA, CPCU, ARe, +1-312-606-2321
Senior Director
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Christopher A. Grimes, CFA, +1-312-606-3263
Associate Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com

Sharing

Contacts

Fitch Ratings
Brian C. Schneider, CPA, CPCU, ARe, +1-312-606-2321
Senior Director
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Christopher A. Grimes, CFA, +1-312-606-3263
Associate Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com