Bermuda market increases reliance on reinsurance - Reinsurance News

A new report by the Bermuda Monetary Authority (BMA) shows that the island’s insurance market has increased its reliance on reinsurance year-on-year.

Bermuda reinsurance Looking at market activity in 2018, the BMA found that on average, insurers ceded close to 52.0% of gross losses, which is an increase of about 2.4% compared to last year.

While reliance on reinsurance did increase overall in 2018, use varied widely across different perils.

Generally, perils that have potential for the largest losses, such as Gulf Windstorm, Miami-Dade Hurricane, Pinellas Hurricane and San Francisco Earthquake, were the most heavily reinsured.

The report also indicated that less reinsurance is being purchased for more rare events (1 in 1,000), compared to less rare events (1 in 50).

This is true for all perils except Japanese Typhoon and Earthquake (for 1 in 100 return period) where there is no monotonic relationship between retention and return periods. Nevertheless, for Japanese Typhoon, the average retention ratios are close for all return periods.

European Windstorm exhibits a rather flat demand for reinsurance across return periods. However, Atlantic Hurricane and North American Earthquake are the major perils where significant variation in the use of reinsurance per return period is evident.

Compared to 2017, this year’s gross catastrophe exposure assumed by Bermuda insurers increased by about 7.3%.

But accounting for the increase in ceded exposure, the net catastrophe exposure assumed by Bermuda insurers has decreased by about 14.8%.

The global share of gross estimated potential loss assumed by Bermuda insurers on the major catastrophe perils also increased by about 1.0%.

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 last year.

And on a net basis (after reinsurance), insurers are anticipated to retain approximately 92.0% of their statutory capital & surplus.

Overall, the global share of gross estimated potential loss assumed by Bermuda insurers on the major catastrophe perils (combined) has increased by about 1.0% in 2018.

BMA data shows that Bermuda insurers are more exposed to Atlantic Hurricane than any other peril, with gross average modelled losses over all companies stretching from US $798.4 million for the “1 in 50” year events up to $1.4 billion for the “1 in 1,000” year events.

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