Bermuda reinsurers are losing ground on North American rivals

Bermuda-based reinsurers are losing ground when their profitability is compared to that of their peers in North America, according to Fitch.

The combined ratio of Bermuda-based reinsurers is deteriorating and profitability is further pressured by low investment returns, Brian Schneider, senior director at Fitch Ratings, said during a pre-Monte Carlo event.

While the combined ratio of North America-based reinsurers has been increasing since 2013, the speed has been slower at Bermuda-based players, according to the ratings agency, narrowing the gap. At the same time, Bermudians’ return on equity advantage is shrinking.

In addition, the favourable reserve development of Bermuda-based players is declining. Reserves as a percentage of net earned premiums fell to 6 percent in the first half of 2016 from 8 percent in 2009, according to the presentation. At the same time, North America-based reinsurers’ ratio remained broadly stable at around 2 percent over the period.

Schneider also noted that alternative reinsurance capacity growth is slowing down. Non-life catastrophe bonds issuance fell to $6.8 billion in 2015 from $8.3 billion in 2014. In the first half of 2016 volumes were $3.5 billion.