Most Bermuda insurers and reinsurers recouped their bottom-line losses for 2005 with their 2006 earnings, according to a recent partial survey of the sector.
The findings were reported in the 13th annual Bermuda Insurance Survey–a collaborative effort between Deloitte, Standard & Poor’s and The Bermudian Business magazine.
Of 20 insurers and reinsurers participating in the survey, the study found only monoline catastrophe writers Montepelier and IPCRe reported 2006 earnings that were lower than 2005 losses arising from Hurricanes Katrina, Rita and Wilma.
For 23 surveyed Bermuda companies as a group–including three that started up operations after the 2005 storms–net earnings were a record $11.7 billion, with an overall average rate on equity (ROE) of 22 percent, according to figures compiled by N.Y.-based Deloitte.
The report said that the next best recent year for Bermuda companies was 2003, with an average return of 16 percent.
S&P, which analyzed such figures, however, sounded alarmed about longer-term performance, noting that the average return over the last six years–based on results of surveyed participants from 2001-2006–was 7 percent.
The N.Y.-based rating agency characterized this result as disappointing, adding that for the handful of Bermuda monoline property-catastrophe reinsurers operating for more than 10 years, “the 2005 catastrophe season erased years’ worth of earnings and cost them huge chunks of their capital bases.”
Still, a bar graph in the report reveals that three of the top 10 Bermuda companies, ranked by 2006 ROE, were monoline property-cat reinsurers–Top Layer Reinsurance Limited, RenaissanceRe Holdings Ltd., and IPC Holdings.
Top Layer Reinsurance Limited–a joint venture of RenaissanceRe and State Farm writing very high layers of property catastrophe reinsurance programs–had the best 2006 ROE, at 48 percent, followed by OIL Insurance Limited, a liability insurer owned by policyholder members of the energy industry, which came in at 42 percent.
Newcomers also did well, with Amlin Bermuda leading the pack of 2005 entrants, coming in third overall with an ROE of 30 percent. Other 2005 entrants participating in the survey, Validus Holdings and Flagstone Reinsurance Holdings, had returns of 17 percent and 19 percent, respectively.
In addition to key balance sheet and income statement items, Deloitte also compiled information about line-of-business and geographic compositions of the books of business of each of the 23 companies.
Beyond the numbers, Deloitte also surveyed Bermuda companies about top concerns, finding that the top issue is the ability to maintain profitability while growing market share. The next two strategic concerns were competition and limited resources, like space and personnel, according to the report.
Deloitte distributed the report to clients last week. The report was previously published in the April/May edition of Bermudian Business.