The capacity of the Bermuda insurance and reinsurance market grew to more than $75 billion by year-end 2007, a rating agency report said today

Oldwick, N.J.-based A.M. Best, reviewing 2007 key financial results for the Bermuda market and using total shareholders' equity as a measure of capacity, noted that the total for the Bermuda market jumped more than 14 percent to $76 billion in 2007.

At the end of 2006, shareholders' equity was $66.4 billion, Best said in the report, "Bermuda Insurers Carry Strength Into Softening Market."

The report said that the $10 billion change represented both earnings from incumbents and from the Class of 2005 insurers--those that were launched following Hurricane Katrina.

Looking at the two-year surge in shareholders' equity, the report said that excluding the Class of 2005, total shareholders equity for the remaining Bermuda companies rated by Best increased 46 percent from 2005 to 2007.

The report noted that the Class of 2001 Bermuda companies--those set up in the wake of the 9/11 attacks--grew capital even faster than established counterparts, with the Class of 2001 group reporting a 48 percent jump in shareholders' equity.

To get rid of some of the excess capital, carriers have been actively buying back shares and paying out dividends, the rating agency reported, adding that mergers and acquisitions will become a dominant theme in 2008.

"CEOs should expect to field calls from investment bankers pitching opportunities as routinely as drinking the morning cup of coffee," Best analysts wrote in today's report.

For the most part, other key financial results for the Bermuda market as a whole stayed relatively flat in 2007, according to the figures presented in the Best report.

o Net premiums were $44.2 billion in 2007, compared to $43.8 billion in 2006--a jump of less that 1 percent.

o Net income fell 0.9 percent in 2007 to $11.4 billion, compared to $11.5 billion in 2006

o The overall combined ratio was 82.9 in 2007, compared to 83.6 in 2006.

Commenting on underwriting results, the Best report said that the overall combined ratio benefited from significant loss reserve releases related to prior accident years, with such releases reducing the overall combined ratio by 5 points overall.

In addition, Best noted that some Bermuda companies had double-digit reserve releases relative to earned premiums. These included: Max Capital, 12.3 points; Allied World, 10.6 points; Partner Re, 12.9 points; Endurance, 10.0 points; AXIS, 12.3 points; Renaissance Re, 16.4 points.

"A.M. Best does not view the trend of reserve releases as sustainable and expects the redundancies to be largely exhausted through 2009," the report said.