Bermuda Reinsurers '05 Storm Loss $11. 3Billion

Bermuda's reinsurers--following losses of $11.3 billion from Hurricanes Katrina, Rita and Wilma--registered a total 2005 net loss of $2.8 billion compared with a profit the previous year of $5.5 billion, according to a reinsurance intermediary.

London-based Benfield, in its latest "Bermuda Quarterly" report, said 11 Bermuda reinsurers reported losses in 2005 compared with only one in 2004.

The average return on equity for Bermuda reinsurers sank to negative-6 percent from a positive 13.1 percent in 2004 and a peak of 19.1 percent in 2003, Benfield reported.

Gross premium written by the group increased by 6 percent to $57.1 billion, but growth rates more than halved for the second year in succession.

The average combined ratio, Benfield found, deteriorated from 96.3 in 2004 to a record high of 118 in 2005, with only two companies reporting combined ratios below the 100 breakeven point.

Balance sheets, Benfield reported, were hit hard by the 2005 storm losses, but capital replenishment was swift and outpaced losses--leaving total capital up 5 percent to $47.2 billion.

Benfield said some $18.4 billion U.S. of new capital flowed into Bermuda after Hurricane Katrina to replenish battered balance sheets and exploit the expected price increases and capacity shortages, with 53 percent going to established companies, 40 percent going to start-ups and the remainder into so-called side-cars.

Benfield noted that since Hurricane Katrina, five Bermuda companies have either ceased underwriting or re-orientated their business.

"Bermuda's underwriters were chastened by the 2005 hurricanes," according to Chris Klein, a member of Benfield's Industry Analysis and Research team. "Companies reacted by reducing their risk exposure, changing their catastrophe models and increasing their reinsurance protection."

Mr. Klein added that 2006 renewals "witnessed robust price increases in loss-affected areas, but elsewhere expectations were tinged with disappointment as the response was more moderate."

He said that reinsurance capacity is expected to tighten for the July 1 renewals as catastrophe models are recalibrated, appetite shrinks for peak exposures and increased cost of capital exerts further sustained upward pressure on pricing.

Benfield compiles and shares information on Bermuda's 16 leading reinsurers on a quarterly basis. A full copy of the report can be viewed online at www.benfieldgroup.com/research. Printed copies can be obtained by contacting IAR@benfieldgroup.com.