US & BERMUDA – U.S. and Bermuda reinsurers are well capitalised

According to A. M. Best, following the devastating catastrophe losses that occurred in 2011, reinsurers rebounded quickly to produce an average return on equity in the low double-digit range through the first nine months of 2012. It is expected that even with consideration for the catastrophe loss that occurred recently in the fourth quarter, reinsurers will be well positioned to put forward an acceptable level of underwriting and overall profit for the full year. 

From a capital perspective, the U.S. and Bermuda reinsurers are well capitalised and capable of absorbing significant losses from a combination of events. The ongoing weakness in the global economy presents unprecedented levels of uncertainty and challenges. Risks associated with underwriting and investment activities are manageable from a capital perspective. It is expected that there would be reasonable organic growth in reinsurers’ capital for 2013, tempered by active capital management strategies. While super storm Sandy had little effect on pricing going into the January renewal, some regional accounts that were impacted did experience price increases. Furthermore, while reserve releases have helped to bolster profits and will be likely to do so, this crutch will provide less support over time.