Our aim was to create some meaningful time series by which we could monitor the development of the market. One year later, we were struggling to maintain the consistency of that approach, and since then the changes have been so radical that each year, the Pricewaterhouse Coopers team has revised its strategy.

A good measure of how the market has developed is the way that the three largest companies, those we are calling the “billion dollar writers,” have grown. From the end of 1996 to the end of 1999, the total assets of ACE, XL Capital and PartnerRe increased dramatically, primarily as a result of acquisitions: ACE from $4.6 billion to $30.1 billion (up 554%); XL from $5.0 billion to $15.1 billion (up 202%) and PartnerRe from $1.5 billion to $7.6 billion (up 407%).

This year, therefore, the PricewaterhouseCoopers' analysis looks first at the forces that are shaping the Bermuda market as a whole, and second the development of these three companies, which over the last year have consolidated their position on the global stage. The report concludes with discussion of the relationship between Bermuda and Lloyd's, where Bermudian companies this year provide more than 18% of total market capacity.

In terms of the market as a whole, three trends stand out:

  • Corporate activity, mergers and acquisitions (, which are part of the global reshaping of the property/casualty industry;

  • The relocation to Bermuda of several US reinsurers, sometimes as a result of mergers and acquisitions, but also as part of their corporate strategy;

  • New formations and product developments. The use is growing of capital market/convergence type products, such as weather derivatives, insurance linked securities and financial guarantee products. Bermuda is also becoming a centre for life reinsurance business.

    To this list could be added a corollary: the demonstration by European windstorms Lothar and Martin in December 1999 of the potential impact of natural catastrophes.

    Bermuda today clearly has to be considered as an integral part of the global (re)insurance market, not just as a niche player. Like their counterparts elsewhere, Bermuda (re)insurers in most cases reported generally poorer financial results in 1999. Those that did not experience such reductions were generally specialty companies that have managed to develop niche markets for their products and expertise.

    Billion dollar writers

    For their part, ACE and XL Capital have remained very active in the M&A sphere, while PartnerRe has largely concentrated on consolidating and integrating the important deals it completed in 1998. The result is that all three now write a far more diversified book of business than they did even three years ago, and from their common roots, ACE and XL Capital have increasingly differentiated profiles. PartnerRe, although no longer a pure property catastrophe reinsurer, has specific areas of concentrated expertise.

    The larger and more diversified these groups become as part of the relatively small worldwide property/casualty industry, the more their business is representative of the industry as a whole. Inevitably, they have had to struggle with the same stresses as the rest of the market: over-capacity fuelling rate competition, cost pressures and stock market infatuation with new economy companies.

    Their costs and loss experience, likewise, will more closely approach the industry mean, and this is, indeed, an indication of the PricewaterhouseCoopers study. However, these companies were established to meet a need, and they have prospered as a result of their ability to adapt continually to changing circumstances and take advantage of new opportunities, such as the growing market for financial guarantee risks.

    Already in 2000, we are seeing more positive financial news emerging, and the FT-Bermuda Stock Exchange Insurance Index, which at one point had dropped to half its launch value of 1000, is now back around 650. Next year will undoubtedly bring another stage in their evolutionary process.


    The storms Lothar and Martin occurred too late in the year to affect property catastrophe renewals at 1 January 2000, but, by April, there were indications of modest firming in property rates. Casualty, however, generally remains flat. The potential exposures revealed by Lothar and Martin are expected to increase demands for higher level protection, but generally, the traditional property/casualty market is a mature one. Improvements in pricing are likely to be gradual and, with financial markets looking for more than bit parts, modest as well.

    On the other hand, commerce is looking for much more flexible risk management solutions and demand is growing substantially for long-term income protection and savings products for an ageing but wealthier population in developed countries. Bermuda companies are well placed to grow from the opportunities that both these trends present.

  • Lee Coppack, Editor, Global Reinsurance.