Global Reinsurance takes its annual look at the Bermuda market

Introduction
As capital flooded into Bermuda in late 2001 and early 2002, the question of whether the re/insurance industry could survive an event of the magnitude of September 11 was effectively answered. The next question, however, was whether the new investors were taking a short-term, opportunistic view of the business, or whether they were in it for the long run. With three successful IPOs of the so-called 'class of 2001' on the New York Stock Exchange (NYSE) to date, it is less the persistence of the original investment capital and more the persistence of the proposition which appears to count.

Continued progress
The Bermuda proposition remains strong. Bermuda-based re/insurers continue to outperform the S&P 500 on the NYSE, and the majority of Bermuda-based companies posted hugely improved figures for 2002.

Gross written premiums shot up in 2002 for many of the companies included in this survey. Class of 2001 writers had their first full year of underwriting, helping the increase in gross written premiums from $10.17bn in 2001 to $12.92bn in 2002. Many of the established writers had added to this bottom line, however, with only ESG, Inter-Ocean, Max Re, Richmond and Stockton Re recording falls in gross written premiums. Of these five, ESG and Inter-Ocean subsequently displayed fairly stable figures for net earned premiums.

The market hardening had a profound impact on income for the rest of the exchange-traded companies, with at least double digit growth for all the main players. Net income finally bucked the trend of recent years with either massive turnarounds or marked increases for all the major players. Again, it was generally the troubled companies that saw losses in 2002, though Max Re and OIL posted losses of $5.8m and $210m respectively.

On the downside, the post-Enron, WorldCom et al environment and the general US antipathy towards perceived tax havens and corporate inversions has contributed towards the net reduction in captives on Bermuda. Although the island remains the largest domicile by far, it recorded 30 fewer captives in 2002 compared to the previous year, despite an overall increase in the worldwide captive community.

Whether 2002 will also emerge as the year that rang the death knell of the finite sector remains to be seen. SCOR closed Commercial Risk Partners at the end of the year; Stockton Re, which had already passed its finite team across to Overseas Partners (which subsequently closed), went even quieter; and Centre Solutions stopped writing credit enhancement business. Other withdrawals included Scandinavian Re, offspring of troubled ABB, and Carolina Re, which collapsed following September 11 under less than transparent conditions.

Mutual Risk Management bid farewell to its Hemisphere business in February 2002, as it tried to raise funds to continue trading, while a year later Annuity Life & Re announced it had stopped writing new policies. In the meantime, the future of Trenwick lies in the balance as it now wholly relies on its Lloyd's operations.

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