Moody's assigns stable outlook to Bermuda market reflecting robust balance sheets
Moody's outlook for the Bermuda insurance and reinsurance market remains stable, reflecting its view that over the coming 12 to 18 months, and subject to the level of catastrophe activity, the number of rating actions is likely to be moderate and driven more by specific characteristics of individual firms rather than by industry-wide conditions.
The outlook, contained in Moody’s Market Perspective: Bermuda Insurance & Reinsurance report, reflects generally robust balance sheets, strong operating profits generated over the past eighteen months, and enhanced risk management practices challenged by the inherent volatility of catastrophe-related lines, softening market conditions, and low barriers to entry in this industry sector that thrives on opportunities generated by market-wide disruptions.
Moody’s universe of rated Bermuda insurers and reinsurers has experienced significant strengthening of balance sheets following strong earnings momentum achieved over the past 18 months.
These firms generated average returns on equity of 20% in 2006, and have sustained their strong earnings in the first half of 2007, primarily reflecting strong post-2005 premium rate levels and a dearth of new catastrophe loss activity.
Furthermore, the earn-out of relatively well-priced business written over the past year should ensure good earnings momentum for the remainder of 2007 barring a large catastrophe.