Fitch Ratings expects Bermuda re/insurers’ underwriting results to weaken in 2025 due to pressure on premium rates and rising loss costs. However, strong returns should continue as capital remains strong.
Bermuda-based insurers and reinsurers are likely to maintain favorable returns in 2025 by upholding underwriting discipline.
The market pricing cycle has passed its peak, as seen in the January 2025 renewals, where prices remained stable or softened due to increased supply exceeding rising demand (see TOP 20 Reinsurance Companies in Bermuda 2025).
Fitch projects a combined ratio of about 90% for 2024, up from 86.5% in 2023. Catastrophe losses are expected to contribute 7-8 percentage points to the 2024 ratio, compared to 3.2 points in 2023.
Market conditions are expected to soften further by the 2025 mid-year renewals. However, if underwriting discipline holds, risk-adjusted returns should remain strong.
Fitch noted that Bermuda-based insurers and reinsurers will take a significant share of insured losses from the recent California wildfires.
Despite this, ratings are unlikely to be affected due to strong capital levels. The impact on reinsurance renewal pricing will depend on the total losses and how the event aligns with catastrophe loss expectations.
The ILS market is expected to remain stable unless major losses occur. Emerging risks like cyber insurance could expand but will need improved modeling before gaining significant participation.
ILS capital support was strong in 2024, driven by favorable property catastrophe risk pricing after a major price correction in 2023.
Catastrophe bonds delivered strong returns in 2024, with investors benefiting from high yields and the elevated positioning of catastrophe bonds in cedent catastrophe reinsurance towers.
Limited losses for catastrophe bonds with per occurrence triggers reflect their generally high attachment points. However, ILS capacity supporting aggregate reinsurance has been pressured by increased severe storm activity in the U.S. and the recent California wildfires.
According to Beinsure Data, Bermuda reinsurers expected improved underwriting performance in 2025 will be driven by accelerating premium rates with a market reset in pricing, terms and conditions, even amid heightened catastrophe losses, inflation and economic uncertainties.
Global ratings agency Fitch recently reported strong to very strong Insurer Financial Strength (IFS) ratings for Bermuda and U.S. insurers and reinsurers.
Arch received an ‘AA-’, RenaissanceRe an ‘A+’, and both SiriusPoint and Hamilton an ‘A–’, all with Stable Outlooks.