Capitalisation and returns on capital are likely to remain broadly supportive of the Bermuda market re/insurers' ratings over the next year to 18 months months despite cyclical pressures, according to Fitch Ratings.

Fitch's expectation is that the Island's re/insurers' capitalisation metrics will remain materially unchanged despite expected share repurchases. Returns on capital are likely to be in the high single digits as the soft rate environment and a reduction in favourable reserve development reduce earnings in 2010.

Improving capital market conditions, including recoveries in equity market prices and reductions in corporate bond spreads bolstered the Bermuda market re/insurers' capital positions significantly in 2009. From a credit perspective, Fitch views this as somewhat offsetting the negative effect of the soft pricing environment faced by the Island's re/insurers.

Fitch noted that its selected Bermuda market re/insurers generated an 85.5 percent combined ratio for the first nine months of last year. As re/insurance companies report fourth quarter 2009 earnings over the next several weeks, the ratings agency expects that the Bermudian companies will report strong full year underwriting profits and returns on capital. The industry benefited from a benign hurricane season and favourable reserve development in 2009, however Fitch expects these trends to be less favourable in 2010.

The full report "Bermuda Market Update" is available on the Fitch Ratings website at www.fitchratings.com and covers a range of topics from capitalisation and return expectations, market conditions underlying Fitch's capitalisation and return expectations, to the market's 2009 financial performance and factors that could influence credit rating direction.