Bermuda companies take a hit from LA wildfires
Bermuda insurers and reinsurers will be impacted by California wildfires in a meaningful way, a ratings agency has determined.
Fitch Ratings said the companies they follow on the island can expect deteriorating underwriting results this year as premium rates are pressured and loss costs increase.
Fitch said the combined ratio will approximate 90 per cent for full-year 2024, which was not as good as the 2023 combined ratio of 86.5 per cent.
The agency’s “Bermuda 2025 Market Update” stated: “Catastrophe losses will represent 7 to 8 percentage points on the 2024 combined ratio, up from 3.2 points in 2023.
“Fitch expects the Bermuda market to have a meaningful share of insured losses from the recent California wildfires for both primary business and reinsurance.
“However, we do not expect ratings to be affected, given plentiful capital levels.
“The potential impact on reinsurance renewal pricing from the fires will depend on the ultimate level of loss and the remoteness of such an event relative to catastrophe loss expectations.
“The January 2025 reinsurance renewal demonstrated that the reinsurance market cycle is past its peak, with stable to softening pricing as increased supply was more than adequate to meet higher demand.
“Fitch expects market conditions to soften further at the 2025 midyear renewals, although risk-adjusted returns will remain favourable as underwriting discipline is maintained.
“Shareholders’ equity grew 18 per cent at 9M24 from year-end 2023 due to underwriting gains, solid investment income, and equity and bond market gains, partially offset by an increased return of capital to shareholders.
Return on average equity will be favourable in 2024 at near 18 per cent, although down from the superb 25.4 per cent in 2023.
• For more on Fitch Rating’s “Bermuda 2025 Market Update”, see Related Media
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