Fifteen Bermuda-based companies appear in the world's top 35 reinsurers by gross premiums written last year, according to credit rating agency AM Best.

The Island's biggest writer of reinsurance in 2008 was PartnerRe, which amassed premiums of $4.03 billion and ranked ninth globally.

The results do not take into account PartnerRe's acquisition of Paris Re, which itself was ranked 22, with $1.4 billion in gross premiums written.

Everest Re was 11th in the rankings with $3.68 billion, while XL Capital was 12th and the third biggest Bermuda reinsurer with $2.95 billion.

The rankings appear in Best's special report on global reinsurance, which suggests reinsurers' performance in a treacherous 2008 could be called "an achievement". It has a "stable" outlook for the reinsurance industry.

Twelve of the 15 Bermuda reinsurers achieved underwriting profitability, despite the destructive Hurricane Ike which sparked more than $20 billion in claims, while hurricane Gustav cost $4 billion.

But Best suggested that the Bermuda and US markets' underwriting results were driven by the release of loss reserves, after estimates of claims for prior-year events proved to be less than anticipated. This shaved some seven points off the segment's loss ratio.

"AM Best believes the degree of favourable loss reserve development is not sustainable," the New Jersey-based agency states in its report. "Any cushion accumulated from the previous hard market likely has subsided, given increased accident-year loss trends.

"Yet to be seen, though, is whether inflation will take hold as increased government spending and other factors stoke inflationary pressures in the global economy.

"The effect on insurers' pricing, investment strategies and demand for their products will depend on the magnitude of any surge in inflation."

But Best also highlighted the devastating impact of the credit crunch and the plunge in asset values that caused huge realised and unrealised losses among reinsurers.

A remarkable 35 percent of the Bermuda and US markets suffered losses that exceeded 20 percent of shareholders' equity, Best said. Shareholders' equity for the group fell by 15 percent last year.

"Although the segment's fundamental operating performance in 2008 was favourable, considering the challenges encountered, total return measures were hampered, with many carriers experiencing negative double-digit returns," Best said.

"Nevertheless the US reinsurance and Bermuda market's three-year total operating return measures are strong and highlight the ability of several carriers to manage the underwriting cycle."

Like Best, Standard & Poor's has a "stable" outlook for the reinsurance industry.

S&P said reinsurers were showing "impressive" resilience in coping with the financial crisis and a rise in large insured losses.

"Almost without exception, the sector has shown an impressive level of resilience in the face of an unprecedented confluence of events," S&P analysts Peter Grant, Laline Carvalho and Rob Jones wrote in a report published last week. "Over the past decade, the reinsurance sector has endured seven of the 10 largest insured losses in history."

The June-November Atlantic hurricane season, which can result in reinsurers' most costly claims, hasn't produced a major storm on the US coast this year.

"The combination of the extreme turbulence experienced in global financial markets, and the insured losses attributable to Hurricanes Gustav and Ike, had a very material adverse effect on the level of available capital within the sector," S&P said. "However, this unprecedented confluence of events happened to coincide with peak of the cycle capital adequacy."

Reinsurers gathered for their annual meeting with clients in Monte Carlo last week, setting off negotiations for next year's contract renewals.

Moody's Investors Service last week lowered its outlook for the reinsurance industry to "negative" from "stable" because the state of capital markets may make it difficult for companies to replenish funds, "particularly when signs point to greater price competition in 2010".

Fitch Ratings kept its outlook "negative" on September 2, saying reinsurers may struggle to replenish losses should funds become drained by natural disasters.