The impact of Covid-19 on the Bermuda insurance market has been an “earnings” event affecting the insurers' income statements and not a capital event affecting their solvency positions, a Bermuda Monetary Authority report has said.

But the BMA also surmised that some insurance events, directly and indirectly linked to the Covid-19 pandemic, are still unfolding, increasing the overall uncertainty associated with assessing the full impact of the pandemic on the sector.

The document dated December 2021 is the Bermuda Insurance Property and Casualty Market Catastrophe Risk and Stress Testing Analysis 2020 report.

It includes comments from Gerald Gakundi, BMA director, supervision (insurance).

The report advised insurers to take prudent measures, including avoiding actions that significantly reduce liquidity and capital through until insurers have sufficient clarity as to the underwriting and financial exposure resulting from Covid-19.

In addition, the authority has increased the frequency and level of consultation with other regulators and other international partners.

The report said: “The stress test results demonstrated that the Bermuda insurance market is resilient to potential adverse impacts from various global adverse financial market, cat and other underwriting loss scenarios.

“These results highlight the industry’s overall resilience and establish the insurers’ ability to absorb these unlikely potential large losses while still having capital remaining to settle policyholder obligations and meet regulatory capital requirements.”

An executive summary highlights that overall the 2020 catastrophe risk results showed that the gross loss exposure assumed by Bermuda insurers grew 7.5 per cent, from $193.7 billion to $208.3 billion.

In addition, the global share of gross estimated potential loss assumed by Bermuda insurers on the big cat perils combined had increased by 3 per cent to 24 per cent (from $181.9 billion to $193.1 billion).

The report adds: “Bermuda insurers are more exposed to Atlantic Hurricane than any other peril, with gross average modelled losses over all companies stretching from $817.1 million for the "1-in-50” year events up to $1.5 billion for the “1-in-1,000” year events.

“Other perils show lower modelled losses for the “1-in-50” and the “1-in-1,000” year events with significant variation between firms. The use of reinsurance is widespread and is generally more pronounced for lower frequency return periods for Atlantic Hurricane and North American Earthquake.