The Bermuda insurance market has demonstrated its resilience in recent years while weathering $100 billion of catastrophe claims, the global pandemic and soaring inflation and interest rates.

Having weathered those storms, PricewaterhouseCoopers says the recent January renewals show the market is finally in a position to deliver superior returns to its investors after years of sub-par results.

Matt Britten, PwC Bermuda, partner - insurance, said in a review released today: "When you think about just how challenging the environment has been for the Bermuda market, the multiple years of cat losses exceeding $100 billion, far-reaching impacts of the global pandemic, and more recently, rampant inflation and the rapid rise in interest rates, I think you have to say that the Bermuda market has weathered extremely well.

"It's shown fantastic resilience, it continues to innovate and it remains a market that attracts new capital and new entrants."

He said the newly hardened reinsurance market will make it more feasible for re/insurers and ILS firms to demonstrate they can deliver an acceptable level of returns to their capital providers.

He said: "I definitely feel that 1/1 of this year was a turning point, that should start to allow reinsurers to have a platform from which they can start generating those returns that will help them meet their cost-of-capital."

Mr Britten’s comments were echoed by Arthur Wightman, PwC Bermuda territory leader and insurance leader for the Caribbean region, who said insurers must use transformation programmes to position themselves for increased growth in a period of extreme uncertainty.

The review said PwC research showed that re/insurers had invested heavily on transformation programmes but had struggled to deliver the intended benefits.

It noted: “For example, the top property and casualty insurers’ underwriting profits have shown no material increase over the past two decades.”

Mr Wightman said: “The central challenge facing insurers today is how to adapt by transforming their organisations and operating models. We see six areas that represent the range of levers for insurance transformation – costs, distribution, capital, ESG, technology and people.”

He added: “There’s huge volatility in how climate change is manifesting, in terms of underwriting and the risks that are being underwritten. There’s an enormous amount of effort being placed on gathering data – new data that certainly looks different from data ten years ago, using technology to better understand, and price risk.”

The report noted that global insurance industry CEOs now see Inflation as their top threat and said no one who had entered the industry within the past 15 years had experienced “an inflationary environment like the one that exists today”.

It added: “And at the same time, a set of devastating environmental events all over the world have presented insurers with new challenges.”

The report noted: “Insurers and reinsurers find themselves in the eye of this storm not only because of the implications of climate change for claims, but because their huge investment capacity puts them at the forefront of efforts to speed the transition to a low-carbon future.”

Marisa Savage, PwC Bermuda ESG leader, said: “ESG is affecting both sides of the balance sheet for the sector as the regulatory focus on ESG and society’s expectations ramp up.

“Moreover, recent regulatory developments are forcing insurers to meet expectations with actions, especially on climate concerns, requiring institutions to develop a comprehensive and coherent approach to ESG across products and services, risk management and reporting.”