Best’s Report Finds Bermuda Companies Face ‘Significant Challenges’
A.M. Best Co.’s review of the Bermuda market’s results finds these companies strongly capitalized; However, Best warned that they will “face significant challenges during the current phase of the insurance cycle.”
Best said it “believes that companies also must consider the opportunity costs for prematurely deploying capital, which could be grave if a catastrophe occurs or margin compression accelerates.
A summary of the report’s conclusions includes the following:
— Most pressing are the lack of meaningful pricing improvements and the forecast for pricing pressure on January 1, 2010 renewals and beyond.
— Best expects reserve adequacy to be pressured within the next 12 to 24 months. Bermuda’s 2009 results are being bolstered by considerable reserve releases from prior years that have masked meaningful deterioration in recent accident years.
— Large catastrophic events are a major industry concern; however, often overlooked are the compounding effects of underpriced casualty business and possible significant reserve charges over many years.
— Uncertainty over the economy continues as the specter of inflation affects the demand for and pricing of insurance and reinsurance coverages.
— Claims inflation is being compounded by pricing constraints in nearly all classes of property/casualty risks and by severe competition in primary insurance markets, particularly casualty products and large commercial accounts.
— Credit/surety, directors and officers and longer-tailed casualty business lines such as workers’ compensation and other liability are raising the most concerns.
To access a copy of Best’s special report, go to: http://www3.ambest.com/bestweek/purchase.asp?record_code=166558&AltSrc=26
Source: A.M. Best – www.ambest.com
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