Wednesday, 25 January 2012
Fitch sees Bermuda market as ‘fundamentally resilient’
Fitch Ratings has said that Bermuda-domiciled reinsurers are well positioned to benefit from an improved underwriting and somewhat better pricing environment this year, following a very difficult 2011.
Fitch Ratings said in a report that it sees the Bermuda market as: “Fundamentally resilient, with a strong, albeit diminished, capital position and a proven ability to adapt in meeting capacity needs.”
Market underwriting capacity remains strong, said Fitch, even though overall capital declined slightly in 2011 for the 17 Bermuda-domiciled insurers that Fitch actively follows.
“Moreover, an uncertain earnings outlook puts additional pressure on (re)insurers to preserve existing capital, as Fitch regards maintaining focus on profitable underwriting as the key factor in preserving capital,” the rating agency said.
It added that regulatory changes are expected to introduce both opportunities and threats, as the island faces competition from other jurisdictions, tax-status scrutiny, and changing collateral rules. Reinsurance demand may be boosted by the need for insurers operating under Solvency II to hold more risk capital. However, Fitch pointed out that with Bermuda seeking Solvency II equivalence, “the country's regulatory framework will, at a minimum, become less flexible, reducing its appeal as the preferred location for start-up companies.”
Following the financial crisis of 2008, AIG received a $182bn loan from the US government and taxpayers to save its business, which had been severely damaged by a foray into the credit default swap business and the global economic meltdown. Four years later, in December 2012, AIG announced that it had repaid its entire debt, plus a positive return of more than $22bn, to the US government.This restructuring and repayment was led by AIG president and chief executive officer, Robert Benmosche.