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BMA Report: Bermuda's Catastrophe Resilience Stronger Year over Year

Bermuda flag-SF
December 04, 2018

The Bermuda Monetary Authority (BMA) has released its third annual "Catastrophe Risk in Bermuda" report. According to the report, Craig Swan, managing director, supervision (insurance), said that the (re)insurers' 2017 filings to the BMA indicated their continued resilience to major, but improbable, catastrophe events and the sophistication and advancement of catastrophe modeling practices in Bermuda.

The report's executive summary explained the report's four main objectives, as follows.

  1. A high-level overview of the capacity of the sector to absorb shocks from various catastrophe risk events underwritten by Bermuda insurers (including reinsurers)
  2. A review of the various stress tests to assess if Bermuda insurers are adequately capitalized to withstand severe, but remote, underwriting losses from various possible catastrophe events that might adversely impact their balance sheets
  3. Analysis of the exceedance probability curve trends, including the level of reliance and sufficiency of the reinsurance, and pricing dynamics
  4. Analysis of the catastrophe modelling practices in Bermuda

Mr. Swan said, "Bermuda is predominantly a wholesale reinsurance market offering a variety of risk transfer solutions covering life and annuity, specialty, and catastrophe risks. Evidencing the magnitude of the catastrophe capacity that Bermuda (re)insurers supply, it is noted that the industry paid $30 billion in claims to mainland United States and Puerto Rico alone for Hurricanes Harvey, Irma, and Maria in 2017."

The report said, "Bermuda insurers are more exposed to Atlantic hurricane than any other peril."

"Compared to 2016, this year's net catastrophe exposure slightly decreased by about 2.0 percent, while the (re)insurers have increased their statutory capital and surplus by 12.0 percent. Consequently, the overall industry's resilience to potential catastrophe events has further strengthened compared to last year," said Mr. Swan.

"In addition," continued Mr. Swan, "the global share of gross estimated potential loss assumed by Bermuda (re)insurers on major catastrophe perils (combined) increased by about 2.0 percent. The increase in the statutory capital and surplus and global share are largely attributed to the inclusion of more (re)insurance entities in the survey."

The report also reviewed cyber risk stress testing, and the analysis showed that the (re)insurers' own defined worst impacts from cyber risk would have a minimal effect on their statutory capital.

The full report can be accessed at the BMA website via HOME > PUBLICATIONS > BMA SURVEYS.
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