Fitch Ratings has noted that the Bermuda market will have a meaningful share of insured losses from the recent California wildfires for both primary business and reinsurance, however, it does not expect ratings to be affected given plentiful capital levels.
According to a new report from Fitch, underwriting results for Bermuda-based re/insurers it follows are expected to deteriorate in 2025 due to pressure on premium rates and rising loss costs.
At the same time, the rating agency observed that the combined ratio for Bermuda re/insurers will approximate 90% for full-year 2024, marking an increase from 86.5% in 2023.
“Catastrophe losses will represent 7-8 percentage points on the 2024 combined ratio, up from 3.2 points in 2023,” Fitch explained.
Fitch also highlighted that the potential impact on reinsurance renewal pricing from the fires will depend on the ultimate level of loss and the remoteness of such an event relative to catastrophe loss expectations.
The highest estimate so far for the event comes from CoreLogic at $35 billion to $45 billion. More recently, Verisk pegged insured losses from the wildfires at between $28 billion and $35 billion, and Karen Clark & Company said that the hit to the industry will be close to $28 billion.
Elsewhere in the report, Fitch said that the January 2025 reinsurance renewal demonstrated that the reinsurance market cycle is” past its peak”, with stable to softening pricing as increased supply was more than adequate to meet higher demand.
Fitch has suggested that market conditions will soften further at the 2025 midyear renewals, although risk-adjusted returns will remain favourable as underwriting discipline is maintained.
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