By Michael Loney

April 2 - (The Insurer) - Losses from the California wildfires will add 4 percentage points to Bermuda (re)insurers’ 2025 combined ratio, Fitch Ratings has estimated.

In a commentary, Fitch said that first-quarter California wildfire losses for the Bermuda (re)insurers it monitors will represent about 60% of their total catastrophe losses reported for all of 2024.

The rating agency said this “may pressure earnings but will not affect ratings given ample capital levels."

“The California wildfires will have a meaningful effect on the 2025 combined ratio, adding approximately 4 percentage points,” Fitch said. “This reflects the sizable 40%-50% share of the total industry loss expected to be assumed by the reinsurance sector given the more remote nature of the event loss.”

Fitch expects Bermuda (re)insurers’ underwriting results to deteriorate in 2025 because of higher catastrophe losses and as premium rates are pressured. But the rating agency added that results should remain profitable.

The January 2025 renewal demonstrated that the reinsurance market cycle is past its peak, and market conditions are expected to soften further at the 2025 mid-year renewals. Fitch added that risk-adjusted returns will remain favorable because of disciplined underwriting.

The Bermuda (re)insurance group tracked by Fitch posted a 90.7% combined ratio in 2024, including 6.4 points of catastrophe losses primarily from Hurricane Milton and Hurricane Helene, as well as U.S. convective storms.

This was up from the 86.2% combined ratio in 2023, which had a lower 3.6 point impact from catastrophes.

The group’s net income return on equity was a “strong” 17.8% in 2024, Fitch said, although this was reduced from 26.6% in 2023.

Reserve releases decreased the Bermuda (re)insurers’ aggregate combined ratio by 0.1 point in 2024 compared with 1.5 point in 2023 and 2.4 point in 2022.

“While most companies continued to report overall favorable development, Everest Group, Ltd. posted a sizable $1.3 billion of reserve additions driven by U.S. casualty business,” Fitch said. “PartnerRe Ltd. also reported adverse development in 2024 related to casualty reserves, while Aspen Insurance Holdings Limited had an unfavorable impact from a loss portfolio transfer.”

Fitch expects Bermuda (re)insurer group net premiums written will rise at a lower rate in 2025 than the 14% increase last year, as companies compete for growth in a favorable price environment.

RenaissanceRe’s 33% NPW increase was driven by the renewal of business acquired through its acquisition of Validus Holdings. SiriusPoint’s NPW fell 4% because of its exit of international business and the non-renewal of a workers’ compensation program.

Bermuda (re)insurers’ shareholders’ equity grew 16% in 2024, driven by underwriting gains and increased investment income from higher reinvestment rates and equity market gains.