Bermuda-based reinsurers are expanding their exposure to natural disaster risks, such as hurricanes, even as reinsurance pricing shows signs of softening, according to a recent Moody’s report.
The report indicates that insurers in Bermuda are committing more capital to cover storm-related losses than they did in previous years. Since 2018, exposure to US hurricanes among a group of top reinsurers has increased by 58%, reflecting a compound annual growth rate of 6.7%.
Although the aggregate level of risk has risen, the ratio of risk to company size has remained consistent. Moody’s noted that reinsurers are adding exposure in proportion to their growth, maintaining a steady risk profile.
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Arch Capital Group was identified in the report as a company that has significantly expanded its hurricane risk portfolio. Meanwhile, Axis Capital has exited the property catastrophe market.
Arch has previously indicated it anticipates a notable impact from the wildfire losses on its 2025 financial performance. The company previously reported US$6.5 billion in gross premiums written for the first quarter of 2025, an 8.9% increase from the prior-year period, alongside a combined ratio of 90.1%. The higher combined ratio reflects the elevated catastrophe loss activity, including losses tied to the California wildfires.
Meanwhile, Axis Capital, despite its exit from the property catastrophe reinsurance market, reported a 5% increase in gross premiums written, reaching US$2.8 billion in the first quarter of 2025.
The company has shifted its focus toward specialty lines, including casualty, accident and health, and credit markets, aligning with its broader strategy to reduce exposure to catastrophe volatility.
Moody’s noted that reinsurers are adopting varying approaches based on their risk tolerance and strategic focus. Risk appetites are diverging, with Arch’s position cited as an example of firms prepared to increase their exposure to peak perils where margins are still considered favorable.
The growth in disaster risk exposure comes amid a broader trend of flattening or declining prices for catastrophe reinsurance after several years of rate increases. Property catastrophe reinsurance pricing posted a 6.2% decline at the January 1, 2025, renewals, marking the first rate reduction in this segment since 2017.
Despite this decrease, reinsurers continue to show interest in deploying capital toward property catastrophe coverage, particularly US wind risks, given the still favorable expected returns.
Bermuda reinsurers are also contending with substantial claims activity. The Southern California wildfires in January 2025 resulted in nearly US$10 billion in gross claim losses, now considered the costliest wildfire disaster in US history.
Bermuda-based firms are expected to shoulder a significant portion of these losses, impacting overall claims ratios and underwriting results for the year.
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