Editorial - Bermuda's STILL rock-solid!

(From Reinsurance)

Byline: Mark Geoghegan, editor, mark.geoghegan@incisivemedia.com.

Dear Friend,

A year ago I wrote to you under the banner 'Bermuda's rock-solid'. Well, 31 North Atlantic storms later, and some individual failures, Bermuda is even more rock-solid now.

Just look at the numbers in Guy Carpenter's recent Bermuda report: on a net-written-premium basis, the island will have taken almost 10% of the global reinsurance market in 2005, more than doubling its share in five years. Its actual dollars in the bank tripled to $28bn in 2005 from $9.2bn in 2001.The incumbent Bermuda market will pay over $14bn in claims for the 2005 year, and - thanks to great results outside catastrophe - will lose only about $3bn overall.

With the huge recapitalisation, total equity will have increased by over 5% to a staggering $52bn - and that's not even counting the $9bn the class of 2005 chipped in. While the burden of the overall debt-to-total-capital ratio for Bermuda's incumbent players increased to 18.6% at year-end 2005 from 14.8% in 2004, debt at this sort of level is hardly a worry - this market is not particularly leveraged. So, to quote the report's conclusion, "The Bermuda market weathered 2005 well, expanding as new capital entered the market in the wake of hurricanes Katrina, Rita and Wilma."

Not bad for the worst year in history! But what about the chinks in the armour? Well, we already know the physical constraints of doing business on the island are considerable: Bermuda needs more regular flights to everywhere; more reliable internet access; more office space; bigger hotels; more schools; and more affordable housing. But these problems are caused by success, not failure, and unlike most governments, the Bermudian authorities are in the enviable position of being able to do something about it. And they are - hardly a day goes past without new training or educational initiatives being launched. As long as the Bermudian government equips its youth with the right numeracy and literacy skills, the island will continue to be successful.