Reinsurance rates have increased this year after last year’s expensive catastrophes but momentum is fading and could vanish heading into next year.

That is the view of analysts from Standard & Poor’s, who said some Bermudian reinsurers had seen an entire year of earnings wiped out by last year’s catastrophes which included hurricanes Harvey, Irma and Maria.

The three storms alone racked up combined insurance losses of more than $90 billion. Wildfires also generated record losses of $14 billion, as global insured losses reached $138 billion.

Bermudian insurers’ combined losses from hurricanes, wildfires and earthquakes totalled $8.9 billion, S&P said — up from $2.1 billion in 2016.

In its quarterly insight on Bermuda’s re/insurance sector, S&P described the 2017 catastrophe losses as a “one-in-30-year event”. But the rebound in rates was not as strong as many in the industry had hoped.

“Following 2017’s record catastrophe year, global reinsurance pricing was up slightly to about 5 per cent, in aggregate, during the year-to-date renewals,” S&P reported.

“Specific increases varied by line of business and region, and whether reinsurance contracts had experienced any losses. However, according to a JLT Re report, JLT Re’s Risk-Adjusted Florida Property-Catastrophe Rate-on-Line Index rose by only 1.2 per cent this year from 2017, failing to meet early market expectations.

“It seems that the Florida June renewals were highly competitive, reflecting abundant capacity and only moderate rate increases. Therefore, the reinsurance price increase momentum that the industry was hoping for at the beginning of 2018 is losing steam and may fizzle out heading into 2019.”

The report added that insurance-linked securities, including catastrophe bonds, had been tested last year, “without major hitches”, and continued to expand.

S&P expects to see more mergers in the Bermuda market, “as players look to offset some of the secular trends, as organic growth has been hard to achieve”.

S&P has a stable outlook on the global reinsurance sector mostly because of re/insurers’ strong enterprise risk management and still-robust capital adequacy.

The Bermudian reinsurers rated by S&P saw gross premiums written increase to $61.1 billion last year from $54.8 billion the year before. The trend continued in the first quarter when GPW totalled $20.7 billion, up from $17.5 billion in the first three months of 2016.

S&P attributed the top-line growth to acquisitions and rate increases.

The industry has focused on efficiency, the report added. “In a soft pricing environment, the Bermudian re/insurers continued to focus on creating efficiencies in their expense structure, which along with a cut to incentive compensation in 2017, led to a 2.1 percentage point improvement in the expense ratio to 33.9 per cent in 2017 down from 35.9 per cent in 2016,” S&P said.