Hurricane losses ate up about one-quarter of the capital held by Bermuda?s largest insurers, a new report from the research arm of UK-based broker Benfield revealed yesterday.

The report, which is compiled based on the quarterly results of 16 major Bermuda companies, calculated that storm losses last year totalled $11.3 billion, or 24 percent of shareholders? equity at the end of June (see chart for more details). Shareholders? equity is the common measure of capital for publicly-listed insurers.

The Bermuda insurers that Benfield follows are: Ace Limited, XL Capital, White Mountains, Arch Capital, PartnerRe, Axis Capital, Aspen Insurance Holdings, RenaissanceRe, Platinum Underwriting, Endurance Specialty, Allied World Assurance Company (AWAC), Max Re, Montpelier Re, Quanta Capital, IPC Re and PX Re. All but AWAC, which has filed notice of its intention to list on the New York Stock Exchange, are publicly listed entities.

Record storm losses last year led many of the Island?s insurers to take a hard look at the way they do business.

?Companies reacted by reducing their risk appetite, changing their catastrophe models and underwriting assumptions and increasing reinsurance and retrocession protection,? Benfield reported.

Aspen, for example, said it was reducing the number of risks it takes on in areas that may be hit by major catastrophes. The insurer also bought $400 million in reinsurance protection, and was considering bringing that up to $500 million.

Montpelier was another reinsurer to step up its purchase of reinsurance in the post-Katrina environment. The company, in the fourth quarter, sold $106.8 million in policies, on a gross basis, but in a departure from its normal business pattern bought reinsurance to protect it from losses on $98.5 million of the policies it sold.

Overall, for 2005 the group recorded a combined loss of $2.8 billion. This compared to a profit of $5.7 billion a year earlier.

While losses hit companies hard, investors more than replenished the capital wiped away by storm claims. By the end of the year, the group actually held five percent more, or $47.2 billion, in shareholders? equity than at the end of 2004.

The capital raised went to the major Bermuda companies already established, as well as new reinsurers forming in the Island?s insurance market. A total of $18.4 billion was raised after Hurricane Katrina hit on August 29. Of the capital raised, 53 percent (nearly $10 billion) went to established companies, 40 percent (about $7.4 billion) to start-up insurers and seven percent ($1.2 billion) to ?sidecar? reinsurers, Benfield said.

Benfield said the new reinsurers got a ?muted? reception from reinsurance buyers ?who gave weight to existing relationships and proven credit ratings. Consequently the volume of submissions, line sizes offered and signings were below expectations?.

The report predicted that rates charged for insurance policies, particularly property-catastrophe policies in areas prone to disaster, will continue to harden.

?Reinsurance capacity is expected to tighten for the July 1 renewals and beyond,? the report said. ?The recalibration of catastrophe models, a shrinking risk appetite for peak exposures, restructuring of coverage on a more restrictive basis and the increased cost of capital are generally expected to exert further sustained upward pressure on pricing.?