The Bermuda insurance market's overall operating performance is stronger than that of Lloyd's of London, while its growth has exceeded its British rival over the past decade, according to a report by Standard & Poor's Ratings Services.

The study entitled 'Premium Development And Performance Converge As Integration Of Lloyd's And Bermudian Markets Increases', which was released this week, focuses on reinsurance written by the Lloyd's market and Bermuda-based operating entities after the industry-changing attack on New York's World Trade Center in 2001.

S&P analysed the data published in Global Reinsurance Highlights since 2001 with the aim of providing insight into the development of the Bermuda and Lloyd's reinsurance markets and their relative performances, which also revealed that Lloyd's remains one of the largest providers of reinsurance capacity, with a global market share of 6.4 percent in 2009, up from four percent in 1997.

The report found that Lloyd's continued to attract investors, while both Bermudian and global re/insurers have started up or acquired agencies and syndicates at Lloyd's in recent years.

It revealed that since 2001 the unweighted average combined ratio for Bermuda was 87 percent — 11 percentage points better than Lloyd's at 98 percent.

The study noted that Bermuda had become a "natural home" for catastrophe risks during the last 10 years, but Lloyd's likely had more per-risk exposures and geographical diversity, seeing a trend develop with Bermuda outperforming its global peers, including Lloyd's, in years less affected by catastrophes and underperforming during those impacted by disasters, as in 2005.

However, it also found that Bermuda outperformed Lloyd's in years of above average catastrophic activity, such as 2004 and 2008, reflecting the high operating expenses in London.

The report concluded that in 1998 net reinsurance premiums written in Bermuda were equivalent to its Lloyd's counterpart at around $3.5 billion, but since then both markets had grown rapidly — to $11.9 billion at year-end 2009 in the case of the former — equivalent to a compound rate of just above nine percent versus 8.6 percent for Lloyd's and 4.6 percent for global reinsurance.

"Bermudian reinsurance premiums remained at a similar level to Lloyd's until 2002 when Bermuda was the preferred destination for new capital in the aftermath of the September 11 terrorist attacks, leading to a near-doubling of premium," it stated.

"Bermuda's premium growth was less pronounced relative to that at Lloyd's after the record-breaking 2005 Atlantic hurricane season. Since 2006, Lloyd's growth has accelerated, while Bermuda has seen a reduction in net premium written.

"We believe this reflected the increasing attractiveness of Lloyd's as a marketplace and the increased interaction between the two markets."

The S&P study cited the type of catastrophic loss in the form of property risks as one of the key factors in Bermuda's superior performance. It added that the clean balance sheets of recently established Bermudian companies protected them from the soft market between 1997 and 2001 and it was too early to get a clear view of how an event like the Chilean earthquake or Deepwater Horizon rig loss and subsequent oil spill would affect the relative performance of the two markets.

Furthermore S&P's data indicated that the Bermudian market had seen stronger premium growth than Lloyd's in the past decade, with Amlin, Catlin and Hardy Underwriting, which all originated at Lloyd's, expanding into Bermuda in recent years as they diversified their portfolios.

Vice versa, there have been a steady stream of Bermuda-based businesses that have launched Lloyd's underwriting operations, with the London market forming an integral part of Ace Ltd. and XL Group Ltd.'s business and Allied World Assurance Co. Ltd. and Arch Capital Group Ltd. buying or starting their own syndicates there.

In fact Bermuda-based players contributed 13 percent of Lloyd's capital requirements in 2009, up from five percent in 2007.