The total equity of Bermuda's insurers and reinsurers has rocketed to nearly $67 billion — up 24 percent since the 2005 Hurricane Katrina.

That was one of several notable points made in a report by rating agency A.M. Best, entitled "Bermuda — 12-month Financial Review", which concludes that the peak of the property catastrophe insurance market has passed.

Excluding the "Class of 2005" — the wave of insurance start-ups that followed the devastating hurricane season of that year, the total equity of the Bermuda insurance market at December 31, 2005 was $47.37 billion, the report said. By the end of last year, that figure had risen to $66.97 billion.

The report documents the heavy flow of capital to Bermuda since Katrina. "By the end of 2005, $7 billion of new capacity was deployed for the formation of new insurance and reinsurance companies on the Island," the report, written by Best's Robert DeRose and John Laubach, said.

"In addition to that, 20 sidecars were formed throughout 2006 with $4.5 billion of total capital, while elsewhere in the world, catastrophe bond issuances topped $4.6 billion."

But the "hard" (high) rates that property insurers and reinsurers were able to charge last year are now softening in the wake of a 2006 season which saw no hurricanes make landfall in the US and which helped the Bermuda market to record annual profits totalling $11.6 billion.

"While the market has for the most part remained rational, the current overall consensus is that the peak of the cycle, if only temporarily sustained by the events of 2005, is now clearly in the rear-view mirror," Best's report said.

"As a result, the key to successful navigation in 2007 will be a clear focus on capital management and underwriting discipline.

"Given the increased competitive pressures, A.M. Best believes that the 2005 start-ups will be forced to seek alternative business opportunities in an attempt to fully utilise the capital raised."

Any lack of discipline in chasing new business would put downward pressure on insurers' all-important ratings from agencies like Best, the report adds.

"The bad news is clearly that the strong performance in 2006 has set the stage for increased pressure on rates as a whole," Best said.

"Property rates in regions exposed to severe catastrophic events likely will continue to fare better. Casualty classes, however, most likely will continue to decline, ideally at a gradual pace.

"Longer-tailed classes should demonstrate greater strength where expertise with products and superior financial strength keep the bar high and limit the threat from naive capital."