It's official ? the Bermuda insurance market is booming ? and has been given the thumbs up by the well-respected ratings agency A.M. Best Co.

"The Bermuda market continues to enjoy strong demand for its products and services as clients seek carriers possessing underwriting capability and strong and unencumbered balance sheets," said the report.

In a survey of the 15 largest Bermuda-based reinsurance and insurance organisations, the agency said between them they generated $28.6 billion in net premiums written and an underwriting income of $3.0 billion as of the end of the third quarter on a US GAAP basis.

The report said that this translates into a year-to-date combined ratio of 87.5 percent, which includes the consolidated underwriting results of US based operating subsidiaries.

Underwriting earnings for the 15 companies were complemented by $2.3 billion of net investment income to generate a year-to-date operating ratio of 77.7 percent and the report added that realised capital gains totalled $374 million for the companies.

And it said that the reason for the good results shown by the Bermuda group of companies for the nine-month period was the favourable pricing and contract terms in both property and casualty classes gained over the previous year, which was now "flowing to the bottom line".

A.M. Best said that these earnings were augmented by the absence of major catastrophe losses and, unlike their US counterparts, "these Bermuda companies have had no need to materially bolster reserves for prior accident years".

But it added that the only notable exception to this trend was XL Capital, which did bolster its reserves relating to its US operations in the third quarter by $184 million pre-tax, "which most likely is the precursor of more to come for the company".

Despite this action, A.M. Best said the XL still reported below breakeven underwriting results on a year-to-date basis.

"Further, given the diversity of XL's businesses and current strong earnings momentum, the company is well positioned to absorb a significant reserve charge relative to its US operations, should one be necessary," added the ratings agency.

The report also said that there was also an ongoing expansion for these Bermuda-based companies into select casualty classes of business, where rates continue to increase at levels which AM Best said it believes remain ahead of increases in loss cost.