Bermuda's re/insurers could take several years to recover from the record investment losses suffered in 2008, according to an industry report released this week.

The survey by New York-based Deloitte LLP, which compiled data from 24 of the Island's largest re/insurance companies, revealed that participants reported $13 billion in aggregate realised and unrealised investment losses last year. The declines led to a 15 percent contraction in aggregate capital and surplus for the group at year-end 2008 compared with the previous year, the report said.

The survey said that despite the market being hit by higher-than-expected catastrophe losses from Hurricanes Ike and Gustav, survey participants recorded an average combined ratio of 90 percent, representing relatively good underwriting performance.

In spite of significant economic pressures in 2009, Bermuda-based insurers were also well positioned and were likely to benefit from a number of positive factors, including hardening reinsurance prices and a focus on enterprise risk management, the report said.

In addition, the survey found that the market still enjoyed strong levels of capital adequacy and strong liquidity, and the conservative investment strategy used by most firms on the Island should help mitigate potential further investment losses. Strong results in 2006 and 2007 helped build substantial levels of excess capital for companies entering 2008, the report said.

Deloitte said it expected the market to recover from 2008 investment losses in the next two years, assuming it experiences normal levels of catastrophe exposures during that time.

However, the survey said a large catastrophe event - defined as losses of greater than $40 billion - is the greatest risk to the Bermuda market in the short-term.

Also, due to financial turmoil, it was not certain that all companies would be successful in replenishing their capital bases, the report said.