The market value of Bermuda’s international re/insurance companies plunged by hundreds of millions of dollars on Friday as their shares slumped.Their decline was more severe than the fall in the wider market and followed the downgrading of the sovereign debt of both Italy and Spain by Fitch Ratings.Endurance Specialty Holdings suffered the steepest fall of the Bermuda companies, sliding 6.1 percent to $32.80. Early in the trading day, Endurance had announced estimated catastrophe losses of nearly $100 million during the third quarter.Other hefty fallers included Montpelier Re, which dipped 4.5 percent, PartnerRe (3.9 percent), Axis Capital (3.7 percent), Aspen Insurance Holdings (3.7 percent), White Mountains (3.7 percent), Argo Group (3.5 percent), XL Group (3.2 percent), Allied World (three percent), Alterra Capital (2.9 percent), Platinum Underwriters (2.9 percent), Validus Holdings (2.9 percent), RenRe (2.5 percent), Everest Re (2.5 percent), Arch Capital (2.2 percent) and Ace (two percent).In comparison, the S&P 500 fell 0.8 percent.The miserable day on the markets came after investment bank Keefe, Bruyette & Woods (KBW) issued a report which concluded that many companies in the Bermuda reinsurance sector are expected to make an underwriting loss this year, after third-quarter catastrophes added to record claims from natural disasters in the first half of the year.The KBW analysts have a cautious outlook on the Bermuda group because of shrinking reserve cushions and a difficult investment environment.However, KBW did see some grounds for optimism for the sector, with pice increases for property coverage seen in mid-year and more expected in the second half of the year, driven by changes to the new RMS 11 catastrophe model.The analysts also felt most P&C insurers were “cheap” on the stock market, trading well below their book value. The companies they recommend to investors include Ace, Arch Capital, Allied World and PartnerRe.“Although hurricane season was relatively quiet, the third quarter of 2011 could still be a difficult quarter for Bermudians,” KBW noted. “Results could be hurt by several smaller events during the quarter as well as likely additions from events that occurred earlier in 2011 and late in 2010, combined with continued pressure from the volatile investment landscape.”Endurance was the first Bermuda re/insurer to publish estimates of third-quarter losses. Its statement reflected KBW’s comments in that the losses accumulated from a variety of events, including $21 million relating to Hurricane Irene, $26 million as a result of July flooding in Denmark and $11 million from wildfires in Texas last month.In addition, Endurance incurred $41 million of estimated losses related to aggregate catastrophe reinsurances of regional insurance companies in the Midwest. The loss estimates were pre-tax and net of reinsurance and reinstatement premiums.“Endurance has historically emphasised the underwriting of regionally focused risks both within and outside the United States,” Endurance chief executive officer David Cash said.“As a result, the losses experienced by Endurance in the third quarter were expected given the $2 billion of third quarter industry losses in the Midwest that came on the heels of earlier tornadoes and floods in the same region, the $1 billion of industry losses from Danish floods and the $5 billion industry losses from Hurricane Irene.”In their conclusion on the Bermuda re/insurance sector, KBW’s analysts said: “Underlying profitability continues to show signs of deterioration, reserve cushions are shrinking, investment returns remain under pressure, and recent catastrophic events continue to pressure results, although also helping to improve pricing in certain lines.”KBW found that US mid-year renewals were generally up in the eight to 12 percent range, with RMS model changes expected to allow these increases to be sustained through January 1, 2012.While property catastrophe rate improvements were “encouraging”, the analysts saw few signs of improvement in the broader market, describing casualty lines as “bottoming”.