Log In

Reset Password

ABIR: Bermuda market to bear 40 percent of reinsurance losses from 2011 catastrophes

Bermuda market companies will end up shouldering at least 40 percent of the total reinsurance losses sustained as a result of the series of catastrophes that occurred in 2011.

That was the message from Brad Kading, president of the Association of Bermuda Insurers and Reinsurers (ABIR), who urged attendees at the Risk Management Society (RIMS) All Industry Day Conference in Seattle on Friday to fight against protectionist proposals that inhibit the ability to spread risk globally.

Mr Kading said reinsurers will pay 45 percent of the mega-catastrophe losses from 2011, a record year for global natural disasters. He emphasised that Bermuda’s internationally active insurance groups represented by ABIR will pay a very large share of that at least 40 percent.

“This ability to spread risk globally is imperiled by protectionist measures, whether it’s the reinsurance tax bill introduced by US Rep. Richard Neal and Sen Robert Menendez, the Brazil regulatory restrictions on affiliated reinsurance, or the mandates to use local reinsurers in Argentina and elsewhere. If you ring-fence the capital so that risk can’t be spread you make it more difficult for consumers to get the insurance they need,” Kading said.

ABIR represents 22 international insurers and reinsurers who derive business income from more than 100 countries around the world.

Mr Kading explained that the Cascade Range area of Washington state and Oregon is exposed to mega-catastrophic earthquakes roughly every 400 to 600 years; the last major quake occurred in 1700. Insured losses from such a quake have been estimated at $65 billion to $90 billion, spread through the Pacific Northwest region with substantial losses in Washington and Oregon’s urban areas.

“If protectionist measures prevail in the US they will restrict Washington state’s ability to recover from such a catastrophic earthquake. Inevitably, such limitations on risk spreading will lead to a government insurance fund subsidised by consumers and built on debt that burdens future generations,” Mr Kading said.

“Just look to Florida to see what will happen in Washington; most home insurance will be provided by a government corporation, subsidised by taxpayers who don’t own homes on the coast and paid for with debt that will be paid off by your children.”

Kading added that Seattle is exposed to catastrophic earthquake losses in addition to volcanic and tsunami threats from nearby areas. Insurance and reinsurance markets provide a great deal of protection to residential and business customers in those areas and are fully prepared to handle these losses.

Reinsurers have an excellent, impeccable track record in paying catastrophic losses, he said, as the events of 2011 demonstrate.

“Reinsurers handled catastrophic earthquake losses in New Zealand and Japan, flooding losses in Australia and Thailand, and hurricane and windstorm losses in the United States and Australia. The larger the losses, the bigger the share that is absorbed by international reinsurance markets,” Mr Kading concluded.

ABIR president Brad Kading

You must be Registered or to post comment or to vote.

Published March 12, 2012 at 2:00 am (Updated March 12, 2012 at 9:33 am)

ABIR: Bermuda market to bear 40 percent of reinsurance losses from 2011 catastrophes

What you
Need to
1. For a smooth experience with our commenting system we recommend that you use Internet Explorer 10 or higher, Firefox or Chrome Browsers. Additionally please clear both your browser's cache and cookies - How do I clear my cache and cookies?
2. Please respect the use of this community forum and its users.
3. Any poster that insults, threatens or verbally abuses another member, uses defamatory language, or deliberately disrupts discussions will be banned.
4. Users who violate the Terms of Service or any commenting rules will be banned.
5. Please stay on topic. "Trolling" to incite emotional responses and disrupt conversations will be deleted.
6. To understand further what is and isn't allowed and the actions we may take, please read our Terms of Service
7. To report breaches of the Terms of Service use the flag icon