Bermuda insurance market companies took on more catastrophe risk in 2024 and chose to keep a larger share of that risk on their own balance sheets, according to a new report from the Bermuda Monetary Authority.

“Data increasingly point to secondary perils such as convective storms, floods and wildfires, including recent events in California, as key drivers of catastrophe losses,” the authority stated.

However, insurers and reinsurers “benefited from risk-adequate pricing, prudent retentions, restricted coverage and well-structured programmes aligned with their risk appetite”.

The BMA’s Catastrophe Risk and Stress Testing Analysisfound that insurers’ total exposure to major disasters such as hurricanes and earthquakes rose 7.5 per cent year-on-year to nearly $220 billion. At the same time, the amount of risk insurers kept after buying reinsurance increased even faster, up 10.5 per cent to about $95 billion.

Reinsurance did not grow at the same pace. The share of catastrophe losses passed on to reinsurers fell slightly to about 57 per cent, compared with about 58 per cent the year before.

While the change may appear small, the BMA noted that at this scale it represented billions of dollars in additional risk retained by Bermuda insurers.

The report suggests this reflects a shift in market behaviour. Insurers appear more willing to hold risk themselves, supported by strong capital positions and continued pricing discipline.

Atlantic hurricanes remained the single largest source of catastrophe exposure for the Bermuda market. Average modelled losses from Atlantic hurricane events ranged from about $1.1 billion for a 1-in-50-year event to more than $2 billion for the most extreme scenarios. The BMA also found that insurers tend to retain a higher share of risk for rarer, more severe events.

“Insurers are retaining higher levels of exposure for the most extreme events, with the retained exposure ratio increasing with return periods,” according to the report.

Despite the increased exposure, the stress testing results showed the market remained resilient. After applying the three largest catastrophe scenarios combined, insurers retained more than 70 per cent of their capital and surplus on average. Even under the most severe combined financial market stress, capital levels remained well above regulatory requirements.

Other risks, including terrorism, cyber events and mortgage insurance losses, were found to have a limited impact on overall capital. The report also noted that while expected catastrophe losses increased in 2024, pricing remained strong, helping insurers absorb higher risk.

“In 2024, Bermuda’s international [insurance and reinsurance] sector maintained a strong combined ratio and solid net income, supported primarily by a stable pricing environment,” according to the report.

The BMA said the results indicated that Bermuda insurers were well capitalised and able to withstand severe but plausible loss events, even as they take on and retain a larger share of global catastrophe risk.