The Bermuda reinsurance market expects to manage the financial implications of the recent California wildfires, which have caused an estimated US$250 billion in damages and economic losses.
According to John Huff (pictured above), chief executive of the Association of Bermuda Insurers and Reinsurers (ABIR), while the wildfires have had a devastating impact on affected families and communities, their financial effect on Bermuda’s reinsurance sector is anticipated to be manageable.
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“With global non-correlated portfolios, Bermuda market reinsurers are generally well diversified with no specific concentration of risk in California,” Huff said. “Non-correlated risks refer to risks around the world, i.e., their risks are not concentrated.”
According to a report by The Royal Gazette, Huff said that risks covered by these reinsurers span across a variety of geographies and types, including California wildfires, Florida hurricanes, Midwest tornadoes, UK terrorism, and floods in Japan. ABIR member companies operate in nearly 150 jurisdictions, enabling them to balance exposures worldwide.
Analysts have echoed this outlook. A recent report from S&P highlighted that the insured losses from the wildfires, though substantial, are expected to be manageable for the reinsurance market.
Piper Sandler analyst Paul Newsome stated that the profitability and capital levels of most insurers should allow them to handle the losses effectively. Jasper Cooper, vice president and senior credit officer at Moody’s Ratings, estimated insured losses in the billions of dollars, citing the high value of homes and businesses in the affected areas. He also indicated that commercial property losses could be significant.
Read More: Mercury General updates customers on Southern California wildfire claims
The financial resilience of Bermuda’s reinsurance market comes as the Bermuda government integrates disaster risks into its economic planning. David Burt, premier and minister of finance, announced during the 2024-25 Budget presentation that the government anticipates generating at least US$750 million annually from the new corporate income tax.
A government spokeswoman also said that potential disasters, such as the California wildfires, were accounted for in revenue projections. The calculations incorporated historical data, risk assessments, and economic modeling, ensuring significant financial headroom against the annual revenue estimate.
She added that the international business sector, including but not limited to insurance, underpins the tax base used in these projections.
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