In terms of building value in Bermuda, the Island has a number of inherent strengths. But I don’t think it’s a change in confidence-it’s really just a change in viewpoint regarding the forward-looking returns of the industry. As a whole, insurers are starting to improve prices to address some of those themes, but we’re probably still a year or two away from starting to see that make a difference. Rather, it is investors’ viewpoint regarding the financial model of P&C companies being suppressed by macroeconomic conditions. This creates a significant macro overlay that isn’t specific to Bermuda, but is a distinct negative when it comes to P&C valuations.Īs to what is it going to take for valuations to improve, I don’t think it is about investor confidence. That has an adverse impact on forward-looking investment returns. We have benefited from the reduction in interest rates, which has helped increase the value of existing bond portfolios, but as time goes by the reinvestment rates for redeployed invested assets are lower and lower. We’re now several years into globally suppressed interest rates which has had a significant impact on re/insurers who typically maintain significant levels of fixed income investments. The other macro theme affecting valuations-which is probably more important for the P&C sector-is the interest rate environment. That said, a number of companies are beginning to show growth and are seeing rate improvements on lines such as US specialty.
Growth has been weak and exposures have been muted, while few catalysts for improved conditions exist.
We are in a prolonged period of challenging economic conditions.
#Down in bermuda kraken driver
The primary driver of valuations has been global macroeconomic conditions that all property and casualty (P&C) re/insurers are facing, not just those in Bermuda. In fact, over the last year we’ve seen an improvement in valuations, although admittedly from a historically low standpoint. I don’t believe that there has been a significant erosion in investor confidence in the Bermuda market. Michael McGuire, chief financial officer at Endurance
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