Bermuda Association explains reinsurance risk spreading role

Syamsul Sunduseng on Report
"The global reinsurance market plays an integral role in spreading US
hurricane risk around the world," said a bulletin from the Association of
Bermuda Insurers and Reinsurers (ABIR). "Without it, the risk would be
concentrated in a single state (or geographic region) or in the US with
the result being higher insurance costs for US consumers."

The ABIR noted that "the reinsurers of US hurricane risk are predominantly
located outside of the United States with a very large number located in
Bermuda." Many of them are ABIR members.

ABIR president Brad Kading explained the following:

1. Bermuda's insurers and reinsurers understand property catastrophes
including hurricanes. We understand the tragedy they create for families
who lose loved ones or lose their homes. Hurricane Ike has the potential
to cause a tremendous loss of life. ABIR member employees themselves are
exposed to hurricane risk in Bermuda and they are familiar with what
families and businesses need to do to protect themselves against these
storms and to recover from those losses. We offer our heartfelt sympathy
to those affected so severely by Hurricane Ike in Texas and in the
Caribbean prior to the US landfall.

2. Bermuda's insurers provide an estimated 66 percent of the reinsurance
purchased by the Texas Windstorm Insurance Association (TWIA). The TWIA
protects the property most exposed to hurricane damage in Texas.

3. Based on an analysis of reinsurance premium from insurers most exposed
to hurricane risk in Texas, Bermuda's insurers will provide an estimated
45 percent of the reinsurance claims that will eventually be paid to
insurers for damage caused by Hurricane Ike. It is impossible to
accurately forecast the total insured losses for Ike at this time. All
loss estimates at this time are purely hypothetical. However, the more
severe Ike's damage is, the more likely it will be that reinsurers pay a
larger share of the actual insured hurricane damage. For example, if Ike's
insured losses are $10 Billion, insurers will primarily pay for these
costs (with exceptions including the TWIA payment noted above). If
Hurricane Ike's insured losses are $25 billion, reinsurers may pay $10 to
$15 billion of the eventual Hurricane claims. Based on these estimates
Bermuda reinsurers' share of these losses may then be $4 to $7 billion.

4. In the period from 2001 to 2008, Bermuda insurers have paid nearly $25
billion in insured and reinsured US property catastrophe losses. These
reinsurers have remained financially strong despite these losses and these
reinsurers have remained committed, and indeed have expanded, their
capabilities to provide protection to US insurers and their property
insurance clients. These reinsurers in turn in 2006-2008 continued to
provide protection to support US consumers and expanded their capacity
(either through their own underwriting capacity or via capital markets
resources) to provide even more protection to US consumers.

5. It is estimated that following Hurricane Katrina, Bermuda reinsurers
paid out enough to rebuild 45,000 homes in Louisiana and 24,000 homes in
Mississippi.

6. The lessons of the last decade indicate that Bermuda's reinsurers, and
global reinsurers generally, are: financially strong, capable of absorbing
enormous losses, capable of raising capital when needed and committed to
continuing to provide US property insurance and reinsurance protection.

7. Bermuda's reinsurers are well regulated by the Bermuda Monetary
Authority and have very high financial strength ratings and are well
capitalized to absorb these losses. Losses such as these are expected by
reinsurers. Reinsurers will reimburse their US insurance company clients
promptly as claims are submitted. Reinsurers are financially strong enough
to pay all these claims and more.

8. ABIR has 23 member insurance companies, all based in Bermuda. 14 of
these companies have US subsidiary insurance companies. These US
subsidiaries will also write US insurance for hurricane risk. Thus many
ABIR members will be paying claims both from their US subsidiaries and
their Bermuda parent corporations.















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