Review
The business – Amlin Bermuda
Trading environment
The trading environment in 2008 provided a number of challenges. Overall renewal rates decreased by 6.6% across the portfolio, with particular pressure on the catastrophe lines of business. However, following the impact of Hurricanes Gustav and Ike, combined with extraordinary global financial events, we began to experience improving terms across all classes towards the end of 2008 and recent experience of 1 January renewals provides a positive outlook for 2009.
For US catastrophe business, the first part of 2008 witnessed rates falling, driven by a lack of major loss activity and increased competition. However, the market generally continued to act with discipline and acceptable margins were maintained. An average rate reduction of 14.6% was experienced in the year. Rates on international business decreased through 2008 but attractive margins held where there was recent loss experience, such as in the UK and Australia.
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Pricing for large property reinsurance in 2008, when measured by unit of premium against unit of exposure, decreased throughout the year. In the absence of market changing losses driven by catastrophe events in the prior year, this was expected. There have been a number of sizeable market risk losses throughout 2008 in both the international and US markets. This will allow the imbalance to be re-addressed and improved pricing is expected in 2009.
While proportional reinsurance rates were flat overall during 2008, two large accounts that renewed in December experienced cumulative improvements to terms of over 30%.
2008 loss activity
The table on page 23 shows catastrophe losses for 2008. There were a number of notable losses in the first half. However, Amlin Bermuda’s exposure to these events was relatively modest, reflecting risk selection and, in part, our relatively small line size.
The impact of Hurricanes Gustav and Ike was more significant. The estimated total combined cost of both these events to Amlin Bermuda is US$162.0 million, contributing 32% to the combined ratio for the year.
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