Operating & Financial Review

Amlin Bermuda

Amlin Bermuda commenced underwriting on 1 December 2005 and 2006 was the first full year of trading. The business was targeted towards writing a catastrophe reinsurance and property reinsurance account similar to the style that is written in London.

The Bermuda business can underwrite reinsurance in most areas of the world but does not have the ability to write insurance in most territories because it has no insurance licences. In order to gain access to a wider insurance exposure, reinsurances were granted to Syndicate 2001 for specific classes of business. In the first few months of operation, Amlin Bermuda reinsured Syndicate 2001’s reinsurance account to make early use of its capital.

In addition, in order to provide more overall balance to the Bermuda portfolio, a 10% whole account quota share reinsurance of Syndicate 2001 was also written.

No reinsurance was purchased for the Bermudian operation.

In all, Amlin Bermuda has written US$411.3 millionof gross premium for 2006. Of this US$225.8 million was written directly into the Bermudian operation, US$54 million was written under the per class reinsurance arrangements. US$12.3 million was written for the retrocessional treaty for Syndicate 2001 and US$119.2 million under the whole account reinsurance arrangement.

The level of direct business written by Bermuda was less than originally planned. This was due to a reduction in event risk appetite at the start of the year when it became apparent that Syndicate 2001 would be ceding more risk than anticipated as less reinsurance had been purchased, a slow start due to the assignment of Insurance Financial Strength Ratings towards the end of December 2005 and disappointing rate increases at the 1 January 2006 renewals.

However rate increases accelerated through 2006 and a lack of global capacity in the reinsurance market allowed the company to keep largely to plan through 1 April renewals onwards.

The combined ratio for Amlin Bermuda is 48%. This is the result of excellent performance on the direct portfolio, helped by the low level of catastrophe losses in 2006 and a record start for the portfolio ceded from London. In addition the expense ratio for Bermuda is low compared to the London operations, due to the high operational gearing of the reinsurance business written in Bermuda.

© Copyright Amlin 2006