Tables and charts are available for the following sectors of Bermuda's insurance industry:

Reconfiguring the Market

As it positions itself for the next millennium, Bermuda's Insurance Industry finds itself at a crossroad in its development. Continuing soft insurance and reinsurance market conditions, slow acceptance of market-triggered risk solutions and increased competition from clients-turned-competitors have placed operational and underwriting pressures on the island's insurance members with many insurers believing that a multi-line specialty operation will be better positioned to compete globally.

Standard & Poor's believes that the aforementioned concerns will place some strain on Bermuda insurers' performances. However, in keeping with Bermuda's creative history, Standard & Poor's also expects that innovative counter-strategies will be developed to offset the pricing inadequacies of the current insurance cycle.

Bermuda has benefited from a favourable regulatory and tax environment that has made it attractive to excess liability insurance carriers, finite (re) insurers, catastrophe reinsurers and most notably, captives. However, an overcapitalised global insurance and reinsurance industry and competition increasing from both traditional and non-traditional markets has caused Bermuda insurers to diversify over the last three years through product innovation, acquisitions and mergers, or strategic alliances.

The expansion and diversification into new lines of business has shown positive short-term results upon certain Bermuda market members. However, Standard & Poor's believes it will be several years before any long-term economic benefits will be recognised from Bermuda's current growth strategies.

The recent wave of acquisitions in Bermuda raises the question that many observers of the global insurance and reinsurance community have considered: Has the Bermuda insurance and reinsurance market peaked? We think not. As we pointed out in our overview of the history of Bermuda, published last November in our Bermuda Market Report (for a free copy, please access our Web site at http://www.standardandpoors.com/ratings), Bermuda has had to recover from many shocks to its financial system over the last 20 years, including the Carnation decision, the era of naiive capacity and the passage of the Tax Reform Act in the US in 1986. Through all these events, the creativity of the Island has remained intact and the industry has been able to re-invent itself, always stronger and capable of taking advantage of its unique strengths. Standard & Poor's expects the industry will be able to come through the current turbulence well.

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