Bermudian insurers and reinsurers reported strong earnings in 2013 despite increasing competition, low investment yields and a skittish global economy.

The Bermuda Insurance Market Report from accounting firm Deloitte, which includes an analysis of 20 Bermuda-domiciled insurance and reinsurance companies, is upbeat about the British overseas territory’s insurance sector.

It says Bermuda’s share of the global reinsurance market doubled to 8% in 2013 from 4% a decade ago. Its insurers and reinsurers underwrite one-third of the global natural catastrophe business.

Each of the 20 companies examined by Deloitte reported strong underwriting and operating performance last year – “thanks in part to mild catastrophe losses and favourable prior-year reserve development”.

In aggregate, the 20 insurers and reinsurers had a combined operating ratio of 85.6%, an improvement from 91.5% in 2012, and a return on average equity of 12.9%, up from 11.4%.

Deloitte says Bermuda has become “the domicile of choice for [insurers and reinsurers] setting up new businesses”, citing the advantages of quick regulatory approvals, favourable tax laws, most notably zero corporate income tax, and proximity to the US.

Bermudian gross premiums in 2013 rose 8% from the previous year to $US76.04 billion ($81.01 billion). About half of the premiums were written in North America.

However, there are challenges ahead. The companies surveyed in the report ranked the five business issues that concerned them most as renewal rates, investment returns, cost control, regulation, and preserving profitability while increasing market share.

Predicting that growing competition is likely to see weakened profitability for Bermudian insurers and reinsurers in 2014 and 2015, the report notes that companies are keen to expand into non-catastrophe short-tail classes of business such as accident and health, crop, credit and motor coverage.

“As a result, we could see some margin compression in those lines of business due to increasing competition.”