Capital held by Bermuda’s reinsurers and insurers fell only 2% last year despite the string of natural catastrophes, supporting arguments that the cost of reinsurance is not rising because the market has plenty of capital.

The annual Bermudian Business magazine insurance survey by Deloitte says capital dropped from $US105 billion ($103.3 billion) to $US103 billion ($101.3 billion) mostly because companies returned funds to shareholders through dividends and share repurchases.

However, companies did put share buybacks on hold in the second part of the year because of catastrophe losses in the first half.

Catastrophe losses meant the 22 companies in the Bermuda Insurance Survey reported a combined ratio of 104% – 15 percentage points worse than in 2010 – although the report says investment income offset the underwriting loss.

The group wrote $US54 billion ($53.1 billion) in net premium.

The researchers expect the companies to generate earnings before interest and tax in the low teens this year due to current pricing, low investment yields and assuming normal catastrophe losses.

Rates have increased 5-10% for property catastrophe treaties that were loss-free last year, while increases were higher for treaties that incurred losses, depending on regions.

“In some lines we consider the rate increases we have seen to be insufficient to cover increasing loss costs or the increased view of risk,” the report says. “Therefore, we do not consider the market as having become ‘hard’ across the board yet.”

Bermuda-based companies do not pay corporate income tax, but the report notes the country faces increasing competition from Dubai, Dublin, Luxembourg and Zurich. The Lloyd’s market has also been adding syndicates and progressively regaining its former strong market position.

The report says most Bermuda companies have a significant presence offshore so changes in domicile are unlikely to affect their business significantly.