On the face of it, Bermuda's established cadre of (re)insurers might be forgiven for looking back on 2013 as a golden year.
Boosted by a benign period for catastrophe losses, full-year results are expected to confirm strong financial performance with the promise of additional returns to shareholders through capital management after a year that saw the share prices of several players surge to historic highs.
But instead 2013 is likely to be remembered as the year when the transition of non-traditional capacity into the mainstream altered the dynamics of the property catastrophe market for good, and when the model of the traditional reinsurer began to be seriously challenged.
Triggered by a precipitous fall in pricing on the Nationwide cat bond back in March, property cat writers faced a mid-year renewal that became ever-more weighted in favour of reinsurance buyers. In a sector awash with excess capital, that buyers' market was only exacerbated as the year progressed, culminating in the recent 1 January renewal, which saw significant softening both in the US and internationally.
In a further attack on the traditional reinsurer business model, pressure also mounted on the casualty segment of the market.
The long-term trend of stagnating demand was compounded when several buyers opted to restructure or completely pull cover from the market, depriving underwriters of hundreds of millions of dollars in premium income in the process.
Meanwhile, optimism about the sustainability of pricing momentum on the US P&C insurance business written by Bermuda's more diversified (re)insurers also waned in the latter months of 2013.
The pressure on underwriting from all sides has led some to question the health of the Bermuda market and its prospects.
Yet when The Insurance Insider descended on the island a few weeks before Christmas the mood was far from sombre among the senior executives gathered for our 2013/2014 roundtable discussion.
Yes, there was recognition among carriers of the challenges presented by the rapidly changing market dynamics. And there was an acceptance of the realities of the imminent 1 January renewal - predictions that were largely borne out as firmer order terms and signings were revealed.
But there was also a significant focus from carriers and brokers alike on the evolution traditional carriers are already going through, and the role they will increasingly play in working with new sources of capital to understand and price risk.
As previously reported by The Insurance Insider, almost all traditional carriers have responded in one way or another to the capital markets onslaught, in many cases creating managed funds or sidecars to become a conduit for those new entrants to the sector.
The discussion also highlighted the level of innovation among traditional writers as they fight back with new products to differentiate their offering from that available from alternative capacity.
Of course, Bermuda has also been the hub to which the majority of alternative capital has flowed, through existing players and new ventures. In that sense, its relevance as a market for innovation and new capital endures.
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David Bull
North American Editor
The Insurance Insider