August 27, 2014

Appleby Interview: The global centre for risk management

Having established itself as a global reinsurance market leader for many years, thanks in large part to its regulatory environment, Bermuda is enjoying a boom. But while this mid-Atlantic island is experiencing a surge in interest, it has continued to look at ways in which it can expand its offering to insurance businesses. To cater for this growth in interest, a number of specialist institutions have emerged that will guide potential clients through Bermuda’s business community.

One such firm is Appleby, one of the world’s largest providers of offshore legal, fiduciary and administration services. Of Appleby’s 12 offices globally, Bermuda represents one of the largest and oldest locations. It has carved out a leading role in the island’s reinsurance market, notably in sidecar and the growing Insurance Linked Securities (ILS) market. European CEO spoke to Appleby partner Brad Adderley about how the island has developed over the years.

Broadening the market

Bermuda has been a popular offshore location for investors for years, and its reinsurance market has been one of its leading industries. Among its other legal services, Appleby Bermuda has a sizeable specialist team that focuses on the insurance market. The company has been heavily involved in a number of recent big deals, including the African Risk Capacity (ARC) transaction where a specialist hybrid mutual insurance company was formed to help African Union member states become more resilient to extreme weather events and to protect insecure food populations in light of climate change.

ARC was initially capitalised with $135m (€96.8m) in drought insurance coverage tailored to the specific needs of the five insured countries. Appleby also recently advised on the largest cat bond transaction in history, breaking new ground for the ILS market and ILS investors. The $1.5bn (€1.1bn) issuance through Bermuda special purpose insurer Everglades Re will provide reinsurance coverage for Florida’s state-created property insurer Citizens Property Insurance.

While Bermuda has been known for a long time as one of the leading locations for offshore reinsurance and sidecar insurance business, it is only recently that it has started to develop the ILS market, largely thanks to new regulations, says Adderley. “In four years Bermuda has gone from having zero percent of the market to having almost 70 percent of the cat bond market in 2013 and almost 80 percent in the first half of 2014.” What is more, cat bonds, insurance-linked securities and insurance linked investment funds recently hit a new all-time high with the Bermuda Stock Exchange (BSX) now totalling $12.43bn (€9.12bn).

According to Adderley, the firm has been involved in a number of areas over the last decade, broadening their offering from typical reinsurance sidecar offerings to captives and cat bond products for the ILS market. “We’ve been quite fortunate in that we’ve been involved in almost every insurance-related M&A deal in Bermuda during the last decade. We are also very much at the forefront of the ILS community,” he says.

To read the full article, visit the full online article in the August edition of European CEO Magazine

 

Source: European CEO

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