October 27, 2016

ILS Bermuda: ‘Collaboration and innovation will grow the global ILS market’

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ILS Bermuda: ‘Collaboration and innovation will grow the global ILS market’

  • BSX listings reach 159 securities with market capitalization of $19.2billion
  • Within the last decade, the Bermuda Monetary Authority (BMA) has registered 159Special Purpose Insurers (SPIs) as at Q2, 2016.
  • Bermuda Convergence 2016 business networking event to bring together global industry leaders November 9-10th in Bermuda – its fourth annual event

Bermuda is known as the ‘World’s Risk Capital’ and has achieved that stature as a result of decades of hard work.“

Bermuda has earned the right to be referred to as the World’s Risk Capital and a centre of excellence for the creation, support and listing of ILS structures. This position is the direct result of our resilience, innovativeness and ability to anticipate and respond to changes in our core markets as they occur and with our clients that we service in mind.” Said Greg Wojciechowski, ILS Bermuda Chairman and CEO of the Bermuda Stock Exchange (BSX).

Not only is the island’s infrastructure modern and forward-looking, its framework of regulation meets international standards andprotects clients’ commercial interests and their assets. Bermuda meeting NAIC qualified jurisdiction status and Solvency II equivalence is evidence of this and underscores Bermuda’s long-term stability in an age of uncertainty.

Bermuda was one of the first jurisdictions that embraced the creation, support and listing of ILS structures and is now the leading centre of excellence for this business with the greatest global market share of ILS.

Whatever claims are made, Bermuda, uniquely nestled between two of the largest capital markets and insurance centers of the world, has been a stable and innovative force for the industries which it has served for decades.

The ILS market is a case in point. Bermuda’s solid commercial and regulatory platform

supported by depth and breadth of industry professionals located in the jurisdiction has been critical to the innovative seeds of ILS germinating, growing and maturing in Bermuda which has supported the acceleration of the development of the asset class globally.

Bradley Kading, President and Executive Director, Association of Bermuda Insurers & Reinsurers (ABIR) stated in a recent press release, “Bermuda’s Solvency II equivalence finding by the European Union will serve us well as the UK negotiates its multi-year transition out of the EU. The Bermuda equivalency is unaffected by the UK vote. ABIR has excellent relationships with both UK and EU policymakers and regulators. ABIR members provide vital insurance capacity that makes UK and EU insurance markets more competitive. ABIR members will be reviewing corporate structures to determine what changes in their regulatory footprints may be necessary in order to conform with expected changes in European regulatory governance.”

ABIR members have nearly 10,000 employees in Europe, with 6,000 in the UK alone. In any given year, Bermuda’s commercial insurers provide close to 25% of Lloyd’s capital and capacity. There is no reason why this type of partnership cannot be further extended into the ILS space.

Bermuda’s government and regulator have bilateral relationships with the UK and EU that have led to important legal agreements on tax cooperation and transparency, along with global recognition of Bermuda’s compliance with international standards

The island currently has more than 90 treaty partnerships with nations around the world and has been recognized as a leader on tax transparency issues by the Organisation for Economic- Co-operation and Development (OECD), the Financial Action Task Force (FATF), and G20 nations.

The UK’s decision to leave the European Union could have important consequences for many (re)insurers based in the UK which trade significantly with Europe – and many players that use the UK as a gateway to Europe. The full implications will only become clear in the long term. It is evident that Bermuda remains a safe harbour in the face of uncertainty and today, Bermuda is better placed than ever to cater to the contemporary needs of international business.

Bermuda Business Development Agency (BDA) CEO, Ross Webber stated, “In a global economy, Bermuda is affected, like other nations, by such major events. We stand ready to deal with myriad eventualities. No matter how the exit unfolds, we remind our business partners in the UK that Bermuda continues to offer the same stable, attractive, effective and proven blue-chip international business domicile as it has for the past 70-plus years.”

With so many years of experience and with innovation being firmly entrenched in the Bermuda DNA and psyche — it comes as no surprise that the Bermuda market, in the early 2000s, quickly realized that the capital formation process for the traditional space was changing and that change was not a temporary one. A very subtle paradigm shift in the way that capital was going to enter the insurance and reinsurance world in the future was evident. Based upon its deep market experience, Bermuda was able to recalibrate, innovate and address the needs of a developing trend and deliver a sought after solution in a timely way so that clients could get products to market and into the hands of those that needed it before catastrophe struck.

Given Bermuda’s sophistication around risk transfer, matched with a world-class infrastructure, robust regulation and deep pool of expertise, the island has also often acted as an incubator for pioneering ideas. When innovation has occurred in the risk transfer industry it has often been born in Bermuda or eventually moved there and thrived on the island.

“Bermuda has been and will continue to be the nexus of delivering efficient sources of capacity and protection to insureds when and where it is needed. We have consistently shown that we are able to evolve and improve our infrastructure to meet the market’s needs”, said Kathleen Faries, ILS Bermuda Deputy Chair and Head of Bermuda, Tokio Millennium Re Ltd.

“I fully expect Bermuda to once again be at the forefront of this evolution. We have already seen the rapid acceptance of this new capital by Bermuda companies as evidenced by many adding ILS Asset Management to their platforms, Side Cars, Cat Bonds or Risk Facilitation and Fronting. We have only seen the beginning stages of this transformation. It will continue to accelerate as this capital finds more efficient ways to access risk across the entire value chain.”

Results and performance are what an innovative platform delivers to its clients, the industry and those in need of the sought after service. This is exactly what Bermuda did and continues to do in relation to ILS.

Today, Bermuda remains well positioned to be a leader in risk innovation. Greg Wojciechowski, ILS Bermuda Chairman and CEO of the Bermuda Stock Exchange (BSX) noted, “The ILS sector and associated companies are using Bermuda for the same reasons such firms have always done: because of its extensive commercial offering, expert professional services community, stable currency due to parity with the US dollar, and a flexible yet globally-respected regulator that thoroughly understands ILS structures and the concept of innovation around them.”

“The industry and the clients it serves are in a state of evolution – new risks, geographies and markets are being sought while those in need of coverage are seeking ways to obtain much needed protection in catastrophic times. Through collaborative efforts by governments and leaders in key industry market segments, addressing of the critical “protection gap” can be achieved and continue to evolve while still expanding the universe of business and helping those in need. Such socio-economic initiatives are best achieved through international cooperation and collaboration for the collective benefit society.”

 

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