Shaping Bermuda’s future

20-10-2016

Shaping Bermuda’s future

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Bermuda has become the force and influence it is within risk transfer because of the dedication and foresight of great leaders. In part 1 of a two-part feature, we profile 25 individuals running reinsurance enterprises and taking up the mantle of shaping the Island so it is fit for the next decade of opportunities and challenges.

The concept of leadership can be an evasive one. Thousands of books have been written trying to explain and capture this critical but elusive quality. What few in business dispute, however, is that great companies, breakthroughs in technology and innovations that have changed whole industries all develop and mature, in part, because of great leaders.

Bermuda is no different. It is worth remembering that for a small rock in the middle of the North Atlantic, it punches well above its weight in terms of its economy and the quality of the people working there. It has come as far as it has in terms of being a global hub and centre of excellence for risk transfer because of the leadership of certain individuals along the way.

A fledging captives industry may still have been just that had it not been for the pioneering efforts of certain individuals in the 1970s and 1980s which paved the way for that industry to thrive—not just on Bermuda but further afield too.

The liability crisis of the 1980s brought a first batch of full commercial start-ups to the Island. They too may have remained specialist, niche, carriers writing liability risks the US market had shied away from had it not been for the ambition and foresight of a series of great leaders moving those businesses forward.

Then came the new classes of property-catastrophe players, some of which became industry leaders in that art; others diversified into global multiline players.


A fundamental change

Bermuda’s reinsurers and risk management specialists are now faced with a new set of challenges and opportunities. The proliferation of risk transfer mechanisms that have allowed third party capital to enter the industry so easily, and with lower frictional costs, means that the industry as they know it is changing rapidly.

With this in mind, the industry will require a new set of leaders to embrace this fundamental change and use it to their advantage. This is the core basis of this special report by Bermuda:Re+ILS. We asked our in-house editorial teams and the many experts and advisers we speak to daily to help us identify those individuals within reinsurers who will help change take place—for the better of both the industry they work in and society as a whole.

"Technology will be a determining factor in Bermuda adapting to a new risk landscape." Kathleen Reardon, Hamilton Re

A full list of these leaders can be found on page 24 and a selection of their biographies and thoughts on the industry over the coming pages. It is important to stress that this cannot be a definitive list, but these are the names that came up most during our informal inquiries.

Our quest also focused on individuals who will mould the industry going forward—as opposed to having shaped it in the past. All these individuals are from reinsurers—separate lists of influential service providers and insurance-linked securities (ILS) and funds experts will be published in the November issue.

Two themes that pervade most of the commentaries are optimism around the future of risk transfer and Bermuda’s role within that, and also the vital importance of Solvency II equivalence.

John Rathgeber, chief executive of Watford Re, for example, believes that Bermuda is fast becoming a melting pot for a heady mixture of talent and risk transfer innovation which will see the industry continue to evolve with Bermuda at the heart of things. While he does not believe all new strategies and innovations will succeed, he thinks Bermuda will win either way.

“Bermuda will retain its prominence as a centre for risk-taking, risk management, and the provision of services related to these activities. Bermuda has always had a robust and pragmatic regulatory framework but the attainment of Solvency II equivalence greatly solidifies Bermuda’s reputation and credibility as a significant insurance jurisdiction,” Rathgeber says.

“Historically, Bermuda has been receptive to new ideas and structures for transferring and assuming risk as long as the business plans made economic sense and the management teams could demonstrate the expertise to execute those plans.

“It will be fascinating to watch as consolidation activity continues to reduce the number of companies on the Island while, at the same time, new companies and alternative vehicles are being formed with unique, somewhat untested business models.

“The spectrum of new strategies we’re seeing is extremely interesting to observe. There are many more variations in asset strategies being employed, variations in how business is sourced and underwritten, and variations in targeted lines of business. If Darwin were alive today he might choose Bermuda over the Galapagos for developing his evolutionary theories.”

Charles Cooper, chief executive of reinsurance at XL Bermuda, calls Bermuda, with its history of innovation and robust regulatory regime, a thoughtful risk-taker. He also singles out ILS as being a good example of how Bermuda has come to dominate certain new areas of risk transfer because of this approach.

“Bermuda continues to lead innovation in the ILS world and that will continue because of the underwriting talent here and the ability to innovate and provide rapid solutions to problems as they evolve,” Cooper says.

“Bermuda has a reputation of being a thoughtful risk-taker. Now that Bermuda has Solvency II equivalence, the reputation of Bermuda in the insurance world has been further strengthened. It is right up there with London and New York. A lot of goodwill goes along with that reputation.”

Rob Wyatt, chief executive of MS Amlin AG Bermuda Branch, says that Bermuda’s success is built on three core factors.

“We continue to attract top talent. Second, we have a highly sophisticated, flexible and entrepreneurial view towards risk. Third, we continually look to adopt new approaches to providing solutions to clients’ needs. This is all combined with a favourable and constructive regulatory environment. It is this unique combination of factors that has made Bermuda successful and will continue to underpin our success,” he says.


Adapt and thrive

Mark Watson III, chief executive, Argo Group, adds that while Bermuda is a hub for re/insurance, providing the majority of high excess liability insurance capacity for global Fortune 1000 companies, the key to the future will be adaptability.

“As in many industries, the keys to success lie in being proactive in the face of change. And it’s no different in Bermuda, where the risk transfer landscape is continually changing,” Watson says.

“As the global capital markets get more comfortable with investing in ILS, Bermuda will need to continue embracing the capital markets and further develop mechanisms that make such investments efficient. There is growing opportunity to look to the capital markets and work together to address global insurance needs.”

Kathleen Reardon, chief executive, Hamilton Re, agrees that adaptability is key. “The Bermuda market has survived and thrived because of its ability to respond quickly to changing market conditions. I don’t see this changing,” she says.

“A new dynamic in market sustainability is the manner in which Bermuda companies embrace technology to improve their risk selection and underwriting processes. I see solid evidence that technology will be a determining factor in Bermuda adapting to a new risk landscape.”

Stephen Young, chief executive officer, Global Reinsurance, Endurance Specialty Insurance, sums things up: “Bermuda is an amazingly unique underwriting environment that does not exist anywhere else in the world. The risk capital that resides on this 20-square mile jewel in the Atlantic is the foundation for an established market in the captive, insurance, reinsurance, retrocessional and ILS businesses.

“Bermuda is home to a tremendous amount of actuarial, analytical and underwriting talent and the interaction and discussion as these professionals work within their respective markets to analyse and underwrite risk will no doubt lead to further innovation, providing new products and solutions for individuals and companies around the world.”


The most admired

When we contacted this batch of leaders who will shape the future of Bermuda, we also asked them if there are other leaders past or present they particularly admire.

Brian Duperreault, CEO of Hamilton and formerly the boss of ACE for many years building its global franchise, featured prominently, with Kathleen Faries, head of Bermuda, Tokio Millennium Re; Kathleen Reardon, chief executive, Hamilton Re; Charles Cooper, head of reinsurance at XL Catlin Bermuda; and Rob Wyatt, CEO, MS Amlin AG Bermuda Branch all naming him. (He does not feature in our own list because Hamilton requested the next generation of leadership feature, in the form of Kathleen Reardon.)

“I admire Brian for his long-term commitment to Bermuda. He continues to bring jobs and business to Bermuda while also contributing to the community,” Faries said.

Reardon added: “Brian is first and foremost in my mind as one of the principal architects of today’s Bermuda market. His vision in developing a company like ACE and establishing a company like Hamilton is an inspiration to anyone working in the industry.”

Bob Clements, who played a prominent role in the formation of ACE, XL, Mid-Ocean, Arch and Ironshore, was also named by several people including Bertil Olsson, CEO of Oil Casualty Insurance, and John Rathgeber, the CEO of Watford Re.

“I had the honour of being introduced to Bob when Bermuda-based Arch Capital was formed in 2001. When it comes to the development of Bermuda’s insurance industry, his legacy is unparalleled and I know many others agree. It would be hard to overstate what he achieved during his career and how important he was to the development of the Bermuda insurance industry,” Rathgeber said.

Mark Watson, CEO of Argo, named Don Kramer, founder, chairman and managing partner of ILS Capital Management, describing him as an entrepreneur who has seen business success and faced challenges.

“He’s not one to give up. His foresight and innovative approach which led to founding ILS Capital back in 2011 has not only proved to be a success, it’s changing the industry.”


 

Watford Re, John Rathgeber, Bermuda, MS Amlin AG, Rob Wyatt, Argo Group, Mark Watson III, Hamilton Re, Kathleen Reardon, Insurance, Reinsurance, Risk, ILS

Bermuda Re