SPI numbers burnish Bermuda’s credentials in innovation

27 special purpose insurers (SPIs) were established in 2012, as the Island played host to an increasing number of innovative vehicles looking to extend sidecar and dedicated cat fund capacity to the market.

11 were registered in December alone, with the rush of new entrants evidently looking to take advantage of the imminent renewals. The Bermuda Insurance Development Council said that the figures were further proof of the Island’s ongoing status as a “hotbed of innovation in the international insurance arena.”

Talking with one of the markets that recently reloaded its sidecar capabilities, Bermuda Re found that current iterations of the SPI are displaying a rather more varied risk:return profile than in previous years. Traditionally sidecars have been clustered in the high-risk, high-return area of the reinsurance market, but in order to attract growing and varied investor interest into the space, current entities are displaying more of a bar-bell distribution.

Many continue to satisfy demand from the likes of hedge funds looking for high risk:return investments, but rising interest from pension funds on the hunt for uncorrelated investment returns in the current low interest rate environment, has led to the formation of a number of SPIs that satisfy a demand for vehicles with a lower risk:return profile. Bermuda, with its innovative thinking and speed to market, has been well-placed to meet these varied demands, as investor interest in reinsurance continues to hot up.