Alon Neches: In for the long haul

Fortitude Re made history last year when it closed a $28 billion transaction to reinsure life and annuity policies written by US life insurer Lincoln National. 

The deal, believed to be the largest third-party reinsurance deal in Bermuda’s history, reinforced Fortitude Re’s reputation as a leader in the burgeoning long-term insurance industry in Bermuda. 

Fortitude Re’s chief executive officer, Alon Neches, is even more focused on the client and policyholder experience than he is on deal size. Neches is quick to underscore Fortitude Re’s commitment to driving clients’ success. 

“Completing the Lincoln transaction underscores Fortitude Re’s ability to deliver meaningful, bespoke client solutions at scale, something that differentiates our value proposition to clients, and we are absolutely thrilled to see how Lincoln’s stock price and company have performed since the transaction,” he told Bermuda:Re+ILS. Lincoln National’s stock price has indeed improved. It was trading at $21.44 at the end of October, 2023 and on August 1, closed at $34.05, a 58 percent improvement. 

Neches attributes the success of the deal, and the other transactions Fortitude Re has completed, which includes several in Japan, to the company’s ethos. 

“Our philosophy is to deliver for our clients as part of how we deliver for our shareholders and for one another,” he said. “We deliver customer service on a day-to-day basis in a couple of different ways. 

“First, once a transaction is on our books, our client team ensures that our clients are receiving the information they need to ensure that the reinsurance transactions we are entered into are operating as they should. 

“Perhaps more importantly, the folks on our teams in actuarial, finance and legal, who are entrusted with the settlements that fund our promises to our clients and their policyholders, all do so with the perspective of the broader client relationship, and the importance of the promises we’re making to our clients and policyholders, which is customer service that is delivered day to day, and over the life of what are multi-decade relationships.” 

This goes to the heart of what makes Fortitude Re unique, the former Carlyle Group executive feels.

“Fortitude is a place that is differentiated by our focus on clients, by having one of the most talented teams in the industry and by being supported by an extremely sophisticated, long-term oriented group of investors. 

“I recognise that many companies could say the same thing, and they mean it. What makes Fortitude Re special is the connectivity between those things—our people are connected to our clients and to our shareholders. When there are dilemmas between priorities, we all share a vision of resolving those dilemmas with the focus on what works best for our clients and building a long-term franchise that will be here forever. 

“That’s what makes Fortitude special,” he said. 

Welcome competition 

The emphasis on customer service, along with a strong balance sheet and skilled employees, is essential in a market that is becoming increasingly competitive—competition which Neches welcomes. 

“I worry less about the number of new entrants and more about their quality,” he said, highlighting the importance of responsible, well-capitalised firms entering the market. 

“From pricing, underwriting, capital, and risk perspectives, we’re happy to welcome them into the community of Bermuda reinsurers,” he said of the influx of new companies into Bermuda’s reinsurance market. 

“We think they bring something to the market and they drive us all forward. 

“We’re certainly happy to compete with them, but if they’re dedicated the way we are—to helping the Bermuda market thrive— we’re also rooting for their success.” 

A dynamic market 

Neches thinks the market is continuing to evolve and is “dynamic”. 

“We are living through a time of change in our industry, and I see three big trends that are driving that change,” he said. 

“First, we know that across almost every market, there is a savings and protection gap that needs to be addressed, and new products and capital are required to support those products. 

“Second, we see that public insurers have been returning capital to shareholders, whereas privately-backed insurers have been the ones raising capital, investing it into the sector.

“Finally, we’re in a time of global regulatory change where the underwriting, investment capital and risk management discipline that our company and all of our peers have to meet has been set to a higher bar,” he explained. 

Fortitude Re views the continued evolution of the Bermuda longterm reinsurance market as supporting the Island’s continued leadership as a reinsurance jurisdiction destination of choice. 

“I view those three drivers as creating a significant amount of opportunity for firms like ours. We are here for our clients to help support their growth and the management of their existing portfolios. We have made the investments to do so while meeting the highest standards in risk management, operational underwriting and capital discipline.” 

Neches’ recognition of global regulation as a driver of change is relevant. Bermuda has faced increasing scrutiny from overseas regulators and competitors as the long-term reinsurance sector has grown, and the Bermuda Monetary Authority (BMA) introduced higher capital requirements earlier this year following a lengthy consultation. 

Neches says Fortitude Re supported the changes from the outset and noted they were appropriate to supporting Bermuda’s global reputation as a sound, well-regulated jurisdiction that can manage long-term insurance as well as it has handled property casualty for several decades. 

“We have been a strong and vocal supporter of these regulatory changes from day one,” he said. “The reason for that is we call Bermuda home. Anything that the BMA can do to help continue increasing global regulators’ confidence with Bermuda as a home for life and annuity liabilities is something that helps the market, and therefore helps our company.

“My view is that the impact for the Bermuda reinsurance industry is immensely positive.” 

Risk management at the core 

The changes have had relatively little impact on Fortitude Re and the broader market. 

“For a firm of our capital strength and risk management, the impact, frankly, has been rather modest for the marketplace,” Neches said. The company seems remarkably strong, with $76 billion in invested assets, of which 96 percent are deemed to be investment-grade. Total assets at the end of 2023 were $110 billion, up from $77 billion in 2022. That’s backed by a capital ratio of 196 percent. 

As to challenges and opportunities, Neches beamed: “I love this question because I see so much opportunity. 

“Without belabouring it, our opportunity is to keep doing what we’re doing: to continue delivering for clients on their most pressing risk management issues, whether that is to help support their growth or address their existing portfolio. 

“We have built a team of the best professionals in the industry, backed by the most sophisticated investors in the industry, to deliver just that.” 

When addressing challenges, Neches shared: “Our challenges are the same ones that all our peers face, and in my mind, the most pressing ones are twofold. 

“It’s very important that we continue to demonstrate globally that Bermuda can serve as a hub for life and annuity liabilities the same way it already does for property casualty liabilities, in a manner that is sound and secure and trusted by regulators all over the world,” he said. 

“Second, we’re living through a more dynamic investment environment, and that increases the emphasis on risk management as a core part of any business.” 

Neches remains an unabashed fan of Bermuda and its place in the re/ insurance world, but makes clear there is no room for complacency. 

“To maintain the Island’s position as a long-term reinsurance hub, the two most important things are ensuring that the regulatory regime here is respected globally, so that global regulators and insurers all feel comfortable reinsuring into Bermuda as a hub and, two, continuing to build on the talent advantage that Bermuda already has by attracting the best and brightest insurance minds to this market, so that we can continue to drive innovations and solutions for clients around the world,” he concluded.

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