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Bermuda’s flexible and innovative approach has ensured it remains at the forefront of risk transfer globally—but more could be done to educate its wider stakeholders about the good work it does, as Charles Cooper of AXA XL explains to Bermuda:Re+ILS.
Charles Cooper, chief executive, reinsurance, at AXA XL, says that Bermuda’s insurance industry regulator should take great credit for Bermuda’s continued global prominence as a risk transfer hub. He notes that the Bermuda Monetary Authority (BMA) has always managed to strike the right balance between high standards and protecting the interests of policyholders and an innovative and flexible approach.
“The reason capital flows here is because of that open and flexible approach,” Cooper says. “Bermuda’s regulator has very high standards and is internationally recognised as a well-respected regulator, yet it is also willing and able to move quickly and retain a certain level of flexibility.
“It is a delicate balancing act yet one that it has successfully managed for decades.”
Cooper highlights the global importance of Bermuda in certain lines of business, especially those that are capital-intensive and characterised by high severity, low frequency losses, such as natural catastrophe business.
It is estimated that Bermuda provides between 20 percent to 50 percent of the capacity globally for catastrophe business, depending on the location, while in some US states, such as Florida and Texas, it is as high as 60 percent.
He notes that Bermuda is a very influential force in the retrocessional markets, which have a big influence on all rates globally, and is now also the global hub for insurance-linked securities (ILS), which is an increasingly influential form of capital.
“The fact that Bermuda now dominates the ILS space is yet another example of how its ability to innovate has helped it be so successful over the years,” he says.
“When you combine that with the high degree of expertise and talent in the market and its access to global risks, you can see why it is the market of choice for ILS.”
A new class
Cooper adds that with the wider collateralised reinsurance product Bermuda also looks set to dominate, with the BMA mulling a new class of reinsurer specifically designed for such companies, and he notes that for similar reasons Bermuda is a domicile of choice for many captives owners and managers.
Cooper does, however, admit that Bermuda could do better at communicating the important role it plays in risk transfer globally to those less familiar with the jurisdiction. While the Association of Bermuda Insurers and Reinsurers (ABIR) does a good job of conveying this message, more could be done, he argues.
“The insurance industry as a whole faces a challenge relating to how it is perceived,” he says.
“An understanding of the value of insurance on a broader basis could be better understood—too many people view it merely as a cost rather than a benefit.
“In today’s political environment where we are seeing a rise of protectionism, Bermuda can be seen as easy target. Yet the reality is very different.
“When you consider just how many claims we are paying in the aftermath of big catastrophes, that value should be clear to see. We need to communicate that better,” he concludes.
Charles Cooper is chief executive, reinsurance, at AXA XL. He can be contacted at email@example.com
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