The COVID-19 pandemic represents an unprecedented challenge for Bermuda and its re/insurance community. But as the virus struck the Island, re/insurers were quick to adapt and were able to keep business operating largely as usual, Bermuda:Re+ILS finds.
As Bermuda:Re+ILS went to press, Bermuda had been in lockdown since April 4. An Island-wide shelter order in place had slowed economic activity to a crawl, with only groceries, pharmacies and a few other vital businesses permitted to remain open.
The re/insurance industry was quick to adapt to the new economic circumstances. By mid-March, well before the government had ordered people to stay at home, most—if not all—re/insurers had instructed staff to work from home where possible. Teams of professional cleaners were hired to decontaminate workplaces for the benefit of those people who still had to come into the office for whatever reason.
Having taken the decision to stop employees travelling to work, it was a relatively obvious step to prevent them travelling further afield for industry conferences or face-to-face client meetings. Re/insurers restricted their staff’s travel schedules, which in the case of conferences was an easy decision, given that most of them were already cancelled.
Re/insurers assured investors that their technology systems were up to the challenges presented by their newly distributed workforces
The Bermuda Business Development Agency announced it was postponing the Bermuda Executive Forum in New York on March 13, just under a week before it was scheduled to be held. The Bermuda Captive Conference, which was due to be held in June, was postponed a little over a week later, as any lingering optimism that the virus could be brought under control quickly dissipated. Any executives who were determined to get away for an industry jamboree had to contend with airlines rapidly scaling down their services, in Bermuda and everywhere else.
By the end of March Bermuda International Long Term Insurers and Reinsurers (BILTIR) had convinced the government to designate re/insurance as an essential service, meaning re/insurance employees had a pass to leave home when necessary. But in the main, the transition to remote working seemed to be proving a success.
Re/insurers were keen to communicate this, to assuage any concerns among partners and clients. Upcoming board meetings and annual general meetings (AGMs) were rapidly rearranged as virtual events, to held via Skype or WebEx: Argo announced it was cancelling its physical AGM, which was due to be held on April 16, on March 2. Institutions were also communicating details of their business contingency plans, either in virtual meetings or through emails or corporate statements.
Re/insurers assured investors that their technology systems were up to the challenges presented by their newly distributed workforces, promising their operational effectiveness would not be compromised. A number formed dedicated COVID-19 response teams, usually comprising figures from senior management, to ensure decisions could be taken quickly and efficiently, and that implementation was being rolled out properly across different parts of the business.
The Bermuda Monetary Authority (BMA) was also quick to act. On March 20 it reiterated its commitment to promoting financial stability, safeguarding Bermuda’s currency and providing effective and efficient supervision and regulation. Having taken the same precautions as the private companies it oversaw, in sending its employees home, it assured the industry it would continue to operate as usual.
The BMA was swift to grant extensions on filing requirements and fees that were coming due, recognising the economic and practical difficulties firms were having meeting their paperwork deadlines.
BILTIR pledged to work with the BMA and other government agencies to safeguard the re/insurance industry’s ability to conduct business.
“The life insurance and reinsurance industries must remain resilient to robustly support policyholders, cedants and local employees,” BILTIR said at the time. It stressed it was fully supportive of the steps Premier David Burt had taken to tackle COVID-19 on the Island, describing them as “decisive and compassionate”.
Despite the preparations and assurances that business was continuing as usual, re/insurers knew COVID-19, and the global response to it, presented a considerable challenge. In late March IGI said what many of its peers were thinking, admitting it had no idea how the pandemic would affect its business.
Re/insurers face a plethora of challenges. Keeping a disparate workforce motivated presented a new kind of problem for human resources teams, amid concern that the virus represented almost as much of a psychological risk to people being kept at home as it is a physical risk to people working in close proximity.
Meanwhile, claims handlers had the unenviable job of telling frustrated clients that the losses they were experiencing in their
own businesses were not covered by their business interruption policies. This news put many well-established relationships under severe strain.
Perhaps the most alarming short-term problem was the chaos in the financial markets, which was ravaging investment portfolios. Over the weeks of late March and April various re/insurers admitted their quarterly results would reveal precipitous drops in profitability for reasons that had little to do with their insurance exposures, and everything to do with their stock and bond positions.
Chubb’s Q1 results, unveiled on April 21, presented a perfect illustration of the situation. It spoke of a balance sheet and liquidity that remained strong, and “a very good first quarter that demonstrated the underlying health and strength of our company”. In the same breath, it was announcing a collapse of Q1 profit, which had fallen to $252 million, from $1.04 billion in the same period of 2019.
Despite watching their balance sheets evaporate in the heat of frenzied trading, re/insurers recognised their responsibility to help Bermudians cope with their own struggles. BILTIR promised to do what it could to help, pledging to donate “a very large percentage of its contingency reserve to the Bermuda Hospitals Board and local charities, with the goal of helping families through these tough times”.
The Association of Bermuda Insurers and Reinsurers helped organise a flight to help Bermudians who were stranded in Canada to get home.
Individual re/insurers were also digging deep. Many made donations of various sizes to a number of local charities, as well as to those in other countries in which they did business. Athene Life Re, Athora Holding, Aspen Insurance Holdings and Catalina Holdings clubbed together to acquire ventilators for the Bermuda Hospitals Board.
Bill Wheeler, president of Athene, summed up the mood in a statement given at the time of that donation.
“We are grateful for, and supportive of, the healthcare professionals on the frontlines treating patients during this extraordinary time, and it is our honour to give back to our community,” Wheeler said.
“Widespread shortages of essential medical equipment have created a challenge for our local hospital. The Bermuda Hospitals Board identified that there was an urgent need for these additional ventilators and in an effort to support the healthcare professionals on the frontlines, we led an initiative in conjunction with our partners at Athora, Aspen and Catalina to fund the purchase of this equipment, which is crucial for treating patients with COVID-19.”
As April drew to a close, re/insurers were hoping the virus was close to being contained, that the public health emergency was easing and that markets would start returning to normal. Whatever happens, they have proved they can be resilient in the face of extraordinary circumstances, and are prepared to help their fellow Bermudians.
COVID-19, Bermuda Monetary Authority, BMA, Bermuda Business Development Agency, BDA, Bermuda International Long Term Insurers and Reinsurers, BILTIR, ABIR