Storms, fires, and a whirlwind of M&A

20-12-2018

It’s been a busy year for the reinsurance industry on Bermuda. Bermuda:Re+ILS surveyed readers to find out what caught people’s attention the most over the course of the year.

Looking back on the year that is now coming to an end it’s hard to say what has caused the most distress for the industry. It’s also hard to tell the difference between 2017 and 2018.

This year was dominated by an extremely active Atlantic hurricane season and yet more wildfires in California, following on from similar events in 2017.

Looking at the storm season first, during the 2018 Atlantic hurricane season there were 15 named storms, eight hurricanes and two major hurricanes and a total of $33.3 billion in damages. The season started off early with the formation of Tropical Storm Alberto in May, before the official start of the usual period of Atlantic hurricane formation, and ended with Hurricane Oscar, which formed in the middle of the Atlantic and dissipated to the South East of Iceland.

As for the Californian wildfires, California’s insurance commissioner Dave Jones said at the start of December that the recent wildfires in California will cause at least $9 billion in insured losses, making them the deadliest and costliest wildfire catastrophes in California’s history.

Both of these events were therefore at the forefront of people’s minds when Bermuda:Re+ILS carried out an end of year survey. We asked readers the following question: “As 2018 comes to a close, what has been the most important event to affect the Bermuda re/insurance market in your opinion, and why?” Readers could pick multiple options.

Fifty percent of readers picked the 2018 Atlantic hurricane season as the joint most important event of the yearFifty percent of readers picked the 2018 Atlantic hurricane season as the joint most important event of the year. Another 50 percent picked the second year of late-season extreme Californian wildfires as the event that caught their attention.

Another event—or rather, series of events—that caught the market’s eye was the increase in merger and acquisition (M&A) activity over 2018, with 30 percent of respondents choosing this as the most important event of the year.

It was indeed a very busy year on the M&A side. In March 2018, French insurer AXA acquired XL Group for $15.3 billion in cash. In January 2018, AIG revealed that it would acquire Validus Holdings for $5.56 billion in cash, which included treaty reinsurer Validus Re, ILS manager AlphaCat, Lloyd’s syndicate Talbot and US specialty player Western World.

In August 2018, Bermuda-based Enstar Group acquired Maiden Reinsurance North America (MRNA) from a subsidiary of Maiden Holdings for $307.5 million. Bermuda runoff specialist Premia Holdings acquired Boston-based claims, audit and risk management advisory firm Alan Gray from Vanbridge Holdings in September 2018. And in August 2018, Markel Corporation revealed it will acquire Nephila Capital. The deal is expected to close in the fourth quarter of 2018. The value of the deal has never been revealed.

More activity could be on the horizon in 2019, depending on what the market looks like and what kind of an appetite companies have, so many market participants will be watching events carefully.

The final occurrence in Bermuda that was mentioned by respondents was the ongoing push by the government of Bermuda to increase the number and variety of fintech companies on the Island. In addition the government of Bermuda has been making a major push to attract Bitcoin and other electronic currencies to the Island.

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In a speech in Paris in September Premier David Burt highlighted three turnkey initiatives which, he said, give Bermuda the most advanced position in comprehensive initial coin offerings (ICOs) and digital asset legislation.

The first initiative came in July, when the Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018—legislation governing ICOs in Bermuda—was enacted, requiring potential investors and owners to meet the ‘Bermuda standard’ on beneficial ownership and transparency, one highly regarded by regulators the world over.

The second was the Digital Asset Business Act 2018. Related legislation, which is fully administered by the Bermuda Monetary Authority, is expected to serve as a global model of best practices for regulation of digital asset service providers. This came into effect in September.

Third, Bermuda amended its banking laws: the Banks and Deposit Companies Amendment Act 2018 (Restricted Banks Act) allows banks in Bermuda to service companies that provide digital asset services in Bermuda.

 

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