Bermuda: the leader in reinsurance
Bermuda has been a leader in reinsurance, risk capital and captive insurance industry for several decades. From the establishment of the first companies more than 40 years ago, the Island’s spirit of innovation and entrepreneurship has made it the home of underwriting operations for more than 30 major international insurance and reinsurance companies.
As an example of its market size, the Association of Bermuda Insurers and Reinsurers (ABIR) property and casualty companies generated approximately $100 billion of global gross written premium in 2018, from 150 countries.
The Bermuda market has grown over the past three decades in response to the greater need for insurance and reinsurance coverage. For example, after Hurricane Andrew in 1992, the World Trade Center attacks in 2001, and the Katrina, Rita and Wilma hurricanes of 2005. Whenever there has been dislocation in the reinsurance and insurance market and a need in the insurance industry, Bermuda has stepped up to fill that need and serve its clients.
Entrepreneurial spirit
As noted above, the Bermuda insurance and reinsurance industry evolves to meet market demand. Bermuda has led the reinsurance industry in developing complex catastrophe modelling underwriting capabilities, and this scientific approach to underwriting assists clients in mitigating risks and establishing risk management programmes.
Although property catastrophe insurance has been a key driver of Bermuda’s growth over the past few decades, coverages have expanded to almost all property and casualty insurance, including cyber and mortgage and, more recently, growth in the life sector. Bermuda continues to focus on the next wave of opportunities with innovation sandboxes based on new technologies, such as blockchain and cryptocurrencies.
The growth in Bermuda has not just been on the property and casualty side. In the last five years, Bermuda International Long-Term Insurers and Reinsurers (BILTIR) has seen life sector assets grow to approximately $300 billion, and growth continues with 15 new life insurance licences issued in 2018.
Collaboration
The growth in the Bermuda insurance and reinsurance industry is further facilitated by industry collaboration to solve the most complex challenges. The Bermuda government works closely with the Bermuda Monetary Authority (BMA) to attract new business. They operate together with industry associations, such as ABIR, BILTIR and the Association of Bermuda International Companies (ABIC). This collaborative spirit allows response to industry changes or proposed legislation or regulation.
Strong regulation
Bermuda’s insurance regulation meets or exceeds standards used by the International Association of Insurance Supervisors. Bermuda has been designated as a Solvency II regulatory jurisdiction by European regulators and is viewed as a jurisdiction with strong but fair regulation.
In the US, the National Association of Insurance Commissioners (NAIC) has prequalified the BMA as a regulator that meets its standards and allows Bermuda reinsurers to do cross-border business in a streamlined manner.
Bermuda is respected as a regulator by both the US and the EU. The Island’s government has worked tirelessly to build and maintain relationships with the global regulatory community to appropriately regulate the global companies based in Bermuda.
However, the key to Bermuda’s success has been its ability to maintain this strong regulatory environment while remaining nimble and agile. One of the key competitive advantages is the BMA’s willingness to meet with constituents, talk through issues and avoid unnecessary bureaucracy.
Talented insurance professionals
Over the past 40 years, Bermuda has developed a talented workforce, including underwriting professionals, actuaries, accountants, attorneys and service providers. Young Bermudians are encouraged to study in fields that contribute to the insurance and reinsurance industry. Many people say that only in Bermuda does an elementary school child know what an actuary is, and that an actuary or underwriter has “rock star” status.
This talent has been key to the development of new insurance and reinsurance coverages where, in addition to its leadership position in property and casualty coverages, and the growing life sector, Bermuda continues to lead the insurance-linked securities market, where risk is matched with alternative capital sources.
Strong market
Because of the large number of underwriting companies on the Island, Bermuda has a strong market within a short walk, which is a competitive advantage compared with other jurisdictions.
Brokers can meet with numerous reinsurance companies in an effective and efficient manner, likely within a few hundred metres of their hotel. Another advantage for Bermuda is its proximity to key US cities: it’s only a 90-minute flight from New York. In addition to business, brokers and other visitors enjoy coming to Bermuda for its beautiful beaches and unique culture.
The views reflected in this article are those of the author and do not necessarily reflect the views of the global EY organisation or its member firms.
David Brown is the senior partner of EY Bermuda and EY regional insurance leader for Bermuda, Bahamas, British Virgin Islands and Cayman Islands. He can be contacted at: david.l.brown@bm.ey.com
