Jo Stanton, chair of ILS Bermuda and head of finance at Tangency Capital
11 July 2022

Different strokes: ILS is much more than an alternative

When Bermuda introduced the Special Purpose Insurer (SPI) class on July 30, 2008, world financial markets were in crisis.

On September 15 that year, and just weeks after the SPI legislation was enacted, Lehman Brothers filed for bankruptcy and global markets went into full-scale meltdown—the climax of the sub-prime mortgage crisis.

At the time, investors were desperate to diversify and find investments uncorrelated to traditional financial markets. Insurance-linked securities (ILS) provided a solution.

Fast-forward 14 years and financial markets are again showing signs of increased volatility and uncertainty—and diversification is once again at the forefront of investors’ minds. And once again, ILS is sure to be viewed as an attractive, non-correlated asset class.

ILS Bermuda was formed in 2012 to promote Bermuda as the jurisdiction of choice for the development of ILS. Our group works with regulators, trade groups, government organisations and industry partners to enhance and deliver our combined intellectual capital and sophisticated re/insurance solutions to the global market. We are also focused on growing the market by attracting new sources of risk to match with capital.

In order to create opportunities for Bermudan students, we provide education and opportunities in the ILS industry, including facilitation and partial funding of internships in Bermuda within the ILS sector.

I have been a member of ILS Bermuda since 2015 and was appointed chair of ILS Bermuda in March of this year, having served as vice chair for the past three years as well as leading the Thought Leadership and Enterprise Committee.

While there is broader market volatility, ILS is diversifying to cover more lines of business such as casualty risks. With floating rates, and the highest rate environment since 2013, it’s a suitable hedge against inflation.

Nonetheless, ILS strategies have to prove that they can deliver on the results they target. The ILS market has matured and developed throughout a challenging few years by showing underwriting discipline, prudent risk management and capital efficiency.

Recent years have shown that diversification and alignment are vital elements to deliver attractive returns. Managers need to demonstrate clear alignment of interest with their investors.

“ILS is diversifying to cover more lines of business such as casualty risks.” Jo Stanton, ILS Bermuda

Clear objectives

Since the SPI class was introduced, climate change has become one of the most pressing risks for businesses and communities around the world and climate-driven perils are now better understood and modelled than a few years ago, enabling better pricing and risk protection.

In addition, environmental, social and corporate governance (ESG) integration is becoming a key component for investors. Insurers, asset managers and service providers are being asked about their ESG principles and are expected to deliver meaningful responses.

Some ILS vehicles certainly fulfil ESG criteria—and that has been recognised by investors around the world, such as pension funds.

One of the UN Sustainable Development Goals is to ‘Make cities and human settlements inclusive, safe, resilient and sustainable’, specifically to ‘substantially increase the number of cities and human settlements adopting and implementing integrated policies and plans towards inclusion, resource efficiency, mitigation and adaptation to climate change, resilience to disasters, and develop and implement holistic disaster risk management at all levels’.

ILS is clearly a vehicle that can help further this goal. For example, the Generali Lion III €200 million cat bond covering exposure to windstorms in Europe and earthquakes in Italy is considered ESG-compliant. The transaction was the first-ever ILS issuance that embeds innovative green features in compliance with the Generali Green ILS Framework.

Related to ESG, diversity and inclusion (D&I) is also an increasingly discussed topic. When I first started in the industry it was very conservative and male-dominated. The last few years, however, have seen a welcome shift with more women and people of colour in senior positions throughout the industry. There are tremendous opportunities for women in business in Bermuda as diversity in the industry continues to improve.

Bermuda helped to develop the ILS asset class and the Island has been and remains a leader in this market. The Bermuda Stock Exchange (BSX) continues to be the world’s leading exchange for ILS with more than 750 listings at the end of 2021, representing $50.8 billion in nominal value.

In addition, regulation has constantly been updated and enhanced over the years as the ILS sector has evolved to meet the commercial needs of the market and clients while continuing to provide a well-balanced, thoughtful regulatory approach which is proportional and risk-based.

Bermuda’s industry and regulator, the Bermuda Monetary Authority (BMA) works collaboratively to update legislation to ensure regulatory sophistication, flexibility and speed to the market. For example, the BMA recently implemented a faster catastrophe bond issuance vehicle registration process with approval in three days compared to other jurisdictions, which have two weeks as a minimum.

“We are thrilled to be bringing back a full in-person Convergence event this year.”

Convergence going ahead

ILS Bermuda will continue to work with the government and regulators to represent the views of the industry in a collaborative partnership as the market continues to grow and evolve.

ILS Bermuda hosts the annual Convergence event in Bermuda, now in its 10th year. Due to the COVID-19 pandemic and restrictions on in-person gatherings, we held one virtual event during 2020 and none in 2021. We are thrilled to be bringing back a full in-person Convergence event this year, from October 12 to 14.

This year will be our first major event since 2019 and our team will bring together investors and industry participants in Bermuda and continue to promote Bermuda as the centre of excellence for ILS.

Convergence 2022 will examine current trends, challenges and opportunities in the alternative re/insurance, capital markets and ILS marketplace, bringing together industry professionals for information sharing and live networking. ILS Bermuda’s steering committee is focusing on new opportunities to broaden the reach of attendees with a view to attracting end investors and sponsors of ILS.

Events like Convergence help to position and maintain Bermuda’s role as a leader in the global risk transfer market facilitating growth and innovation through an ever-evolving landscape of risk.

While the world grapples with climate change, geopolitical conflict, inflation and market turmoil, the ILS market remains an attractive alternative that is uncorrelated to traditional financial markets. Bermuda will continue to do what has served the Island for the past 400 years—innovate and persevere.

Registration for Convergence 2022 is open and more information is available on our website at

More on this story

29 October 2021   Nearly 15 percent of total reinsurance capital is sourced through ILS.
5 April 2022   She succeeds Kathleen Faries, CEO of Horseshoe.

More on this story

29 October 2021   Nearly 15 percent of total reinsurance capital is sourced through ILS.
5 April 2022   She succeeds Kathleen Faries, CEO of Horseshoe.