Diverse Bermuda market well equipped for the future

The Bermuda Triangle – the Bermuda government, the Bermuda Monetary Authority and the re/insurance industry working together – has enabled the island to establish its position as a leading risk centre.

But a panel of re/insurance leaders speaking at the Bermuda Risk Summit, which has been taking place in Bermuda this week, also said the island’s long-standing tradition of paying claims quickly and being able to diversify its offering over the past five decades were also part of the Bermuda advantage.

Moderated by Tracey Gibbons (pictured), head of global strategy for QBE Re, Future of Risk: The Bermuda Advantage’s panellists  avoided the danger of uncritically singing Bermuda’s praises, instead carrying out a wide-ranging review of Bermuda’s property casualty re/insurance sector.

David Govrin, SiriusPoint president and head of reinsurance, said Bermuda was a role model for public private partnerships between government, regulators and the insurance sector.

He said global risks were “pretty high right now” between global economic problems, geopolitics and climate risk.

Bermuda’s role was to assess and understand the risk, and to provide the capacity and analytics to deal with it.

Colm Singleton, CEO of Allied World Bermuda, said part of the Bermuda advantage lay in the fact that professionals in Bermuda were solving problems from around the world.

“Each of the catastrophe events from Helene to the Los Angeles wildfires present new issues for the Bermuda market and the need to seek solutions,” he said.

He added that one key part of the Bermuda advantage was its ability to pay claims and respond quickly to catastrophes like Hurricane Katrina in 2005.

At that time, he said Bermuda did not have deep technical claims paying expertise.

“That has changed dramatically,” he said. “We are experts in handling North American liability claims. We are the experts on the core issues our large clients are focused on.”

He noted that all of the major liability events of the last 20 years from Deepwater Horizon to opioids had been resolved and worked through in the Bermuda market.

“We should differentiate on the basis of claims excellence,” he said.

Singleton said rebuilding the areas of Los Angeles damaged or destroyed in the January wildfires would be  a mammoth task, with thousands of homes damaged. Carriers needed to be alert to a plethora of claims handling requirements from the California regulator.

“The cost of the rebuild will be enormous,” he said. “There will also be subrogation opportunities in Los Angeles and how we respond will be critical.”

AXA XL Insurance Bermuda chief underwriting officer Noel Pearman agreed on the need for efficiency in claims handling.

He said insurers needed to be partners with their clients, but also said they needed to have honest conversations about mitigation, adding: “We need to get clients to plan for mitigation to make sure it is a long-term partnership.”

Gibbons noted that the Bermuda market had evolved from being largely focused on property catastrophe to a diversified re/insurance market, including in specialty lines.

Carolyn Thomas, senior broker, credit and financial risk reinsurance at Aon, said the growth of specialty lines were likely to continue.

She said Bermuda had offered strong coverage in political risk for many years while credit and mortgage re/insurance had grown rapidly.

She said Bermuda re/insurers were not burned in the financial crisis of 2008, which deterred other insurers for many years. As a result, Bermuda mortgage re/insurance underwriting grew between 2013 and a2017 at the same time there was softening in property lines which freed up capital.

“It will continue to grow because there is talent in Bermuda who understand mortgage and credit,” she said.

Pearman said the Bermuda cyber market had seen similar growth.

Pearman, who built the AXA XL cyber insurance book, said the company did a lot of research before getting into the sector, and had to educate senior management about the nascent risk.

He said lessons were learned – including after the rapid rise of ransomware – but the well capitalised book enabled his team to write risk with a margin of safety.

“The growth of cyber is a good example of how Bermuda stays relevant to customers,” Singleton said.

Thomas added that it showed the importance of the diversity of the market. “We need to offer a range of products and be relevant as much as possible,” she said.

Asked what the future of the Bermuda re/insurance industry looked like, Pearman predicted that there would be constant innovation while artificial intelligence would take a bigger role.

He said Bermuda also needed to raise its educational standards to prepare people for jobs of the future while reducing the cost of living,

“We should not be educating teens and young adults for the world we see today,” he said. “The world they enter will be different.”

Singleton said the island was fortunate in that young Bermudians wanted to enter the insurance industry. That was not always true in other countries.

He added that re/insurers needed to make their business models more efficient and to remove any frictional costs of doing business on the island.

Gibbons said no one would have foreseen 20 years ago how the market would evolve.

Bermuda has been extremely nimble and has deep talent, both imported and homegrown, she said. And no one should question the value of a world-class regulator.

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