BMA unveils team specialising in climate change risk

The Bermuda Monetary Authority (BMA) has unveiled a new team specialising in the licensing and supervision of innovative business model proposals to address climate change risk and the associated protection gap.

The team will be comprised of subject matter experts from across the BMA’s business units, with an initial focus on the insurance, investment funds and digital assets sectors. The move is part of the BMA's increased focus on climate change.

Craig Swan, the deputy chief executive officer at the BMA, promised the BMA will continue to update its framework to ensure its agility, with the new team providing market participants with an evolving framework that flexes to innovations and ESG considerations.

“The goal is to ensure industry and the BMA continue to use ‘cutting edge’ approaches in managing risks and opportunities, respectively,” said Swan. “This ultimately will maintain Bermuda’s important role in assisting individuals, communities and businesses around the world to mitigate climate change risks and develop sustainably.”

Stress testing conducted by the BMA and the UK's Prudential Regulation Authority suggests that Bermuda’s re/insurers would remain resilient to a wide range of risk scenarios. However, BMA data show the combined gross potential loss for the Bermuda's commercial re/insurance market on major natural catastrophe perils is approximately $200 billion.

Analysis of exceedance probability curves shows that Bermuda's commercial re/insurers are more exposed to Atlantic Hurricane than any other peril. The gross average modelled losses for this peril, across all companies, stretches from $772.6 million for 1-in-50 year events up to $1.5 billion for 1-in-1,000 year events. Meanwhile, of the 416 notable 2020 natural disaster events, the protection gap was roughly 64 percent, according to Aon.