Unexpected political upheavals including the votes that mean the UK will leave the EU and that Donald Trump becomes the next president of the US, will define 2016 when the industry looks back—and will also determine the tone and direction of travel for 2017.
As 2016 drew to a close, Bermuda:Re+ILS asked a number of re/insurance executives for their opinions on the most important developments in the sector in 2016 and what they expect to see in 2017. The full range of comments from these executives can be read here.
A number identified Brexit and the election of Trump as being the most important events of 2016; both will have an impact on Bermuda in 2017.
In terms of Brexit, executives accepted there would be implications for Bermuda but it remains too early to establish what these will be.
‘The shock Brexit result in June led to speculation about London’s importance as a business centre diminishing and whether the relationship between London and Bermuda would remain strong,’ said Craig Swan, managing director, supervision of the Bermuda Monetary Authority (BMA).
‘Bermuda’s investment in London has been significant, with our insurance industry supplying some 35 percent of Lloyds’ capital and creating a number of jobs within that city.
‘Should there be a ‘hard’ Brexit with the loss of passporting rights then it will likely increase the important of other financial centres in Europe. London is, however, likely remain an important market for Bermuda, and the investment there by Bermuda insurance groups will probably continue to be significant.’
Turning his thoughts to events in the US, Swans said that the reinsurance industry (and the rest of the world) is now waiting to see what Trump’s economic policies will be. ‘For Bermuda, some very US-centric campaign promises may lead to attempts to pull jobs back to the mainland and address arrangements that, on a net basis, have not been perceived to be favourable for the US.
‘However, once again, I do not think this will impact Bermuda much because over the years we have evolved into our own property-catastrophe specialised reinsurance market. As the world’s third largest reinsurance centre, our value to the US in supplying property catastrophe, agriculture and professional liability capacity is unquestioned,’ Swan said.
‘But there remains enormous uncertainty, particularly as the Trump administration looks to reduce corporate taxes and then eventually seeks to address the gap.’
Kathleen Reardon, CEO of Hamilton Re, added that while it’s widely expected that Trump’s planned overhaul of the US tax system will have negative ramifications for Bermuda, she also believes a potential lighter tough on regulation could benefit businesses.
‘It’s important to note that the Island’s re/insurance sector isn’t successful because of tax advantages. Rather, it’s the enlightened and disciplined regulatory and legislative system and the sophisticated financial services infrastructure that enables the market to remain competitive,’ she said.
‘An upside of the rejection of the political status quo could be the rejection of government involvement in how business is conducted. Restrictive regulations hinder the ability to move responsively to market needs. This has been an area of advocacy that I expect will attract increasing attention in 2017.’
Senior executives from companies including PwC, Brit, the ABIR, Hamilton Re, Hiscox Re and the Bermuda Monetary Authority participated in the examination of 2016 and look forward to 2017. To read the full transcript of their thoughts and comments, please click here.
BMA, Bermuda, Insurance, Reinsurance, North America, US election, Donald Trump, EU, Brexit, Europe, Investment, London, UK, Lloyd's, Tax, Hamilton Re