Resilience and innovation make Bermuda a market leader

Bermuda’s role as an innovation incubator makes it a central player in the ILS sector, says ILS Bermuda chair Jo Stanton.

The insurance-linked securities (ILS) market has once again shown its resilience in the face of ongoing global challenges.

Despite continued economic uncertainties and systemic market pressures, ILS remains an attractive asset class for investors due to its inherent liquidity and low correlation with traditional financial markets.

Bermuda, with its enduring legacy as a pioneer in risk transfer innovation, continues to stand at the forefront of this dynamic sector. 

Bermuda’s reputation as a premier insurance and reinsurance hub is well-deserved. As market disruptors create fresh opportunities, Bermuda’s role as an incubator for cutting-edge strategies becomes even more crucial. The Island’s ecosystem is perfectly poised to leverage these opportunities, ensuring it remains a central player in the global risk transfer landscape, and a leader in climate risk transfer solutions.

2024 is on track to break another record in terms of primary catastrophe bond issuances. In the first-half of 2024, catastrophe bond issuance saw record growth and the Bermuda Stock Exchange (BSX) maintained its dominant position in the listing of catastrophe bonds and ILS, with a total value of all ILS securities on the exchange rising to $59.74 billion by the end of June 2024.

Around 90 percent of the global catastrophe bond market’s issuance is listed on the BSX, representing 815 listings during the same period. At the time of this article, total issuance for the year stands at $13 billion, as reported by Artemis.

Bermuda’s leadership in the ILS market is underscored by the continued growth of catastrophe bonds listed on the BSX. Bermuda’s ability to attract and retain significant market share of global listings reinforces its status as the global leader in ILS.

Broader lines

While natural catastrophes have historically been the mainstay of the ILS market, there is a notable shift towards a broader range of lines of business. Investors are increasingly interested in non-correlated specialty risks, including cyber, terrorism, casualty, legacy run-off and other emerging risks. This diversification reflects the market’s evolution and its ability to adapt to the complex,  interconnected risk environment of today.

The hard market presented significant growth opportunities and we expect those conditions to continue into 2025 renewals. Insurers, reinsurers, and ILS funds are accelerating their expansion plans, driven by sustained rate increases across various lines of business and a strong primary market.

An influx of capacity took advantage of property rates improving through 2023 and relatively stable rate increases for 2024 renewals pricing. ILS managers are optimistic that strong returns will continue to bolster efforts to raise additional capital.

The ILS market’s supply of capital could grow by as much as 10 percent in 2024, reaching a total of between $105 and $110 billion, estimated by AM Best and Guy Carpenter. Reports further detail segments within the ILS market, including sidecar capacity estimated between $6 and $8 billion  with larger deals and broader risks covered.

Industry loss warranty (ILW) capacity is estimated to be between $5 and $7 billion, and collateralised reinsurance capacity at approximately $46 to $50 billion. AM Best reported a trend towards more nimble capital deployment in ILS as something that has been increasingly featured in the market over the last few years.

It’s important to highlight that regulatory innovation has played a crucial role in the growth of Bermuda’s ILS product. Bermuda’s regulatory body, the Bermuda Monetary Authority, has been proactive in refining its framework to ensure it remains conducive to ILS growth while maintaining rigorous standards of oversight and supervision.

Recent enhancements in the regulatory regime have made it easier for new ILS vehicles to be established and have streamlined the processes for existing ones to operate more efficiently.

Convergence 2024

Celebrating its 12th year, ILS Bermuda will host the 11th annual Bermuda Convergence event on October 7–9, 2024. This premier event will feature panels on the latest industry trends, offering valuable insights from leading experts and industry leaders. The focus will be on the latest advances in the science of natural catastrophes and related perspectives from the ILS industry, particularly how human behaviour responds to the science, and other market-influencing factors.

ILS Bermuda remains committed to fostering local talent through its partnership with the Bermuda College. Since 2017, this education initiative has provided students with practical industry exposure, internships, mentorship opportunities, CV writing and interview practice, Lunch and Learns, and much more.

The programme continues to expand, ensuring that Bermuda attracts and develops the next generation of industry professionals. 

Bermuda’s strategic positioning, innovative spirit and forward-thinking regulatory framework ensure its continued leadership in the ILS market. As the industry evolves, Bermuda remains at the cutting edge—driving efficiency, resilience, and sustainable growth in the global risk transfer ecosystem. 

Jo Stanton is chair of ILS Bermuda and head of finance at Tangency Capital. To find out more about ILS Bermuda, visit ilsbermuda.com

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