The changing face of legacy
Legacy and asset-intensive reinsurance are being reshaped by greater competition, increasingly complex liabilities and rising client expectations. In this Q&A, Alon Neches, chief executive of Fortitude Re, told Bermuda:Re+ILS how the market is evolving, why Bermuda remains central and where the largest opportunities and risks lie for the industry ahead.
Looking back over Fortitude Re’s journey, what do you think has been the most significant change in the legacy and asset-intensive reinsurance markets, and how has that shaped your strategy?
Two developments have been especially significant. First, new entrants have brought substantial capital into the market, increasing competition and compressing returns on more commoditised business. At the same time, the liabilities clients are bringing to market have become increasingly complex.
Together, those shifts have reinforced the strategy we have always pursued at Fortitude Re: differentiating ourselves by delivering a broader set of solutions for clients whose needs extend beyond access to commoditised capital.
What factors do you believe are sustaining demand for legacy, and how do you see the market developing over the next three to five years?
The factors sustaining demand have remained fairly consistent throughout the market’s evolution. Legacy reinsurance is an important and highly effective tool for helping insurers manage their capital positions and risk profiles, and that need is not going away.
Over the next three to five years, I expect clients to continue raising the bar in the value they expect reinsurers to deliver and how we can deliver it. Legacy solutions were once used primarily by companies with specific, discrete needs. Increasingly, they are getting integrated into their broader risk, growth and capital management strategies, and the value of our solutions is being benchmarked against that higher standard.
How do you balance innovation and growth with the increasing expectations around transparency, governance and asset management in asset-intensive reinsurance?
I do not view those priorities as a trade-off. Innovation and growth must be pursued in a way consistent with transparency, strong governance, disciplined investment risk management and sound asset-liability management.
That work begins upstream, before an investment is made or a growth initiative is launched. We ask the hard questions early: Is this consistent with where we are taking the company? Does it meet our standards for transparency and governance? Are the investment and liability risks appropriately aligned? That discipline, including strong oversight of investment management and related-party transactions, helps ensure we do not put ourselves in a position where one priority must be sacrificed for another.
How has private capital involvement changed the competitive landscape, and where do you see the greatest opportunities, and potential risks, for the industry?
Private capital has largely been a positive force. It has increased competition and the value delivered to consumers, fuelled the industry’s growth and helped establish asset-intensive reinsurance as a foundational part of the broader insurance ecosystem.
I see two significant opportunities. The first is for firms like ours to continue partnering with traditional insurers on solutions tailored to their capital and risk objectives. The second, which the industry is only beginning to explore, is becoming more closely integrated into clients’ product design and distribution strategies so capital solutions can be delivered more seamlessly into the products customers want to buy.
The principal risk I see is not private credit specifically, but credit broadly. We have benefited from an unusually benign credit environment for many years, but we should not assume today’s conditions will continue indefinitely. That reality makes disciplined underwriting, portfolio construction and risk management even more important today than they have been in recent years.
As insurers increasingly look to optimise capital rather than simply transfer risk, how is the role of a reinsurer evolving? Are clients asking fundamentally different questions today than they were five years ago?
Clients are not necessarily asking different questions, but they are appropriately increasing their expectations for the quality of answers reinsurers deliver. In a market that has become more efficient, the price of risk, and especially commoditised risk, is relatively transparent to all market players. Our clients are asking us to demonstrate how we deliver value over and above the price of risk in what are often multi-year and sometimes multi-decade relationships. They want confidence that we will continue to provide strong service and meaningful value long after a transaction closes.
This evolution plays directly to Fortitude Re’s strengths. The more complex the challenge a client is trying to solve, the greater our opportunity to demonstrate that our value proposition extends far beyond the reinsurance contract and that we are truly a partner to support our clients’ growth, capital and risk management goals.
What advantages does Bermuda still offer over competitor hubs, and where does it need to continue evolving to maintain its leadership position?
Bermuda can credibly call itself a centre of excellence across several dimensions in a way few other jurisdictions can. The asset-intensive reinsurance industry has grown up here, creating a critical mass of industry talent, transaction experience and regulatory expertise. That combination produces a uniquely effective environment for creativity, innovation and delivering solutions for the mutual benefit of policyholders, clients and the Bermuda market.
Just as importantly, Bermuda has demonstrated that those outcomes can be achieved with high standards of governance, transparency, risk management and robust regulatory supervision. To maintain its leadership, the jurisdiction must continue investing in those strengths: sophisticated regulation, deep talent, strong oversight and a willingness to evolve as the market and its risks become more complex.
Beyond improving operational efficiency, where do you see AI having the greatest strategic impact for businesses managing complex, long-duration liabilities?
I see two areas of significant strategic impact. The first is productivity, particularly AI’s potential to address the technology debt endemic across our industry. Many legacy systems are not fit for purpose, do not connect seamlessly and cannot capture, much less use, the vast amounts of valuable data available to us. AI can help overcome those limitations and have a significant positive impact on the industry.
The second opportunity may be even more important: helping the industry design, communicate and manage products so that consumers can better understand and utilise their value. The promise of guaranteed lifetime income can be compelling, even when the technical language surrounding an annuity is not. AI can help translate complex products into language and experiences that begin with consumers’ needs, making valuable solutions more accessible to more people.
Economic uncertainty, geopolitical tensions and shifting investment markets have created a more complex operating environment. Which macroeconomic risks concern you most over the next 12 to 24 months, and how should the industry prepare for them?
The risk that concerns me most is the ‘unknown unknown.’ Over the past few years, we have experienced several geopolitical events that many would have expected to have a significant effect on interest rates, credit spreads and equity markets. Instead, rates have risen modestly, credit spreads remain tight, and equity markets have remained relatively healthy.
I don’t know what that ‘unknown unknown’ is, but I know its impact. It will be the event that causes the market to recalibrate the price of risk – the one that causes some combination of rates to spike, spreads to widen sharply, and equities to fall meaningfully. That may even constrain market liquidity, which could be an even more acute strain. Preparation for the unknown comes down to risk management discipline. The industry must stress test rigorously, safeguard capital and liquidity and ensure hedging programmes perform as intended.
We must balance the need to continue taking risk on behalf of clients with our fundamental responsibility to honour our commitments to clients and policyholders, regardless of market conditions.
As CEO, how are you thinking about Fortitude Re’s next phase of growth? Are there particular markets, capabilities or partnerships you believe will define the company’s future direction?
I believe a strategy should be simple enough to fit on one page and clear enough for everyone to understand. Ours begins with a straightforward objective: identify opportunities to deliver value to clients through more than capital and then deliver on those opportunities in a world-class way. Our investments in the next phase of growth are focused on identifying opportunities where we can build on today’s capabilities to deliver that value proposition to a broader set of clients, markets and products. The only constraint on that growth is that we will never waver on our risk management discipline nor on delivering exceptional client service.
Specifically, over the past several years we have made significant investments in several new markets and channels – our franchise in Japan, the launch of our FABN programme and expanding beyond block reinsurance to deliver flow reinsurance solutions. Those efforts are all still in their early days and we intend to continue investing further in each of them.
Looking further ahead, we are also actively evaluating expanding our franchise into new geographies and channels. While I can’t comment on those efforts specifically, I can say they are consistent with our ethos: deliver value beyond capital, underwrite responsibly and earn the trust that makes clients want to work with us again.
Read the full Bermuda:Re+ILS Annual 2026 here.
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