‘The outlook for Bermuda is very strong’

Bermuda is now a genuine multi-line market and is well-positioned for growth, Inver Re’s Alun Thomas tells Bermuda:Re+ILS.

How did you come to Bermuda and insurance?

Like many graduates, I wasn’t sure what I wanted to do after finishing university. My father thought I’d enjoy broking, and he was right! My first job was as an underwriting assistant at a Lloyd’s syndicate. I then spent time as an accident & health broker with Aon and went on to join its North America treaty team.

I then moved to Aon’s property team, and that was the start of my route to Bermuda. I used to broke into the Amlin syndicate and when it set up in Bermuda in 2016, underwriting director John Andrews and Ben Savill asked if I’d like to join them. My family moved here in 2007 for that job, thinking we would stay for two years. Sixteen years later, we’re still here.

I made the move back to broking earlier this year, joining Inver Re as global head of property reinsurance.

How has Bermuda developed as a centre for re/insurance during your 16 years on the Island?

It was already a big market. After each big event or big loss, rates hardened and that attracted new capacity into the market. Bermuda has been a preferred territory for a startup since the 1990s, and there were rounds of new entrants in 2002 after the 2001 World Trade Center attacks, and in 2006 after Hurricane Katrina.

Of course, there is the obvious benefit of tax efficiency that makes it an good place to write volatile business. But there’s much more to Bermuda than that.

There is an established infrastructure that has proved itself over time. The big accountancy firms all have sizeable offices here, and there is a strong track record of intellectual capacity. Why would you set up somewhere else when there is a thriving, innovative and exciting marketplace here?

Bermuda is now recognised as one of the top three largest reinsurance hubs and it’s the global leader for insurance-linked securities (ILS).

How would you characterise the BMA’s role in this development?

The Bermuda Monetary Authority’s (BMA) approach of being efficient and adaptable while meeting international standards has been fundamental.

The regulatory framework’s equivalence with Solvency II in Europe and its qualification as a reciprocal jurisdiction with the National Association of Insurance Commissioners means we can seamlessly deal with companies all over the world.

Closer to Bermuda, businesses that are starting up can meet the regulator in person to get things sorted. It’s no surprise there have been 41 new registrations already this year.

Does geographic proximity to the US still matter?

It is still a significant benefit to be able to see clients and work in their time zones.

Videoconferencing platforms such as Zoom and Teams allowed us to continue collaborating during lockdown, but as soon as people could they got back to visiting to and from Bermuda. I noticed that video calls were easier with clients I already had a relationship with, but it was far harder to build a relationship with new clients purely on video calls. I’m glad we’re back to face-to-face business.

“It is still a significant benefit to be able to see clients and work in their time zones.” Alun Thomas

Is Bermuda a genuine multi-line reinsurance market?

It is. We have market leaders here on-Island who have been here for several years. Gone are the days of its being dominated by property-cat.

That change took off when the property-cat market started to soften after Hurricane Katrina, which drove carriers to look to other lines of business for growth and to balance their portfolios. We started seeing cyber, terrorism and marine all come into the Bermuda market.

That trend has accelerated in the last few years because we’ve had five years of pretty heavy cat activity. The latest development is life insurance coming to Bermuda.

“There is a big difference putting capital into a fund for 12 months and investing for the long term as a reinsurer.”

Where else do you see growth coming from?

As well as reinsurance, Bermudian carriers are writing more primary insurance from mainland US. We’ve seen some US carriers reduce their property appetites massively—and that has left some risks needing new homes. That is what our Price Forbes business in Bermuda has been focused on for the last three years; it is achieving growth by working with carriers on the Island on behalf of US wholesale risks.

ILS has grown exponentially, but 2022 was a tough year to raise capital because of concerns about the world economy, stock markets and inflation. Those are still present, but they haven’t been as bad as many feared. Capital-raising at 1/1 was satisfactory for carriers looking to maintain their size—the committed investors kept going and the marginal players came out—and 1/6 was better again with more coming back to the market. The conversation has undeniably shifted, however, when institutional investors are no longer faced with very low interest rates.

What is the challenge for the Bermuda market?

The onus is on us to prove that ILS remain attractive as investments when there are many other products offering returns in a time of rising interest rates. We must continue to innovate on products, such as parametric cover, and keep pushing the envelope on analytics and insight.

The last 18 months have focused not just on price but also on retention levels when people do attach, and their attachment points.

I think people will keep a very close eye on the market ahead of the 1/1 2024 renewals. We haven’t yet seen this hard market cycle experience a new catastrophe loss, and how the market responds to that will very much determine the appetite of new entrants.

Unlike in previous hard markets, Bermuda has not seen a surge in class 4 insurers being formed—why?

It’s true that we haven’t seen an influx. It is in part a little early as we’re still going through Hurricane Ian loss evaluations. Investors still need more datapoints for profitability in the current market to give them confidence.

There is a big difference putting capital into a fund for 12 months and investing for the long term as a reinsurer.

What is the overall outlook for the Bermuda re/insurance market?

For Bermuda itself, the outlook is very strong. It has an established infrastructure and strong regulator and it’s very strong on intellectual capacity.

You get to know your peers a little better than you might somewhere else, because it’s a small place. Nobody does anyone any favours, but there is a sense of helping where you can and that we all benefit from a thriving market.

In terms of talent, I think we will see a shift to the next generation of C-suite leaders being Bermudians. We have a lot of young Bermudian brokers at Inver Re and there are some very talented underwriters coming up with the carriers. I have no doubt there will be a further shift from an expat-dominated leadership as those individuals’ careers progress.

Equally, I hope that people like me will be able to find paths to commit to the Island for the longer term. 

Alun Thomas is the global head of property reinsurance at Inver Re. He can be contacted at: alun.thomas@inverre.com

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