“Diversification is quite important for this sector.”
Martin Laframboise

Laframboise: In terms of overall growth, it’s coming from various sectors. First, there is the reinsurance sector, whether it is third party or internal reinsurance, but there is also the direct side.

Several insurers on the Island are offering offshore solutions that are similar to what SLFI is doing but, again, it is quite diversified.

As a sector, we also touch many regions of the world (Asia, Europe, Middle East, etc), so that’s why diversification is quite important for this sector.

Bracken: If you consider diversification in terms of different products, geography, underlying risk characteristics, the year in which it was underwritten and the vintage of the business, what you’re seeing in Bermuda is an aggregation of different types of risk.

When it all comes together, you can capture that diversification benefit—and the BMA is willing to factor that explicitly into its capital calculations. This makes Bermuda an attractive jurisdiction for the blending of risk.

“Diversification is also about the business model.”
David Howell

Howell: But diversification is also about the business model. Some BILTIR members have a high net worth retail strategy or use the traditional reinsurance model, which is more about long relationships.

Others, meanwhile, are more transactional with a PRT or acquisition focus. These are quite different business models and they play a role in the way we see ourselves as long-term reinsurers.

Olunloyo: I would say that the diversification of the businesses by product, by location and so on speaks to why Bermuda is such a viable market in the long term.

It’s not dependent on any one market for its business or its assets, so that breadth of experience is what drives the growth of the market and makes it strong.

“There has been an explosion of interest from the whole world.”
Amy Ponnampalam

Ponnampalam: Diversification has really evolved in the last decade. When I arrived in Bermuda in 2010, the focus was heavily on North America and there was actually very little in terms of global or European mandates. If you consider companies that have been set up in the last five years or so, it is a remarkably diverse split.

Companies which have global mandates are looking at Asia, Australasia, and even Africa.

These are all new territories that were previously less accessible to Bermuda, and that maybe comes back to the equivalence ruling which was very valuable for the Island. Since then, there has been an explosion of interest from the whole world in terms of Bermuda as a place for long-term business.

Bracken: On a broader point, the perception that Bermuda is a tax haven has been waning. That has been immensely helpful, and as we look at hopefully decreasing regulation and protectionism from many governments around the world, that can only increase the flow of assets and risk into the Bermuda market.

I think Bermuda is uniquely positioned to capture global risk into a well-run and regulated balance sheet.

“There is a tax advantage, but it’s not central to the jurisdiction’s business model.”
Thomas Olunloyo

Olunloyo: I was wondering how long it would take before we had a conversation about tax, but as you know, tax is way down the list when it comes to Bermuda as a premier reinsurance location. In fact, it doesn’t really factor into our thinking at all.

The regulations that we have here, the talent, the infrastructure, the access to Europe and North America, all of those things make Bermuda the premier place in the world to do reinsurance business.

Yes, there is a tax advantage, but it’s not central to the jurisdiction’s business model.

Howell: Corporate tax rates in the rest of the world may also change in the future, and when any earnings we make go back into our parent company there may well be a tax there.

From our point of view, we will be writing the vast majority of our business in the local branches which pay local taxes, so it’s not even a driver of any kind.

Image courtesy of Shutterstock / Maksim Shmeljov