Taylor: The industry is facing barriers to raising new capital right now given the performance over the past five years, the industry’s response to it, and volatility in broader markets. The industry needs to do a better job of demonstrating sufficient pricing and to do this you need data.

This is a barrier to new startups but even incumbents need to show that there is sufficient pricing for climate change, inflation, social inflation, and other unmodelled risks.

Pricing has increased partly because the view of risk has changed but the required return on capital has also changed. The cat market is competing with volatility and returns of other markets and needs to demonstrate attractive returns and diversification to attract new capital.

Kathleen Faries: That’s what we need. The markets that are taking certain cat risks need to lead in terms of what is adequate pricing. If you want capital to come in, investors need to know what pricing needs to be. It needs leadership.

Jagoda: The concept of rate adequacy and adequate data is a constant evolution. While you might be comfortable today, tomorrow the price might no longer be adequate. All we can do as an industry is keep investing in relevant data and research efforts, while at the same time providing transparency with investors about how we price for evolving risks.

With respect to how investors determine whether they are achieving adequate returns for the risks assumed, we need to consider that no two investors have the same required rate of return and they will often employ different benchmarks when considering the relative attractiveness of the risk/return opportunity within the ILS market versus other markets.

With respect to innovation in the reinsurance space, the market is doing a good job as can be seen through new products and structures to address new and evolving risks. It is important that we continue to invest in innovation. There is a constant push and pull of being reactive versus proactive in the space. Innovation requires taking a proactive approach and I’d argue the market right now is being as proactive as it possibly can.

Tying together various themes discussed, we are seeing much more disciplined underwriting, and much more disciplined deployment of capital. That’s not just in ILS but across the whole reinsurance market, even more so than in 2006. Perhaps the difference is we have better data now. If you were to compare risk/return profiles from 2006 to today, it’s apples and oranges.

Von Herberstein: It’s good news for Bermuda. There have been times when we have been over reliant on the models. Maybe some investors thought they could write business themselves using the models alone. That hasn’t worked. What has come out of the last five years is the complexity of the insurance market. You need more than just data. The idea that you can write cat business using models alone is a dangerous one to say the least.

There are so many markets where the data is inadequate anyway, in Latin America and Asia, for example.

Cyber is much harder to model. The reality is that it doesn’t matter how much you invest internally, you need the experts. There are some amazing tools, but you need to understand and interpret them. Investors are learning that and it’s good news for Bermuda.

Dunlop: What interests me as a legal adviser is the innovative stuff, whether that is around climate or greater distribution or better analysing and pricing risks with improved use of analytics and data. It is not just about selling more policies, it is about addressing unmet problems through a more innovative approach to insurance risk.

That is what is really special about Bermuda—the intellectual capital and grasp of analytics puts Bermuda way ahead. Hats off to Hudson Structured for its work in insurtech and insurtech investing.

Von Herberstein: You’re seeing it happening in insurtechs. You need the data people and the insurance people working together.

Helen Souza: Those are the seeds we’ve been planting in the technology space and green shoots are now emerging. We are seeing a lot more insurtech companies set up in Bermuda. We are also becoming a beta testing domicile for climate data. From an intellectual capital and expertise perspective, it’s good to have the humans and the data. There’s a tonne of data, the question is how we store it and use it.

Taijaun Talbot: We have seen many entrants talk a lot about data, but the key innovation is around how we interpret that data. The real innovation is how we can leverage artificial intelligence (AI) to interpret the data. There is a lot of exciting innovation taking place. I spend a lot of time discussing new innovative vehicles and structures, and everyone sees Bermuda as the place to come to test ideas and platforms.

Within that innovation, there is a greater appetite among ILS investors to look at new risks. I do think those new risks will emerge, certainly they are being looked at from a regulatory standpoint. We are seeing a lot of interest in new risks.

Dunlop: There is now a real convergence between crypto and insurance. We see many new insurtechs exploring the use of tokens to raise risk capital and one day we will be seeing insurtechs receiving premium and paying claims in cryptocurrency. On Bermuda, the advantage is we have one regulator to regulate everything, whether it’s crypto or insurance, so there is a combined regulatory mindset more easily applied to both regulated streams. There are so many great ideas from clients coming through.

Adderley: The first ILS vehicles targeting the crypto space are being formed, which is very interesting. We are also seeing ILS players looking at using artificial intelligence. That would be interesting.

Ten years ago we were discussing convergence, now we are seeing the convergence of data analytics, crypto and insurance in one place. Because of the BMA’s Sandbox, these ideas are being tried. Clients want you to be regulated. They need that to raise capital. This year you will see a lot more of that: insurance, crypto, and ILS all coming together.

Souza: There is no doubt that Bermuda is the risk capital of the world and we’re now positioning ourselves as the emerging climate risk financing capital. We’re known as a reinsurance powerhouse, but we’re probably more a powerhouse of innovation. Over the last few years that’s been very evident in some of the things that have emerged.