FOREWORD: ABIR
RELEVANT, COMPETITIVE, RESPONSIVE: BERMUDA’S RE/INSURERS STAY AHEAD
Bermuda’s re/insurers continue to evolve and respond to the ever-changing risk needs of the world, writes John Huff, chief executive officer of the Association of Bermuda Insurers & Reinsurers.
“Bermuda executive leadership in Monte Carlo is testament to the Island’s continuing relevance.”
John Huff, ABIR
For those of us in insurance, reinsurance and risk management, September heralds a busy period in the lead-up to end-of-year reinsurance renewals, traditionally starting with the Monte Carlo Rendez-Vous.
After a two-year hiatus caused by the COVID-19 pandemic, Bermuda is expected to have a strong representation at the 64th iteration of the Rendez-Vous de Septembre (RVS)—the largest gathering in the sector—enabling all stakeholders in the insurance and reinsurance market to meet up and hold bilateral discussions ahead of the January 1 renewals. Bermuda executive leadership in Monte Carlo is testament to the Island’s continuing relevance as a global re/insurance marketplace.
This is a milestone year for the Bermuda market, with the 30th anniversary of Hurricane Andrew, an event that led to a new, scientific approach to property-catastrophe re/insurance, featuring catastrophe models, exposure management and risk-based capital.
The eight startup reinsurers incorporated in Bermuda in response to Andrew’s capital destruction led these innovations and met a global need for catastrophe underwriting capacity.
Over the past three decades, Bermuda has built on those foundations, to become the dominant provider of catastrophe risk coverage. With a talent base second to none, Bermuda has maintained its global market leadership through constant innovation, including ever-more sophisticated risk modelling and the use of sidecars, catastrophe bonds and insurance-linked securities (ILS) to expand underwriting capacity by tapping third-party capital.
Member companies of the Association of Bermuda Insurers and Reinsurers (ABIR) generate income from nearly 150 countries, partly driven by Bermuda’s proven suitability as an ideal base from which re/insurers can pool global catastrophic risks. This is underpinned by the Bermuda Monetary Authority’s globally recognised regulatory regime, which has earned full Solvency II equivalence from the EU and Reciprocal Jurisdiction status from the National Association of Insurance Commissioners in the US—Bermuda is one of only two jurisdictions in the world to have both designations.
Bermuda’s international diversification model has stood the test of increasing disaster losses, while delivering an exemplary claims-paying track record. Bermuda re/insurers paid out over $418 billion to US policyholders and cedants for large catastrophes, property and casualty losses and life insurance claims during the period 1997 to 2020, including 30 percent of insured losses from record-setting hurricanes Katrina, Rita and Wilma in 2005.
Underlining the market’s development as a truly global hub, Bermuda provides about 20 percent of European, broker-placed property catastrophe reinsurance, met 51 percent of the liabilities from New Zealand’s earthquakes of 2010 and 2011, and paid out $9.6 billion in claims related to the Japanese typhoons of 2017 and 2018.
Today, Bermuda’s property and casualty re/insurers are leaders in climate risk and work with the Insurance Development Forum to help to narrow the “protection gap” in developing countries where insurance penetration is low.
“Bermuda has become a major player in insuring US mortgage risk.”
The competitive edge
The Bermuda market continues to evolve and grow. In the annual survey of ABIR member companies’ global underwriting results, we found that the 25 participating companies recorded net premium written of $98.6 billion, representing a 21 percent increase over the $81.6 billion in net premium written by the same group in 2020.
Market growth and improving underwriting conditions helped to drive the increase, but there is also another trend at play. Beyond its catastrophe risk leadership, Bermuda is rapidly emerging as the specialty re/insurance market of choice. Rating agency AM Best noted in a special report in August that Bermuda re/insurers are “focused on growing their specialty and casualty portfolios”.
In essence, Bermuda re/insurers are continuing the tradition of the post-Andrew startups by adapting to meet the world’s emerging protection demands. In areas including cyber risk, financial products, mortgage, professional liability, terrorism and some longer-tail casualty, Bermuda re/insurers are rising to the risk management challenges of a fast-changing world.
Geopolitical volatility and economic uncertainty are among the global trends driving demand for war, political risk and inflation-triggered financial lines, for example. Vulnerabilities linked to the growing technological interconnectedness of our world have become even more apparent since the pandemic-inspired surge in remote work, generating an increased need for cyber coverage.
Underwriting these complex risks is talent-intensive and requires substantial capacity, strong analytical capabilities and experience in designing products for emerging risks—all aspects of the Bermuda market’s competitive edge.
New market entrants known as the Class of 2020 have added strength and depth to Bermuda’s capabilities in underwriting complex risks. Some have business models heavily geared to state-of-the-art technology and data analytics, as well as the requisite intellectual and financial capital.
Bermuda has become a major player in insuring US mortgage risk, providing the financial backing to help Americans achieve the dream of home ownership. The Island’s re/insurers provided more than 50 percent of the reinsurance capacity of US monoline mortgage guaranty insurers in 2020, up from less than 30 percent four years earlier. Some underwriters have used ILS, in which Bermuda is also the world leader, to expand their mortgage underwriting capacity.
Agriculture coverage is another growing business line. It is of increasing relevance to the world with climate change expected to bring more frequent and severe droughts, floods and heatwaves. Bermuda provides about 7 percent of crop reinsurance in key agricultural US states. Renewable energy is an expanding niche, as Bermuda plays its part in supporting the transition to a low-carbon economy.
Bermuda re/insurers remain relevant and competitive through their responsiveness to the world’s evolving risks in a vibrant marketplace with a reputation for putting new ideas and capital to work in an efficient fashion. With its world-class talent base, credibility borne of decades of solid claims-paying and a regulator focused on protecting policyholders while embracing innovation, there is every reason to believe that will continue.
To find out more visit: abir.bm
Image courtesy of Shutterstock / S.Pytel
