Michael Neff: This is the perfect place to incubate ideas and innovation. You have a single regulator, you have all the talent compressed into a square mile. So if you wanted to start thinking about creative ways to solve ESG problems, this is a great place to start. Climate risk finance tops the list. But there are other dimensions that can all be explored. We can do things here faster and arguably better than a lot of other parts of the world.

Andrew Smith: If you think about what is unique about Bermuda and its track record, it’s its ability to innovate, particularly on issues that transcend national boundaries. If you think of the reinsurance market, if you’re transacting in Bermuda, you can exchange risk from around the world in a friction-free way. It’s not a big step to apply those same things to other areas. Bermuda is arguably the strongest of the nations that have those vital success factors. We must be able to apply those tools to this different issue.

These issues are also very specific to us. Being in the middle of an ocean, having the social challenges and differentiation between rich and poor. Racial issues. Historic issues. We have enough of those things to understand the challenges.

From a business perspective, we’re in a very strong place. There is good communication between government, companies in the reinsurance world, the investment world, banks, the third sector.

It’s all about educating each other about what we do and how we can work together.

Ariane West: Various regulators are at slightly different stages on this issue. The EU has been very bullish and arguably out in front, along with the UK. The US is finally moving forward in respect of regulation and oversight related to sustainability and ESG-related claims with respect to corporate and investment disclosures.

I definitely think that Bermuda as a small jurisdiction has an opportunity to craft an approach to legislating and regulating ESG in a way that other regulators might follow

Andy MacFarlane: And in a way that is consistent and acceptable to other jurisdictions.

West: The idea would be, can we create something that could be in some ways a leader that other jurisdictions could look to? Because perhaps other larger jurisdictions have more stumbling blocks than we might encounter.

Ralf Kuerzdoerfer: On climate risk mitigations such as parametric insurance, what can the reinsurance sector do on that side? New technology, such as carbon-capturing technology, is going to need insurance in the future.

Myra Virgil: The idea of having a goal such as net zero is powerful. But it’s not just about legislation, it’s also about advocacy, trying to ensure that good information is out there. To make good policy and make good decisions, there does have to be agreement on goals. The 2030 goal is in place now, but people need to know what they can do on the ground.

Neff: To me the next big step is on measuring actions. Yes, governments have committed to net zero, but how are they going to do that? And at some point they will be accused of greenwashing. A lot of companies, governments, and communities want a measurable, manageable actionable plan. That’s another big step for Bermuda.

MacFarlane: In terms of tangible things that Bermuda can do, we have experts in a number of different areas: property re/insurance, cat modelling, science, finance and regulation. What skills and expertise are needed in Bermuda to help the world transition to a low-carbon economy? We need to be able to understand the technology, the investment, and be able to underwrite this new technology. Those are huge opportunities for Bermuda.

An example could be how do we build a centre of excellence for renewable technology in Bermuda? If you want to have a meaningful impact, you have to be able to underwrite, invest and bring those new markets to life.

Kathleen Faries: We need to move from the aim of being net zero by X, to actually showing intent. If we don’t know how we’re going to get there, we have no real intent. Should the stakeholders in Bermuda be driving that versus waiting for the government?

MacFarlane: I think government will have a big role to play and will define the actions Bermuda as a country will take to meet its net zero aspirations, whether it’s by moving to electric buses/cars, using more renewable energy sources or reducing the carbon footprint of our imports, I don’t think this will be achieved only through private stakeholders.

West: When I was drafting a form of ESG report, I thought it was helpful to distinguish between how ESG factors played out with respect to a company’s commercial actions—for example, the impact of financial or insurance contracts—and how the company as a community of individuals and a part of a specific community acted out its ESG values.

There’s a bigger picture of what Bermuda can do as a market, as a jurisdiction, to contribute globally. That’s where regulators are starting to focus now. It’s a very positive development that so many are coming out with pledges and commitments, but you soon need to break that down to specifics and report on detailed actions and plans.

Bermuda has an opportunity to focus on developing a regulatory ESG framework and can perhaps benefit from the lessons already being learned in other jurisdictions about the complexity, and develop a model that may be more pragmatic.

The resources of the reinsurance and investment community can help develop solution-based approaches to risk. An important question is what time horizon should the solutions focus on? The need to shift to those longer time horizons is crucial, and if done thoughtfully, it will be good for the industry in terms of its long-term stability, profitability and longevity.

Smith: The reason for the urgency is that the different interests are aligned. Every time a risk becomes uninsurable because it’s too likely to happen, you exclude that. But that means you’re shrinking the pie of your own business. That’s clearly not in the long-term interest of investors.

Maybe through the greater syndication of risk or whatever, there might be ways of spreading that risk and managing the portfolios. From a reinsurance perspective, if I’m getting the premium I need for the risk I’m taking, then you can grow that pie. When the pie is shrinking, you’re increasing the issues around social injustice. It is better to increase the ways the world can share and spread risk.

Governments are part of that picture. They have some directional views that clearly influence the way investors think. But putting aside any other stakeholder interests we’re all going to move forward in the right direction.

MacFarlane: I agree that as a re/insurer we have a role to play to identify areas of risks which are too high—and that might mean shrinking the pie. Yet if we continue to offer coverage in areas which are high risk such as floodplains, barrier islands or low-lying communities, we do the world an injustice. Perhaps we always need to shrink the pie to grow the pie.

West: There are issues around how the market is structured and how risk is placed and priced. It almost feels that we’re baking as many pies as we can until we’re going to close the bakery. We probably need to change the recipe for the pie so that it’s going to be palatable and taste good in 10 or 15 years down the road.

Just look at mortgage insurance as an example, where flood is often excluded, which is just pushing a massive and growing problem down the road, potentially until it is unmanageable.

MacFarlane: That’s why government support is needed. Because what’s going to happen when the market fails? It’s going to go back to the government.

Smith: That’s showing a failure of the market. I agree we shouldn’t be providing underpriced risk transfer for places which are more risky. Some of it is about ensuring transparency through the chain of what the risk is, particularly in markets that are heavily regulated in terms of price regulation.

There has to be a transition because some people have been potentially unduly subsidised and that’s something you can’t switch off. That’s where the role of government is: around planning rules and zoning rules.

If you do it purely by exclusion, if there’s no-one else to buy the cover from, then either people or government are taking on more risk themselves.

West: You can adjust the product to try to create incentives to move that process along.

Smith: There used to be incentives for protecting your home against hurricanes. That’s risk mitigation, that sort of feature can still be used.

MacFarlane: But insurance should not be solely responsible for climate adaption and this is where it links back to the government. That’s where the connection is required. We, as an industry, can’t do it by ourselves, governments can’t do it by themselves. And you and I completely agree we can’t just stop insuring people because they’re living in a risky place and it’s too expensive. So how do you, over time, make those price signals? How do you relocate those communities?

Theodore Potgieter: One lever insurance companies can utilise is updating their investment mandate to incorporating sustainable investing, for example investing into green buildings, green bonds, etc. The other lever can be the insurance underwriting where insurance companies continue to insure climate events and expand their project range for new risks due to climate change.

West: On the investment side, you saw that with renewable infrastructure investing. There is scope for that. The challenge is balancing the prudential aspect—the availability of assets to pay claims versus policy incentives. Hopefully we’ll see more of it

William Curry: One of the things Bermuda doesn’t do is make high-tech things. Everyone here talks about products, but they are conceptual insurance products. Actual real products are needed to solve this problem. Good universities are surrounded by smaller spinoff companies that do this sort of stuff.

There is an investment opportunity in Bermuda for more of a venture capital-type investment programme. And currently Bermuda has limited engineering technical capabilities.

We have partnered with Arizona State University. They want to do things like this that make the situation better. You could probably figure out a way on a longer time scale. There’s an opportunity to change the broader economy, but it’s also beneficial to the environment because studying the ocean and figuring out ways to use the ocean safely and well to remove carbon dioxide is going to be a big industry.

West: These kind of questions are in our wheelhouse. Many people in our market started out on very early stage weather markets, and I’m now part of a team that spends a significant amount of time focusing on renewable energy. But our view is that energy markets are all moving to renewable generation.

The shift is coming and there’s definitely a lot of focus and technical capability on this island that could look to expand the mandate.

Curry: The Bermuda Ocean Prosperity Programme, led by the government and BIOS, is looking to form a new Blue investment fund. That could be an interesting step along this journey for Bermuda.

Virgil: My sense is that there is a lot of data but we often don’t have good data to drive what the goals should be. We need to have agreement on the priorities—and fewer of them.