ROUNDTABLE: LEGACY RE/INSURANCE
WHY IS BERMUDA ATTRACTING SO MANY MORE LEGACY PLAYERS AND NEW CAPITAL?
“When it comes to legacy, the experts are here.”
Brid Reynolds
Brid Reynolds: We established a risk carrier in Bermuda during 2020, it is now a class 3B reinsurer. We more recently moved our group headquarters here, and our group is now supervised by the Bermuda Monetary Authority (BMA).
Why Bermuda? The Bermuda regulatory regime really works for us. The BMA is comfortable with, and has experience of, the US market, Europe and Lloyd’s where Compre operates and provides legacy solutions for clients, which is difficult to find, and Bermuda has NAIC reciprocal jurisdiction status. It makes sense to be based in Bermuda.
The BMA is very responsive and it took us just six months to redomicile here from the time we filed our formal application. In addition, the service providers have relevant reinsurance experience in Bermuda. It’s like a small reinsurance community, and particularly when it comes to legacy, the experts are here.
“The reinsurance community here is a big draw.”
John McGlynn
John McGlynn: We have been group-regulated here in Bermuda since 2008. I’d echo everything in terms of positive interaction with the BMA and its understanding of legacy. I would add that the reinsurance community here is a big draw. A large proportion of our transactions are with Bermudian counterparties. It is an insurance hub.
We bought a reinsurance entity back in 2008 and established an orderly run-off. Since then, we’ve have made many global reinsurance transactions and acquisitions steadily building up our Bermuda platform. As such, it has continued to make sense for us to be group-regulated here.
“Bermuda in general is a favourable jurisdiction for legacy transactions.”
Michael Fontanetta
Michael Fontanetta: Our business started in the early 1990s in London and has expanded over the years into a global business with our group supervisor in Bermuda. I would agree with everything that has been said but add that captives have always been a core counterparty for R&Q, and the Island is home to many of those.
Servicing the captive insurance market led us to establish a foothold in Bermuda and subsequently expand our offering further into the US. Operationally, all of our transactions in the US are run out of Bermuda.
Additionally, I would say that Bermuda in general is a favourable jurisdiction for legacy transactions from the perspective of the carriers. Bermuda-domiciled insurers and reinsurers receive full capital credit for retrospective solutions, while this is not the case in the US most of the time. So in in a hard market where companies want to free up capital quickly to write new business or de-risk, the Bermuda jurisdiction becomes very important.
Mary Ward: Cary Olsen Bermuda is a relatively new entrant to the Bermuda legal market. We will celebrate our fifth anniversary in November. Astonishingly we now have almost 50 employees, of which 36 are fee earners. A large part of our practice on the corporate side is advising insurance companies on all aspects of corporate law. >>>
“We advise a substantial number of the big legacy players in Bermuda.”
Mary Ward
<<< We advise a substantial number of the big legacy players in Bermuda. That has become a large part of what we are currently seeing on the insurance side.
James Ferris: I joined BMS in the spring. It is a London headquartered re/insurance broker which has been growing globally, and in the US now has a strong reinsurance, capital and legacy operation.
Our legacy and capital teams are one global team referred to as Capital Solutions. We have been involved in a few US deals this year and are investing heavily in this side of the business. In the Capital Solutions team, we’ve hired across the UK, the US and in Bermuda so now we have a global platform across the key re/insurance markets. We work as a team to source deals and facilitate the move to legacy markets, with most legacy markets being in Bermuda.
We want to help clients to manage their capital. My main remit is to help people manage their legacy liabilities so they can free up capital. That is what is driving the growth in this market.
Reynolds: We rely on brokers for many of the North American deals brought to us. They generate more competition and brokers based in Bermuda, such as BMS, play an important role in bringing deals to Bermuda.
“Getting clean data is an issue we encounter often.”
Michael Fontanetta
McGlynn: Historically, we probably wouldn’t have used brokers that much, more accountancy firms and investment banks. But there is a lot of growth within legacy, and brokers are starting to bring deals that otherwise wouldn’t have been thought of coming to the legacy market. We’re creating bilateral relationships directly and also using this broker network.
You need a wide funnel with retrospective transactions to create diversification. We filter out deals carefully to maintain underwriting discipline and select profitable transactions.
Fontanetta: It’s all about efficiency and with their client relationships, brokers will have the most ears to the ground. Some might have a legacy specialist in their firm, which absolutely helps in identifying the opportunities with real merit, but the best brokers are those who act as true risk advisors for their clients. In their capacity as an agent, they need to bring all solutions to the table, including legacy solutions. >>>
“We work to make sure that everyone’s aligned.”
James Ferris
<<< Sometimes, a good broker can make all the difference to a transaction. They can advise counterparties on what’s supposed to happen, what an orderly process looks like, and what kind of information is required. Getting clean data is an issue we encounter often. It can be quite messy. Having a broker adds value by getting in front of those issues and can streamline the process.
Ferris: The beauty of using a broker is that we will take a book of business to select markets which we know will be interested in that particular book of business. We’ll get pricing, and often work to optimise the structure. The client can consider which partner it wants. And it is a long-term partnership, so ensuring the market is a good fit (not just a good price) is essential.
We work to make sure that everyone’s aligned with how a book of business is going to run off and how claims are going to be treated, because this is someone’s reputation on the line.
Video on previous page courtesy of Adobe Stock / maxximmm Image courtesy of Shutterstock / Elena Berd
