BERMUDA’S RESILIENT REINSURERS

Adria Richards: We’re facing several years of big cat losses. 2017 and 2018 were the largest two consecutive loss years for insured natural cats in history, and 2019 was not without challenges. During this period, the Bermuda market has performed very well.

The market continues to be resilient and this has only been reinforced by our response to COVID-19.

We’ve stayed open for business, supporting our clients and paying claims. 2020 looks likely to be another record-breaking year, and at the same time, we’re all grappling with the new challenge in COVID-19. That has brought with it a lot of uncertainty, from a loss estimation perspective, as well as operational challenges. But as a market we’ve continued to function at a very high level.

At RenaissanceRe we’ve turned our attention towards future opportunities that we think will arise as a result of COVID-19. We have recently raised some capital and we have a strong balance sheet that will enable us to further support our clients during these unprecedented times. Again, off the back of several big cat losses, the market continues to be extremely resilient.

David Brown: The Bermuda reinsurance sector continues to be very strong, with strong balance sheets. Certainly, the catastrophe events of recent years have been primarily earnings events. Capital has remained strong. Related to COVID-19, it’s too early to determine the long-term impact, but the industry appears to be in very good shape right now to weather the storm.

As a result of the hardening market we’re seeing a number of new reinsurance startups, which is very exciting, in the traditional reinsurance and insurance space as well as in the insurance-linked securities (ILS) space. All of those are forming in Bermuda, which is good for Bermuda.

There’s a number of reasons for that—obviously our history in helping new capital enter the market quickly is very important in these times of uncertainty and when the cycle changes. Bermuda has been a leader in moving quickly to identify these opportunities. We continue to be viewed as a reputable jurisdiction with the highest standards on tax transparency and a strong regulator in the Bermuda Monetary Authority (BMA), which continues to be very important.

I am very bullish and we think it’s the best place to start a reinsurance business.

Brad Adderley: First, there was the question of whether through COVID-19 the BMA would grind to a halt. If there would be issues around reviewing applications and so on. But what we saw was the opposite.

We are seeing new formations with the BMA approving large transactions on the life space, the ILS space—as well as some other interesting startups. Meanwhile, several established reinsurers have raised additional capital, which shows faith in the reinsurance marketplace and faith in Bermuda.

We see an abundance of new capital coming into Bermuda through existing players and new formations and no bottleneck at the BMA, which is great.

On top of that, in the ILS space, we are seeing a whole slew of new cat bonds and transformer vehicles being brought to market. Around 80 percent of cat bonds globally are still domiciled in Bermuda.

So, all through COVID-19, we have seen new capital, new startups and new cat bonds form in Bermuda. And by Christmas I think we will see even more. And they’re all talking about Bermuda and not looking at other jurisdictions. They are looking at being based in Bermuda and raising capital for Bermuda.

Sean Kelly: The capital we were seeing coming into the market in the back half of 2019 has continued to come in through 2020, and every group that I’m speaking with about a potential new startup has a Bermuda element in its strategy. Whether it’s UK-based or US-based, everybody is looking to establish a Bermuda company as a component of that, in part because they see that as the quickest path to the market for January 1, 2021.

The regulator has done a tremendous job to differentiate Bermuda’s speed to market and it’s encouraging for the industry.

The accident years 2017/18 were touched on already—they were the first significant loss years for a large number of ILS investors, yet you’re still seeing capital come into that market. To me, it demonstrates that the industry in Bermuda is trending in the right direction, and the market is very well positioned heading in 2021.

Gavin Woods: The BMA has done a sterling job over the past couple of months. The questions we get most from onshore legal counsel and the industry are ‘will the BMA be able to cope?’ and about what the response time is like. The answer to that is the BMA has been on the ball throughout and they have been exceptionally responsive in a very difficult time.

It has been a very good representation of Bermuda during COVID-19. This has resounded with clients and within the industry.

Andre Perez: The fact that we have existing companies raising significant amount of capital is encouraging. Investors are understanding that certainly on the casualty side we have started to respond in the form of a hard market.

For those of us who have tried to place some D&O insurance, you know what I’m talking about—it is tough. So it definitely is encouraging that there is more capital. The elephant in the room is obviously COVID-19 and the uncertainty around it.

There is no doubt the loss is going to be significant. There is still a lot of uncertainty on the interpretation and the coverage, and that’s not only on the casualty side but now it’s seeping also on the property side with business interruption.

We’re definitely in an uncertainty mode, but the nice thing about it is that we have new capital coming in. We have new companies being formed; on the ILS side the opportunity is slightly different because it’s focused on the property side but that capital which was on hold in March and April is now coming back.

Every single project we put on the backburner in March and April has now resumed and they’re full on. That gives us a lot of enthusiasm and hope for the future of this market. And let’s not forget we have hurricane season to come.

2021 is going to be a very interesting year in terms of what the market is going to be. But all in all, I would say that Bermuda remains a jurisdiction of choice. Just look at some of the new ventures that are setting up. They chose Bermuda because it’s the best place to start a reinsurance company.

Kathleen Faries: It is going to be interesting if we do in fact have any big cat events. We’re still in the middle of this pandemic and it’s hard to see the end point of what’s going to happen. But if we do have a big cat event, what does that mean for how we’re going to handle claims adjusters? Will claims adjusters be willing to go where the event has happened? Are they going to be worried about their own safety?

There’s going to be layers and layers of complexity, so let’s hope we don’t have a big event as, if we did, there’s going to be a lot more unknowns and a lot more uncertainty.

It’s been amazing to watch everybody in Bermuda pivot and adjust to what we’re doing now, working from home. It has been very challenging for people who work and also have young children.

It’s going to take us a long time to say ‘this was the impact’, but it has been amazing to see how people have pivoted and we’re using the technology that Bermuda has been pushing and getting ready for people to use, so that’s all positive.

There’s still a lot of unknowns about how this will all shake out and what the final impacts will be but there are many positives for Bermuda at the moment.

Daniel Malloy: At Third Point Re, we’ve spent the last two-plus years building a stream of underwriting profitability as well as investment returns. So we’re pretty excited about the Sirius transaction [a merger between Third Point Re and Sirius Group]—there are a lot of positives. One of the positives again is how responsive the BMA has been.

We’ve been to the BMA a number of times this year, and we’re very pleased about how quickly they were able to organise meetings, often on short notice and how professional and supportive they’ve been.

We’re a company of 35 people, 25 of them in Bermuda. We were set up eight years ago and our disaster response was really geared toward working from home after a hurricane. So we’re fortunate in that while a disaster really did occur, although our response is geared to a different nat cat, the effect has been the same.

We reopened our office three weeks ago and two people have come in. We’ve had two board meetings, we’ve issued two earnings, we’ve filed with the SEC, we’ve talked to investors. We’ve done an acquisition, and then done the day-to-day business with people were doing it from home.

One of the very positive things for Bermuda was the sense of community and the coming together during this time. We’ve taken steps to help others in the community through some charity initiatives—and all this has occurred at a time of increased social sensitivity to racial equity with the Black Lives Matter movement.

I’ve been really very impressed with not only our firm, but the reaction of the community and our industry. It’s something we can be proud of. Everybody has stepped up and said: ‘I’m willing to recognise there’s an issue’. We have been working as a business community to foster diversity, equity, inclusion.

Anup Seth: We have certainly seen Bermuda respond in a very positive way. I would add that it’s all about access to capital and ensuring the efficient deployment of that capital. We’ve seen an increasing number of enquiries around accessing the reinsurance markets or the capital markets.

The cat bond market had a very successful start to the year. Then we experienced a very volatile equity market in the first quarter due to COVID-19 that led to a slowdown in capital market solutions. However, it’s been remarkable how the market has bounced back in the second quarter and companies have increased their access to capital markets and issued further mortgage insurance bonds as well.

The industry now needs to demonstrate underwriting performance. We’ve had three to four years of poor underwriting performance. As an industry, we need to have several good years where we can demonstrate to investors that this is a good sector to invest in and that our risk-adjusted return is sustainable over a five to 10-year horizon.

There are two types of investors. There are investors who see our industry as a real business and we treat them as permanent capital. And you’ve got those investors who treat our business as an asset class and they’ll play only when the rates and returns are there, and will pull out when they’re not.

We have to cater for both types of investors and provide bespoke solutions for both traditional and alternative capital. Bermuda is well positioned to facilitate the deployment of this capital in an efficient manner.

The other important change is the new licence class that the BMA has come out with: the collateralised insurance class. We have seen some good traction there and that’s a great practical example of how the BMA is innovating and bringing real solutions to the table.

It has been a very busy six months for us, and it’s been great to see how all aspects of our business are performing well, but it’s all centred around that theme of access to capital.

Ariane West: The industry has done a good job of managing the challenges that come with large loss events, and shown growth in other areas aside from property catastrophe over the past few years, including, for example casualty and speciality lines. The ILS market continues to respond to investor appetite for well-priced risk.

With respect to COVID-19, the ability of teams and platforms to continue to serve counterparties and investors has been truly impressive. Despite the challenges, most people haven’t missed a beat, which speaks volumes about the talent and commitment of the people in this industry.

I have seen teams and working groups pull together and be flexible to provide support when needed, because we’re all coping with having our work and home lives come together and managing multiple obligations and demands on our time.

The ability to keep up that pace and execute on our objectives comes down to a sense of collegiality and team spirit, and a willingness to provide support within teams as well as across the table with the counterparties we work with. It has been a really great time in that respect.