The Class of 2020

When the history of the re/insurance market is written, 2020 will be looked back on, not only as the year of COVID-19, but also as the genesis of an impressive cohort of new re/insurance companies in Bermuda.

With the emergence of such an impressive Class of 2020 companies—arguably the strongest group of new companies formations for a generation—Bermuda:Re+ILS and the Bermuda Business Development Agency (BDA) decided to commemorate the moment.

This special report is intended to do just that. It includes Q&As with senior executives at these new companies, as well as executives at a number of more established companies that took advantage of fortuitous circumstances in 2020 to raise capital. The result is a snapshot into the thinking behind these new launches, and a view on the market opportunities to be seized.

Re/insurance professionals have had a number of different motives for setting up new vehicles in recent months. For some it is simple opportunism, with the hardening market creating the perfect conditions for a new business to get established. Others downplay the transient conditions of the market in 2020 specifically, and emphasise instead the longer-term advantages of being a new entrant in the market.

Scale will always be an advantage for the more established carriers, but this is offset by the freedom from legacy books of business and infrastructure that new players enjoy.

Several new launches focus on their approach to technology, in particular, as a key differentiator they believe will contribute to their success in coming years, long after the current market cycle has turned.

Real diversity

The rates environment has also played a role. Super low interest rates have presented a formidable challenge to re/insurers in recent years, making it harder to generate strong profits via their investment portfolios.

It has, however, made it cheaper to finance growth through debt. Some of the largest and best known carriers in Bermuda raised money in the debt capital markets in 2020, using the money to underwrite new business and take advantage of the increasingly attractive market conditions.

Investors have been keen to participate. As John Huff of the Association of Bermuda Insurers and Reinsurers points out, the world is increasingly wracked with uncertainty, be that from spiralling cyber crime, natural disasters of increasing scale and frequency or the largest global pandemic for 100 years.

Re/insurance will be crucial in helping businesses navigate these and the many other challenges they face in coming years, and investors are keen to put their money to work with innovative new managers—and reputable older ones—operating in the global capital of risk transfer expertise.

With all this demand from investors, the surge in supply seen in 2020 was a natural response.

What most of the Class of 2020 have in common is a reputable management team that is well known to investors, and their peers in the industry, most of them having worked for the larger carriers in their past. Huff notes there has been a flight to quality, and the management teams that have been able to demonstrate they have that quality have garnered the most interest from investors and clients.

As the series of profiles in this report demonstrate, there is real diversity among them. There are brand new launches, as well as new Bermuda branches of more established businesses headquartered elsewhere, and large capital raises from established players in Bermuda itself.

There are insurers, reinsurers, and managing general agents writing a plethora of different lines of business, each capitalising on a perceived gap in the market, where capacity is limited or where new company founders believe they can offer clients something they were not getting elsewhere.

Image: shutterstock.com / Trudie Ottolini