Bermuda's history as a source of innovation and capital for the global insurance industry means it's in a prime position to take advantage of several new opportunities, according to speakers at the Insurance Risk & Capital Bermuda conference
"Capital comes to Bermuda in a big way when there's a global risk event," said John Huff, president and CEO of the Association of Bermuda Insurers and Reinsurers, which represents the island's property and casualty sector.
Huff recounted how Bermuda's re/insurance sector has stepped in to help solve critical market dislocations, such as the 1980s US excess casualty crisis, which led to the creation of ACE and XL; providing reinsurance to Florida insurers in the aftermath of hurricane Andrew in 1992; and filling the void in property catastrophe insurance after the September 11 attacks.
But for the next 18 months, "casualty is the one to watch" he told the 29 October event, organised by InsuranceERM. "You're going see some real issues there, particularly related to social inflation."
Huff also highlighted M&A driven by Japanese firms, which have bought two major Bermudian firms in the last year (Sompo's $3.5bn deal for Aspen, and Nippon Life's $10.6bn deal for Resolution Life). This is partly driven by the regulatory push for Japanese financial firms to dispose of their cross-shareholdings, which is liberating billions for diversification into other businesses.
"I think we'll see continued interest. And what an honour that they're looking so closely at Bermuda and considering Bermuda's companies," Huff said.
Technological developments
Anthony Shapella, group chief underwriting officer at SiriusPoint, raised the issue of insurance supporting artificial intelligence (AI) and large language models (LLMs) as an area of future interest.
"If you look at where the value is in equity markets today, so much of it has moved to support the growth of AI and LLMs. The question is how do we transition to a world where these tools are used day in, day out, and we're doing it in a safe, reliable and protected way? That is a problem that needs to be solved, and I'm confident that Bermuda will bring the same level of innovation to that as it has in the past," he said.
More broadly, an increasingly digitalised and roboticized world brings new risks – and the potential for better risk mitigation. "I may feel safer in a robotic car than I do with New York City taxi drivers," he quipped.
"I also think about biotechnology and advances in life science, seeing incredible developments there. Again, this is a market that will meet some level of insurance support," Shapella said.
Shapella further highlighted geopolitical instability as a driver for insurance innovation in Bermuda. "You don't have to go far to find examples of geopolitical conflict ... we're operating in an environment where the risk level has risen," he said, citing areas such as shipping, energy and aviation as having "complex problems that need to be protected and solved".
E&S and MGAs
In the near term, it was the rise of the US excess and surplus (E&S) markets and the growth of managing general agencies (MGAs) that Shapella saw as most promising.
"Often, we see this movement of capital from E&S to admitted [markets]. But we think that the E&S market has staying power, that we won't see as much movement between the two. And we believe strongly that it's an excellent area for insurers and reinsurers to focus on, particularly with freedom of rate and form that the E&S market offers," he said.
Shapella said SiriusPoint had backed MGAs, including Arcadian and Banyan, and he expected the sector to be a growing source of innovation in future years. "Creative underwriters are getting tired of working at full-stack carriers that are very bureaucratic... they are moving out and hanging their shingles and starting MGAs – and they are doing fabulously."
Life and annuity
Bermuda's life and annuity reinsurance business has grown massively over the last few years, and participants in this market backed its further expansion, driven by a huge and growing protection gap for retirement savings.
Jamie Schmerer, senior vice-president for enterprise risk at life reinsurer Fortitude Re, said: "People are going to live longer and the dynamic of what they need in those years, in terms of long-term care and health, is also going to change. We have just a pure quantum of the need growing, and then also a difference in terms of what exactly is needed."
He said primary carriers are working hard to provide solutions, but these require capital. This could come from public equity markets, but these have historically been challenging for primary insurers. Legacy portfolios generate capital, but this takes decades to come through, Schmerer argued.
This leaves reinsurance as one of the primary routes and given Bermuda's robust regulations and strengths in deal structuring and asset-liability management (ALM), the island is in a prime place to satisfy that need.
Timothy Gasaatura, president and CEO of life reinsurer Oceanview Reinsurance, said he was excited by the evolution of the US's SECURE (Setting Every Community Up for Retirement Enhancement) Act.
"We've always been trying to figure out how to get lifetime income into 401k's. I believe between SECURE Act 1.0 and 2.0, there's been more of a drive to do that. If that issuccessful, what opportunities does that bring to the reinsurance side, and what place does Bermuda have in that? That's something that's exciting," Gasaatura said.
He also anticipated more life reinsurance deals with counterparties in Asia, particularly Hong Kong and Japan.