19 October 2015 Insurance

Bermuda players ‘forced to seek new risks’: ABIR

The influx of new capital that has entered the reinsurance industry in recent years has forced Bermuda’s players to reassess how and where they put their capital to work and seek new opportunities and new risks, Brad Kading, president of the Association of Bermuda Insurers and Reinsurers (ABIR), told Baden-Baden Today.

He said the association’s members are being compelled to seek new opportunities but he also stressed that the consolidation sweeping the industry is also relatively normal and part of the industry’s cyclical nature.

“The new $70 billion in capital forces us to think of new markets so we can put that capital to work,” Kading said. “Our efforts are directed towards moving risk out of government funds into the private market; closing the ‘protection gap’; and developing new products like cyber to be relevant to consumer needs.

“There have been seven mergers or acquisitions within the ABIR membership in the last three years. At the same time, though, we’ve had five new re/insurers created in Bermuda and there are trade press reports about four more in the works. We’re going through the normal cycle of consolidation and incubation.”

In terms of the main talking points at Baden-Baden this year, Kading said he expects the “same give and take as participants jockey for position to get the best deal”.

He also noted the significance of the recent hearing by the US IRS/Treasury on proposed regulations aimed at preventing hedge funds from avoiding taxes.

Following a September 18 hearing, the ABIR had reason to believe another version of the regulation may be published by year end, probably with the opportunity for additional consultation on the ‘bright line’ test and facts and circumstances issues.

“Congress continues to put pressure on Treasury to act. If an international tax bill gains traction in Congress we expect the passive foreign investment company (PFIC) issue will be part of that legislation. We’re also talking to key Congressional staff this week on the matter,” he said.

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