Bermuda welcomes new start-ups to the island

Brad Kading, the chief executive of the Association of Bermuda Insurers and Reinsurers (ABIR), has welcomed the arrival of new players in the Bermuda marketplace that have boosted ABIR member numbers previously reduced through the effects of merger and consolidation.

One of the biggest and new arrivals is Qatar Re. “It’s a huge positive for Bermuda,” said Kading. “They previously had some underwriting capacity on the Island but are now making Bermuda their headquarters and that means hiring additional staff. It’s a good sign that there is a vibrant market in Bermuda.”

That positive sign has been replicated in the alternative capital markets, with Bermuda recently overtaking the Cayman Islands as the domicile of choice for insurance-linked securities (ILS) according to a report by Willis.

“Most of the ILS start-ups are coming here and that’s another proof of the vibrancy of the market in Bermuda,” said Kading.

“The arrival of alternative capital does have its challenges but generally it’s a good thing and provides an opportunity to work on re/insurance development in terms of product and penetration into new markets.”

To the charge that the influx of alternative capital sparked the merger frenzy as companies try and compete on size and market reach, Kading replied that consolidation is in the DNA of capitalism.

“There is a natural tendency towards consolidation,” he said. “At the moment Bermuda is an incubator for start-ups, which is the other side of the mergers and acquisitions coin.”

Further opportunities for growth lie with the private-public partnerships in the realm of disaster mitigation and relief.

One such entity—the UK’s Flood Re initiative—is looking at $3 billion in protection. Chief executive Brendan McCafferty has made one trip to Bermuda and another is in the offing.

“There is every confidence that Flood Re will be able to buy whatever amount of reinsurance it wants and the Bermuda market will be a big contributor of capacity to that programme,” said Kading.

The pilot study into the part reinsurance can play in a national flood defence programme also offers encouragement.

“That’s a positive. The Federal Emergency Management Agency (FEMA) reports analysed privatisation and talked about the use of reinsurers. These are fairly positive, with between $9 and $12 billion available for the US flood insurance programme,” said Kading.

He cites efforts made by the United Nations and the international climate change talks in Paris in December, where nations are expected to collectively pledge $100 billion a year by 2020, as evidence of a mood-shift by the people who matter; it will provide the impetus to go forward and embrace private risk transfer solutions.