New capital will create winners and losers

Bermuda will retain its position as a hub for the risk-transfer industry regardless of how the growing influence of alternative capital changes the industry in the future.

That is the view of David Cash, the former chief executive of Endurance Specialty and now deputy chairman and interim CEO of the Bermuda Business Development Agency, speaking ahead of this year’s SIFMA Insurance and Risk-Linked Securities conference taking place in New York this week.

Cash believes that the influx of alternative capital will re-shape in the industry. But Bermuda’s robust regulatory regime combined with a deep pool of underwriting talent and strong flow of risk mean it will remain at the heart of the industry.

“Over the course of a few years Bermuda went from being a reinsurance backwater, to being the point of entry for almost all new capital formation in the global reinsurance and large risk insurance markets,” said Cash.

He said that as the sector started to move into other types of vehicles and investment types in the aftermath of the 9/11 attacks, Bermuda has remained the favoured domicile for most types of formations including ILS deals.

“From that point on there has been a steady growth in the interest and activity around sidecars along with year-on-year growth in catastrophe bond issuance,” he said.

In 2013 alone, nearly $10 billion in ILS was listed on the Bermuda Stock Exchange—a new record for the exchange and a 67 percent growth on the 2012 total.

Cash told Intelligent Insurer that this new capital will “almost certainly lead to a reshaping of the reinsurance industry in the coming years, creating losers along the way”.

To read the full article in Intelligent Insurer’s supplement called ILS from all angles, look out for a copy at the SIFMA conference, or email john.walsh@newtonmedia.co.uk to obtain a digital version.