Risk assumption in Bermuda

Over the last approximately three years (from the second half of 2012 through the first quarter of 2015) only two Bermuda-issued insurance-linked securities (ILS) can be identified as covering risk unrelated to natural catastrophes, according to the Bermuda Monetary Authority (BMA). The coverage of property catastrophe during the referenced period amounts to 76 of 78 deals and $14,791 million of an overall issued total of $15,032 million.

The two exceptions were for lottery winnings and life health. Since the Bermuda ILS market is still markedly dominated by property catastrophe coverage, this article briefly explores some recent trends in Bermuda ILS region and peril exposures.

Figure 1 displays aggregate ILS issued volume by region-peril since the second half of 2012. Not surprisingly, the combined figures show that North American perils (hurricane, earthquake and multi-peril) represent 75 percent of all issuances ($11,081 million), with Asian earthquake and multi-region/multi-peril consisting the majority of the remaining 25 percent volume ($3,710 million).

The non-North American ILS issuances were: Asian earthquake ($1,913 million; six deals), multi-region/multi-peril ($1,513 million; eight deals), European windstorm ($184 million; two deals) and Asian typhoon ($100 million; one deal). This is not a picture that has varied significantly over time, that is, ILS issuances with non-North American peril cover have not outpaced the overall market.

Bermuda has continued to connect capital with North American peak zone catastrophe exposures. In fact, the risk-taking profile of ILS issuances so far in Q2 2015 is heavily concentrated on North American property catastrophe risks, suggesting that the Bermuda ILS market is not pursuing increased business in other geographic regions in the immediate term, to say little of non-catastrophe lines of business.

Figure 1: Bermuda ILS issued volume by region-peril covered