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19 December 2018 Alternative Risk Transfer

Bermuda won’t let up on forging ahead with ILS

Bermuda has worked hard to position itself at the forefront of the risk management world and has broken away from the pack when it comes to insurance-linked securities (ILS). Time and again, the jurisdiction has proved itself to be an environment that encourages and supports growth and innovation.

The past year has presented some new challenges to the global insurance, reinsurance and ILS industries with the low interest rate environment, a soft market and mergers and acquisitions (M&A) all taking their toll. But Bermuda continues to provide the strength, longevity and expertise that our business partners have come to rely on.

In 2018 the ILS market did not see the rate increases it had hoped for following heavy natural catastrophe losses in 2017. Those losses tested not just the traditional markets, but also the ILS sector. The market, however, proved not only resilient but also willing and able to respond.

In fact, what could have been a crisis instead gave investors confidence in the asset class. Hurricanes Harvey, Irma and Maria, together with the destructive earthquakes in Mexico and the Californian wildfires, were a defining moment for both Bermuda and the ILS sector as a credible risk management resource. Following the significant 2017 losses, there was still interest from existing and new ILS investors and many reloaded for the June 2018 Florida business.

Opportunities

The challenges also presented several opportunities within the ILS sector. The first quarter of 2018 was a record for ILS issuance, signalling that the market had bounced back from the losses of 2017. With more professionals managing ILS strategies than ever before, the market has seen growth in new financial engineering solutions to enable ILS capital to be applied to risks beyond natural catastrophes.

It comes as no surprise that what used to be called “alternative” or third-party capital is now being referred to as “convergence” or “partner” capital, which sends a clear signal that the capital is now a permanent and integral part of the industry. Much of the M&A activity earlier in the year illustrated that ILS was a strategic motivator among acquirers, allowing broader access to alternative capital pools and lower reinsurance costs.

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More on this story

Alternative Risk Transfer
19 December 2018   Global insurance-linked securities (ILS) issuance volume rose significantly year over year in the third quarter of 2018, according to the latest Bermuda ILS Market Report by the Bermuda Monetary Authority.
Alternative Risk Transfer
22 October 2018   End investors, ILS funds, and buyers – the three groups active in ILS – have predominantly weathered 2017 loss activity with a view that reinsurance products backed by ‘alternative’ capital have become mainstream, according to a new Global ILS Market Survey by Willis Towers Watson.