Approach ILS with eyes open
Partnerships between traditional capital and ILS will become the new operating model going forward, according to John Huff, chief executive, Association of Bermuda Insurers and Reinsurers.
Huff told Monte Carlo Today that many of the discussions at the Rendez-Vous have centred around ILS and the traditional market, and that now might be the right time to change how the market deals with the two.
“I think that the way forward will be a blend of traditional reinsurers and those traditional reinsurers using ILS or capital market types of risk and using them as part of their value proposition. We can only be stronger together,” he said.
Huff conceded that there will always be competition of some sort, but he added that to put it into perspective participants are all trying to achieve the same goal, which is to highlight it in the Bermuda market.
“There’s no doubt that the Bermuda market does traditional reinsurance very well, and it does ILS very well, so using reinsurers’ expertise and partner capital makes us a superpower,” he said.
According to Huff, the key to Bermuda’s remaining at its place at the head of the market is diversification, a word that he feels has been over-used in the market. What it really means is making the Bermuda market future-proof, a term he is increasingly using.
“It’s how you make your enterprise, market or business future-proof against obsolescence, and how you survive the challenges you are faced with—you do that by diversification.”
He pointed out that Bermuda will always be the leader in nat cat coverage, with many of the conversations in Monte Carlo being about that, and that Bermuda players are also diversifying into specialisations.
According to Huff, they are doing this in a “narrow but deep” fashion, so whether it’s in cyber, flood, or mortgage, companies are not dabbling in those areas but rather making a concerted effort to learn the business and then go deep into it.
“That’s a brilliant strategy—it’s good for Bermuda, and it’s good for those individual firms, because they’re going in with eyes wide open,” he concluded.
