Bermuda Emerging As Centre of Insurance Linked Securities Business

Oct 11, 2012

The following article was published in Bernews on October 11, 2012:

Bermuda Emerging as a Centre of ILS Business

With the release of its September 2012 insurer registrations, the Bermuda Monetary Authority today acknowledged industry reports that Bermuda is “increasingly becoming a centre of the global Special Purpose Insurer [SPI] and Insurance Linked Security [ILS] business.”

For the first nine months of 2012, the Authority registered SPI’s with total premiums of $595 million – this includes four SPIs underwriting over $1.2 billion of cat bonds.

Shelby Weldon, Director, Licensing & Authorisations said, “Registrations are sustaining similar levels from last year across all classes. Fifteen Special Purpose Insurers (SPIs) had registered in Bermuda by the end of September 2012 – one registration higher than the same period last year. A total of 33 new insurers registered during the first three quarters of 2012 – the Authority registered 35 firms during the same period in 2011.”

Mr. Weldon continued, “We are seeing continued momentum and high levels of market interest in the SPI and ILS spaces. This supports reports from industry that Bermuda is emerging as an innovative centre for this type of business due to the wide variety of SPI uses we are starting to see develop.”

“The process of convergence between the (re)insurance industry and the capital markets, combined with Bermuda’s quality environment continues to attract sophisticated clients to the Island,” Mr. Weldon said. “The Authority is pleased that the framework put in place in late 2009 has supported an increase in SPI registrations over the last three years.”

So far a total of 36 ILS deals have been listed on the Bermuda Stock Exchange, making up approximately one-third of global market issuance. The market capitalisation of Bermuda-listed ILS has jumped from $3 billion at the end of 2011 to $5 billion through the first half of 2012.

The world’s largest cat bond deal took place in Bermuda in Q2 2012, when Everglades Re Ltd. underwrote $750 million in cat bonds for Florida Citizens Property Insurance. And SPI’s are starting to complement the traditional insurance models.

“As well as the much spoken of cat bond SPI’s, we are seeing a wide range of SPI uses this year,” Mr. Weldon said. “From property catastrophe reinsurance like European windstorm and Florida hurricane coverage, to Excess of Loss and Industry Loss Warranty coverage, we are starting to see a lot of innovative uses in the SPI space.”

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