Spotlight on Bermuda
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Spotlight on Bermuda

Life in paradise just got trickier, thanks to Covid-19 – how can the (re) insurance sector’s favourite Atlantic outpost prevail?

Hamilton, Bermuda waterfront and Front Street
Credit:wwing/Getty Images/iStockphoto

The streets of the Bermuda capital Hamilton pop with red, yellow and blue buildings, punctuated by green, swaying palm trees, while the turquoise waters of the Atlantic lap along the shore.

It’s no wonder this tropical paradise has become a popular home for the (re)insurance industry – regardless of the financial benefits, residents couldn’t be further away from the grey skies and imposing towers of London or New York.

But while Bermuda has been attracting and retaining risk capital in the insurance sector for decades – it now hosts more than 30 international companies, according to the Association of Bermuda Insurers and Reinsurers – 2020 has posed a number of challenges for the island.

Bermuda has registered 180 Covid-19 cases since its first confirmed diagnosis on 18 March, and nine deaths. Strict measures on movement are being relaxed, with residents required to wear a mask indoors and where social distancing is not possible.

International travel has been severely restricted, although Bermuda is now (as of 21 September) exempt from restrictions put in place in the UK.

Meanwhile, other major (re)insurance hubs in Europe and North America have been seeking to attract capital back to their shores. The rise of remote working has made location less important, reducing the need for substantial bricks-and-mortar locations in jurisdictions like Bermuda.

So how can the island maintain its position as destination of choice for (re)insurers?

Strong and steady

Chris Bonard, CEO of independent broker Ed’s Bermuda operations, says the island’s resident carriers have been affected by the same issues as companies in other jurisdictions: namely capital erosion and rising expense ratios.

The pandemic “expedited a hard market and has caused balance sheet issues, making trading difficult”, Bonard says.

However, Thomas Olunloyo, CEO of L&G Re, says the industry is “well prepared” to navigate these challenges. “As a domicile, Bermuda offers a regulatory regime that has international recognition and respect but is also highly dynamic,” he adds.

Bermuda has continued to see strong inflows through the height of the pandemic in Europe and North America. Underwriter Fidelis has experienced increased deal flow over the past year and its balance sheet has doubled, according to group executive director and chief risk officer Charles Mathias.

Bonard says the only area in which the island’s market has struggled has been its ability to process new business as it emerged.

“Ironically, Bermuda’s reputation as a strong, steady market has attracted a lot of business that we can’t triage as quickly as we would like,” he adds.

Robust regulation

Fidelis’ Mathias states that Bermuda has been “a beacon of decisive governmental action and clear communication during Covid-19 that other jurisdictions could learn from”, making it easier for companies to manage through restrictions on movement.

Local professionals also praise the Bermuda Monetary Authority (BMA) for its accommodating approach to innovation.

“It embraces innovation in both the way it works and within the companies it regulates,” says L&G Re’s Olunloyo. “This creates an environment that allows Bermuda companies to quickly adapt to changing realities to offer products that are relevant and useful to customers around the world.”

Mathias adds that the BMA has proved willing to engage with (re)insurers on innovative approaches to new products and capital structures, which he says will continue to attract business.

“Fundamentally Bermuda is a very resilient place, supported by strong government policies,” Bonard states.

Tech future?

One area in which Bermuda could still improve is on the technology side, industry leaders agree. Mathias highlights the absence of a centralised settlement system on a par with London’s Xchanging.

However, improvements to electronic trading will boost Bermuda’s efficiency further ahead of markets such as Lloyd’s, he adds, where there is “a dead weight of bureaucracy and oversight”.

Olunloyo predicts that the accommodative regulatory regime will allow for more innovation, particularly regarding technology, which will complement the island’s “considerable amount of capital and capacity”.

Other areas for improvement include the primary insurance space, according to Ed Broking’s Bonard. Technological improvements could be used to “open up the island to a bigger flow of business on the excess and surplus lines side”, he says.

Developing and improving technology will also strengthen Bermuda’s attractiveness as a destination for insurance and reinsurance start-ups. Companies including Alcor Group and Arcadian Risk Capital have selected the island as home this year, and more could follow as Bermuda becomes the “destination of choice” for new companies, says Bonard.

Post-pandemic plans

Bermuda is also seeking to attract a new remote workforce. With the pandemic causing a collapse in international travel, the island’s government has sought to incentivise people to come for the longer term.

The Work from Bermuda programme, a 12-month visa to facilitate people carrying out their jobs – whatever they might be – from the island, is designed to help anybody get a change of scenery after months of home working.

As Bermuda’s premier David Burt states on the government website: “No need to be trapped in your apartment in a densely populated city with the accompanying restrictions and high risk of infection; come spend the year with us working or coding on the water.”

At just $263 ($333) per application, Bermuda might just be able to attract a whole new generation of insurance sector workers to experience the delights of island life – and take its (re)insurance market to the next level.