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ABIR CEO: Bermuda Reinsurers Cover Half of US Mortgage Insurance Market

About 50% of the US mortgage insurance industry is backed by Bermuda-based companies, said John Huff, CEO of the Association of Bermuda Insurers and Reinsurers.

Huff spoke with Insider Engage at the Joint Industry Forum in New York. Click on the video below to see the video interview, or read on to see the edited transcript.


Q: What are you focused on today?

A: We're really focused on three C's, if you will. The climate space just plays to our long tradition of being a natural catastrophe hub out of Bermuda. It's what we've done for 30 years, so many opportunities there and a great deal of responsibility putting our companies to work and the capital they have to work.

Cyber is another significant opportunity for Bermuda. The book has not yet been written. There are many changes to come into cyber portfolios, as we push to standalone products in cyber and, cycling out of those that silence cyber exposure. [There's] much more regulation to come, much more analytics and modeling to come, and proper pricing.

And then finally, the last C is capital. We're really showing the strength of the Bermuda market and its capital. We have some new numbers up on our website at www.abir.bm showing in the last five years just from 2016 to 2020, in the US, the EU and the UK, Bermuda companies have provided nearly a half a trillion dollars in claim payments to consumers and ceding companies. So it really shows the strength of our market. And those numbers are even before Hurricane Ida in the US and of course winter storm Uri in Texas.

Q: You've seen some expansion into the mortgage insurance industry. Can you tell us about that?

A: Yes, we did a data call earlier this year and there's some significant growth in the mortgage space. Mortgage reinsurance from the US is a relatively small market in terms of number of insurers, but about 50% of the mortgage reinsurance is backed by a Bermuda reinsurer. It's such an important issue to help first-time homebuyers get into wealth accumulation — many times from minority communities that that don't have that down payment. We're going into a significant inflationary time, which is a great concern. Home prices are still up, although interest rates are still low. But getting that 20% down — which is necessary in the US — if you don't have that 20% for home purchase, you then are required to have mortgage insurance. Bermuda companies are very proud to stand behind that mortgage insurance.

Q: What are you hearing about January one renewals?

A: Most things we're hearing is there will be a later renewal. There's a recognition of the importance of capital, a flight to quality. When I say flight to quality, it's not just legacy firms. We have a significant group of new startup firms with very seasoned executives who we've seen at other companies. We've seen a great deal of investment in by asset allocators to Bermuda companies. Renewals will likely trend later. But we're also seeing a significant importance on rate adequacy. Where in previous years maybe insurance cost drove rate, we're predicting that the reinsurance and retrocession cost will drive some rate adequacy. There are more risks out there. Climate is a perfect example. We're seeing increased severity and frequency of climate events.

Q: What are you hearing about demands for improving infrastructure globally?

A: Infrastructure is a great area for the insurance industry, and it's a great opportunity to partner with governments with the insurance sector. Really, there's no infrastructure investment without the insurance industry, when you think about the requirements for surety, workers compensation for projects to be built, and then the liability protection after a project is built. So tremendous opportunities and there's pent up demand, obviously, from the from the pandemic. So you'll see it in the US with the bipartisan infrastructure bill that passed but I think you'll also see it globally.

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