BERMUDA


“Within little more than a quarter of a square mile area of Hamilton one finds world-class lawyers, accountants, actuaries, bankers and a variety of risk management professionals.”


the Island over a period of months to form new global reinsurers was striking. Similar investment waves of capital arrived over the 2001/2002 period, and subsequently in 2005 with the formation of sidecars.


Books and articles have been written about the development of the Bermuda insurance industry since the emergence of the captive insurance industry in the 1960s and 1970s, because it has consistently risen to meet market demands. Captive business—including through the use of rent-a-captives—grew as the insurance and reinsurance markets also expanded.


But on this ‘insurance island’, synergistic benefits began to be manifested across the separate markets. Some risk managers who form Bermuda captives also use their business visits to the Island to meet with insurance companies about other insurance options. In addition, captive owners can find opportunities to reinsure their captive programmes. Bermuda has long been a one-stop shop for insurance.


Today’s captive market includes 40 captive management companies and the popular Bermuda Captive Conference (www. bermudacaptive.bm) where hundreds congregate in June every year to learn about new developments.


For Bermuda’s commercial insurance, reinsurance and captive markets, there is also a ‘silicon valley effect’, described by Dr John David Cummins, the Harry J. Loman Professor Emeritus of Insurance and Risk Management at the Wharton School of the University of Pennsylvania.


In an economic analysis of the Bermuda markets, Dr Cummins observed that Bermuda has numerous advantages as an insurance domicile. They include benefiting from “economies of agglomeration” in insurance and reinsurance—not only because of the concentration of captive insurers, non-captive insurers, and reinsurers, but also because of the professional infrastructure that has been developed in Bermuda over the years. He marvelled that within little more than a quarter of a square mile area of Hamilton one finds world-class lawyers, accountants, actuaries, bankers and a variety of risk management professionals. Bermuda’s proximity to the New York capital markets, he said, and the island’s close ties with the UK, provided key advantages to insurers and reinsurers.


A broker-driven market, Bermuda’s insurance and reinsurance brokerage community is large. The Bermuda Insurance and Reinsurance Brokers Association membership includes all of the world’s leading global brokers and many independents


108 CICA | Forty years of captive leadership


The Island’s Class 4 insurers and reinsurers—born, bred and/or based in Bermuda—are companies that were eventually responsible for 37 percent, 38 percent and 51 percent of the reported liabilities for Europe’s 2010 Windstorm Xynthia; Chile’s 2010 earthquake; and New Zealand’s 2010 earthquake, respectively. They were also responsible for 29 percent of the reported liabilities for the international reinsured share of the 2011 Japanese earthquake.


Bermuda reinsurers paid almost 30 percent of the insured losses from 2005 Hurricanes Katrina, Rita and Wilma; and paid $22 billion to rebuild the US Gulf and Florida coasts after the horrific hurricane seasons of 2004 and 2005. Bermuda’s carriers provide more than 60 percent of the hurricane reinsurance in Florida and Texas, up to one third of US crop reinsurance in key states and 25 percent of the US medical liability insurance and reinsurance market.


The Bermuda (re)insurance market companies have assets of half a trillion dollars and today are part of the very life-blood of the international insurance industry. These markets have thousands of clients, including owners of captives, commercial insurance and reinsurance companies and the many clients of those companies.


Companies were formed in Bermuda to write risks that were either hard to write or could not be written at all elsewhere. Over the years, it has provided insurance solutions for risks in healthcare, liability, property, the environment, workers’ compensation and many other lines. l


David Fox is the director of information services at the Bermuda Insurance Development Council. He can be contacted at: fox@idc.bm


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