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A report from Kroll Bond Rating Agency (KBRA) highlights the ability of Bermuda over the years to re/invent to address insurance and reinsurance market challenges, underlining its significance to the global re/insurance market.
Today, and despite an array of market headwinds, the island of Bermuda remains a seasoned provider of re/insurance and also a solution incubator fort the global risk transfer market, a role that KBRA feels is perhaps now more relevant than ever before.
According to the report, at the end of 2016, Bermuda reported combined capital and surplus of commercial P&C re/insurers was $110 billion, or, over 20% of the global traditional marketplace, based on figures published by broker Aon.
Perhaps even more striking, says the report, is the fact that for the same period, year-on-year, global traditional capital increased by 4.3%, while Bermuda carriers’ capital swelled by more than five times that figure, or 23.5%, during the same period.
“Hence, the rest of the world experienced flat YoY growth,” says KBRA.
But it isn’t just the traditional reinsurance market where Bermuda’s influence and prominent role can be seen, as the island is also a leading domicile for alternative risk transfer solutions, such as insurance-linked securities (ILS) and catastrophe bonds.
While the scale and market share of Bermuda’s alternative capital structures is harder to determine, the report notes that using Class 3 and Special Purpose Insurers (SPIs) as a proxy, Bermuda’s share of the global alternative market is approximately 57%, or $46 billion, as at the end of 2016.
“Because of its dominance, Bermuda’s growth is setting the trend for the overall market,” says the report
Adding: “While official numbers for 2017 are not yet available, KBRA expects Bermuda to achieve growth that outpaces the rest of the world for traditional capital and will be in line with the non-Bermudan market for alternative capital.”
In light of its prominent position in the global traditional and alternative reinsurance market, Bermuda, like the rest of the marketplace, is facing numerous challenges and headwinds. This includes pressure on pricing from both traditional and alternative capital, and, the report highlights how Bermuda’s acceptance of new and innovative solutions, has enabled it to embrace ILS and try to match the right risk to the most efficient capital.
The report highlights other headwinds that are impacting the market, such as Brexit, cyber risk, InsurTech, climate change, and ongoing competition, and also discusses the potential impacts of the United States Tax Cuts and Jobs Act.
Ultimately, KBRA expects Bermuda to continue to play an important role in both the traditional and alternative reinsurance markets. By embracing all forms of capital and continuing to push the boundaries of risk transfer, KBRA believes that the Bermuda’s position is perhaps more relevant now than ever before.