Bermuda remains world-leader for cat bonds, ILS and Convergence

Bermuda continues to be the world-leading insurance-linked securities (ILS) domicile, with the vast majority of the catastrophe bond market and a significant proportion of the rest of the ILS market, domiciled or serviced on the island, while its industry continues to drive forwards reinsurance and capital markets Convergence.

Bermuda’s Convergence conference, organised by the ILS Bermuda industry group, takes place over the next couple of days and as the ILS community meets on the island, there is also room to celebrate Bermuda’s continued insurance-linked securities (ILS) success.

Bermuda remains the world-leading jurisdiction for insurance-linked securities (ILS) and nowhere is this made clearer than at its stock exchange.

Based on an outstanding catastrophe bond and ILS market size of $41.7 billion at mid-year 2023, the Bermuda Stock Exchange (BSX) was home to an impressive 785 listed ILS issuers and $38.4 billion in market capital outstanding.

Which means the Bermuda Stock Exchange represented a stunning near 92% market share of global ILS, maintaining its position as the world’s leading exchange for catastrophe bonds and other ILS, including ILS issued in other jurisdictions that are later listed on the BSX.

The success of the island and venues like the BSX is testament to the depth of ILS expertise that Bermuda has on the island.

As a key catastrophe reinsurance market for the world, Bermuda was always destined to become a home to insurance-linked securities (ILS) as well and over the last roughly 15 years, since the all-important regulatory changes that allowed the special purpose insurer (SPI) to be formed, it has captured the lion’s share of market activity.

The importance of Bermuda to the global users of ILS, both sponsors of transactions and investors into them, cannot be understated either.

The access to expertise and a wide-range of service providers, as well as dedicated ILS investment managers, based on the island have helped to drive the global ILS market forward.

David Hart, CEO, Bermuda Business Development Agency, commented, “The expertise of our long-established service providers, our robust yet pragmatic regulatory environment, and our excellent reputation in both the asset management and reinsurance sectors means Bermuda is by far the Insurance Linked Securities (ILS) jurisdiction of choice.

“Bermuda is a global leader in ILS issuance.”

Commenting on this week’s conference on the island, John Seo of Fermat Capital Management said, “Convergence creates an important and much-anticipated opportunity for the industry and its leaders to gather and engage each year. We recognize the commitment and dedication of ILS Bermuda in promoting the ILS asset class through this event.”

Aditya Dutt, President at specialist investment manager Aeolus Capital Management, highlighted the success of the Bermuda ILS market, saying, “The Bermuda market has once again displayed an ability to excel commercially through world class infrastructure, a robust regulatory framework, and by being a home for global talent. These three factors will ensure that Bermuda remains the ILS jurisdiction of choice and solidifies Bermuda’s reputation as the ‘World’s Risk Capital’.

“We are excited that once again, Aeolus Capital Management can engage in insightful discussions across the industry which promote sustainable investments that can provide resilience and help communities recover in the face of natural disasters.”

Andre Perez, Chairman and CEO of specialist ILS and reinsurance focused service provider the Nascent Group, added on the Convergence event, “This event is the reflection of Bermuda’s preeminence in the worldwide ILS market and the leadership of the island in terms of regulatory framework, the expertise of its local talent and the depth of its (re)insurance market.”

Kathleen Faries, CEO of Artex Capital Solutions, also commented that, “Bermuda’s world-class insurance linked securities market is where risk meets innovation and collaboration between investors and insurers thrives. The Island has solidified its position as global leader due to its ability to attract capital, remain resilient and uphold a robust regulatory environment. As a pioneer in the ILS industry, Artex continues to see success in Bermuda, underscoring our role in helping our clients find a better way to put capital to work in this asset class.”

Bermuda’s market remains a driving-force in ILS innovation and the convergence of reinsurance and capital markets.

With the need for efficient disaster risk financing capacity rising around the world all the time, the role of Bermuda’s reinsurance and ILS experts in marshalling and delivering investor capital to support the world’s catastrophe insurance and reinsurance needs will persist.

At the same time it will also expand, with innovation helping to make it possible for investors to access insurance risk-linked returns from a growing range of business classes, augmenting global reinsurance capacity, helping to narrow gaps in protection and making risk transfer sources more diverse, efficient, responsive and ultimately effective.

The world needs innovation like we have seen happen in Bermuda and beyond, to successfully develop ILS as an instrument and capacity source for absorbing shocks and critical risk exposures.

The ILS market’s role is growing in importance and we expect to see Bermuda maintain its key position in support of that.