Bermuda Stock Exchange doubles insurance-linked securities (ILS) listings in under a year

by Artemis on July 19, 2012

Back in mid-September of 2011 the Bermuda Stock Exchange (BSX) had just taken the volume of insurance-linked securities and catastrophe bonds listed on the exchange to over the $2 billion mark for the first time, as we wrote here. By January of 2012 they broke that record and cleared $3 billion of ILS listings. Now they have hit another landmark, as their listings have now hit just under $4.7 billion. This means they’ve more than doubled the volume of listings in less than one year, very impressive growth.

The latest cat bond to list on the BSX is the recently completed Queen Street VI Re deal from Munich Re which listed this week taking the total volume of ILS listed on the exchange to $4.688 billion. That total includes the two specialist exchange traded fund classes of shares of the CATCo Reinsurance Opportunities Fund which amount to $338m but are slightly different listings to the typical ILS and cat bonds we cover on Artemis. If we subtract them it leaves the BSX with $4.35 billion of catastrophe bond notes listed on the exchange, an impressive percentage of the total cat bond market. The volume of listings is set to rise further in the next week or two as the latest Embarcadero Re cat bond will no doubt be listed on the BSX once it has completed.

You can see a list of all of the catastrophe bonds and ILS currently listed on the BSX at the bottom of this article.

We felt this milestone, of more than doubling the volume of ILS on the exchange in under a year and getting ever nearer to the $5 billion mark, deserved a discussion with Greg Wojciechowski, President and CEO of the BSX. Greg’s comments follow below.

The BSX is delighted with the progress it has made to date in supporting the continued growth and deepening of the international insurance linked securities market.  We began offering securities exchange support to the ILS space much later that others and are pleased and very grateful to the market for the commercial support it has shown not only to the BSX but to Bermuda as a jurisdiction for the incorporation of new structures.

When we embarked on providing stock exchange support for the ILS market, we felt strongly and still do, that Bermuda makes intuitive sense as a centre or platform to assist in driving the acceleration of the convergence of the insurance and capital markets.

To us it was intuitive as many if not all of the key components of the infrastructure or “plumbing” of the industry have existed and have been operating in Bermuda for many years if not decades.

Bermuda has been in the reinsurance industry for over three decades and as a result has become a leader in the global insurance and reinsurance space and has developed an excellent global reputation in respect of its products, services and solutions.

As a result of this longevity, a sophisticated and respected support infrastructure has developed in Bermuda.  Whether, for example,  it is legal and financial entities that support the creation and ongoing operations of insurance entities or a regulator that understands and balances commercial needs with ensuring that a regulatory environment exists so that companies operate within a framework that meets international standards or a fully deployed securities market which is  internationally recognized and  a full member of the World Federation of Exchanges, the support platform for the insurance and reinsurance industry in Bermuda is unique and unparalleled.

It is based on these years of experience that Bermuda undertook to support the insurance linked securities market and its development.

In 2009, following consultation with the market, the Bermuda Monetary Authority made changes to streamline the process of incorporating a Special Purpose Insurer, a key component of an ILS transaction, which was received positively by the market.  The direct result was an increase in new ILS incorporations in Bermuda.

At the same time, the BSX began actively reaching out to lend its support to the market by providing stock exchange and listing services, which investors on the buy side found to be of value, thus directly contributing to the very deliberate growth that we have experienced over the last three years.

The BSX sees the ILS space as an asset class positioned for further growth.  Our belief is not only driven by the many positive comments in this regard that have been made publicly by market leaders in this space, but from our experience in respect of how a market reacts when structure is added, transparency is embraced and efficiencies are created.

To say that we have been pleased with the progress the BSX has seen to date is an understatement.  We are grateful to the market in supporting our efforts and will continue to work with the market to further develop the ILS space.

ILS and catastrophe bonds currently listed on the Bermuda Stock Exchange

Issuer Cedent Risks / Perils covered Size
Queen Street VI Re Ltd. Munich Re U.S. hurricane, European windstorm $100m
Everglades Re Ltd. (Series 2012-1) Citizens Property Insurance Florida hurricanes $750m
Blue Danube Ltd. (Series 2012-1) Allianz Argos 14 GmbH U.S. hurricane, U.S. earthquake, Canada earthquake, Caribbean hurricane, Mexico hurricane $240m
Queen Street V Re Ltd. Munich Re U.S. hurricane, European windstorm $75m
Embarcadero Re Ltd. (Series 2012-1) California Earthquake Authority California earthquake $150m
Tramline Re Ltd. (Series 2011-1) Amlin AG U.S. hurricane, U.S. earthquake, European windstorm $150m
Golden State Re Ltd. (Series 2011-1) California State Compensation Insurance Fund Workers compensation claims resulting from California earthquakes $200m
Compass Re Ltd. (Series 2011-1) National Union Fire Insurance Co. of Pittsburgh U.S. hurricane, U.S. earthquake $575m
Queen Street IV Capital Ltd. Munich Re U.S hurricane, European windstorm $100m
Embarcadero Re Ltd. (Series 2011-1) California Earthquake Authority California earthquake $150m
Queen Street III Capital Ltd. Munich Re European windstorm $150m
Queen Street II Capital Ltd. Munich Re U.S. hurricane, European windstorm $100m
Montana Re Ltd. (Series 2010-1) Flagstone Re U.S. hurricane, U.S. earthquake, European windstorm, Japan typhoon, Japan earthquake $210m
Lodestone Re Ltd. (Series 2010-2) Chartis U.S. hurricane, U.S. earthquake $450m
Lodestone Re Ltd. (Series 2010-1) Chartis U.S. hurricane, U.S. earthquake $425m
Merna Reinsurance II Ltd. State Farm U.S. earthquake $350m
Montana Re Ltd. (Series 2009-1) Flagstone Re U.S. hurricane, U.S. Earthquake $175m

Total catastrophe bonds and insurance-linked securities: $4.35 billion

CATCo Reinsurance Opportunities Fund – Ordinary Shares $87m
CATCo Reinsurance Opportunities Fund – Class C Shares $251m

Total CATCo Reinsurance Opportunities Fund share classes: $338m

Total insurance-linked listings on the BSX currently: $4.688 billion

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