Expect more alternative capital deployment in Bermuda: Ross Webber, BDA

by Artemis on April 10, 2015

An interesting few years lies ahead for the global reinsurance market as capital continues to enter the space from varied sources using diverse deployment methods, according to Ross Webber, Chief Executive Officer (CEO) of the Bermuda Business Development Agency (BDA).

Speaking to A.M. BestTV earlier this year at the 2015 SIFMA event in New York, Webber discussed the types of new capital that is persistently entering the reinsurance sector, the drivers for the growth of alternative capital and what this means for the market’s future.

Regarding the influx of alternative or third-party reinsurance capital coming to Bermuda, Webber said; “Part of the reason for that is back in 2009 the Bermuda Monetary Authority (BMA) put forward the special purpose insurers act, and regulations that went with it, that helped set the platform for a wide variety of ILS structures and special purpose insurers.”

This was in fact an amendment made by the BMA to the Insurance Act 1978, in response to the improved sophistication of the insurance-linked securities (ILS) market.

Webber also attributes the convergence of risk transfer products in Bermuda to the “natural nexus between the risk and insurance platform that’s been developed in Bermuda over multiple decades, and the asset management platform that is already there.”

The Bermuda market domiciles a broad range of capital, including sidecars, catastrophe bonds and increasingly, various collateralized reinsurance ventures.

Webber remarked that one of the more frequent sources of new alternative capital that continues to enter Bermuda comes in the form of collateralized reinsurance, as a host of asset managers search for similar success as seen with Nephila Capital and Third Point Re.

“We’re also seeing others of the world’s leading asset managers, the likes of KKR, Blackrock, Blackstone etcetera, working together with the world’s leading reinsurers to form more of these collateralized re,” Webber explained.

Partnerships, mergers and acquisition (M&A) deals and the establishment of new, innovative risk transfer structures can flourish in the current market conditions, as executives continue to search for ways of successfully navigating a tough environment.

For BDA’s Webber the future of the market is going to be “interesting,” as the organisation expects to see further consolidation in the Bermuda reinsurance space.

Webber concluded; “I very strongly expects to see the use of third-party capital being deployed an awful lot more in our jurisdiction.”

Should this prediction happen, it would surely help to alleviate some of the pressures on the wider, global reinsurance market.

And if the capital is put to work in less developed regions of the world, like Asia and Latin America, it can help raise the insurance penetration levels for these countries, ultimately bridging the gap between annual global insured and economic losses from natural disasters.

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