ILS market economic impact on Bermuda revealed in study: BDA

In total, insurance-linked securities (ILS) business in Bermuda generated $734 million into the domiciles economy in 2015, as the island saw a rise in ILS sector employment, according to a recent survey commissioned by the Bermuda Business Development Authority (BDA).

More than 400 jobs were generated in the Bermuda ILS and reinsurance convergence industry by the end of 2015, representing an increase of 30% on the previous year, reveals the study.

The BDA commissioned research reveals that in total, Bermuda experienced an overall economic impact of $734 million from Bermuda domiciled ILS funds, underlining the important role the risk transfer and fully collateralised reinsurance industry plays in the islands economy.

More than $100 million in payroll was generated by the expanding ILS space, and with Bermuda being one of the leading hubs for ILS and convergence business across the world, the BDA reveals that 9% of all people working in Bermuda’s internationally operational companies in 2015 worked in the ILS space.

“We commissioned this research to provide details on the economic impact of the ILS market on Bermuda—both actual jobs created and aggregate fiscal contribution,” said BDA Chief Executive Officer (CEO), Ross Webber.

The jobs included 209 people employed by 15 funds, combined with 188 roles with 25 firms that support ILS business directly, which includes the “Big Four” accounting firms and all of the top five brokerage firms, says the BDA.

“The results of the study are certainly positive, proving the convergence sector has quickly become a pivotal and multiplying contributor to Bermuda’s overall economic health. The study is not exhaustive, so data gleaned presents a picture of the minimum contribution,” continued Webber.

Interestingly, and underlining the impressive growth of ILS business in Bermuda in recent times, the BDA notes that prior to 2009 there were no ILS entities domiciled in the region.

“That year, in a move exemplary of the collaboration between government, industry and regulator, Bermuda introduced legislation allowing the creation of Special Purpose Insurers—specifically designed to attract ILS and collateralised insurance companies to the island.

“Since then, Bermuda has become the market leader and the recognised hub for this sort of innovation and product development,” said Webber.

According to the BDA the following are some of the key findings from the extensive study.

• 15 ILS funds employed 209 expert Bermudians and international workers in 2015, while ILS-related jobs within 25 support companies amounted to 188, including lawyers, accountants, brokers, and fund or insurance services
• ILS-related employees represented 9% of all people working in Bermuda’s globally operating entities and accounted for over $100 million in payroll
• Bermuda is the most popular jurisdiction to create ILS fund managers, with 38% of fund assets managed by managers with head offices in the region
• Roughly 9% of total assets under management is managed by funds from other areas with subsidiary offices set up in Bermuda for direct access to reinsurance
• In total, 36 Bermuda-based ILS deals were issued over 12 months in 2015

Greg Wojciechowski, CEO of the Bermuda Stock Exchange (BSX) and Head of ILS Bermuda said, “Bermuda’s ILS sector has always been highly collaborative, bringing together our regulator with industry both here and overseas with a focus on making the jurisdiction a centre of excellence for creation of ILS structures and servicing and listing of transactions.”

“This report crystallises the success of those efforts and illustrates Bermuda’s strengths, its innovative nature and importance to domestic and global clients.

In total, 24 ILS companies out of the 34 registered in Bermuda took part in the study, and the research identified three important, key pillars, being ILS fund managers and funds, ILS assets, and service providers that work with both, explains the BDA.

“The data directly reflects the work that’s been done to provide an efficient and sophisticated commercial platform for products and services in the convergence space. It says a lot about Bermuda’s capability as a jurisdiction and underscores the unique set of variables that must be present and have come together in Bermuda to support this evolutionary force in the reinsurance sector,” continued Wojciechowski.

According to the results, participants are confident on the future prospects of the ILS space and see ample opportunity from new products that ILS funds could access.

Furthermore, participants ranked Bermuda’s ILS market as the top jurisdiction, with London and Zurich sharing second place.

“The findings provide a benchmark to track Bermuda’s performance, compare against competing jurisdictions, and also market the sector and its impressive intellectual capital. We’d like to thank our industry group that met last fall, and the wider ILS community who participated in the study,” said BDA Business Development Manager, Jereme Ramsay.

The full survey report can be downloaded here (PDF format).