SPI’s and ILS drive 2017 re/insurance registrations in Bermuda

by Artemis on March 1, 2018

Special purpose insurance (SPI) vehicle registrations in Bermuda rose by 41% year-on-year in 2017, as insurance-linked securities (ILS) related activity drove the number of insurance and reinsurance vehicles registered on the island to 58 for the year.

Bermuda - Photo from Americas Cup websiteAlongside the 58 registered insurance and reinsurance vehicles, Bermuda also saw 10 intermediaries registered in 2017 and again, ILS related activities drove a decent chunk of this activity.

ILS, alternative reinsurance capital and catastrophe bond business often dominates the registration of re/insurance entities, given the often limited use term of an ILS structure. But with ILS programs now able to issue multiple series across multiple years, the fact so many are registering in Bermuda suggests a bright future for this increasingly key industry on the island.

Bermuda Monetary Authority (BMA) statistics show that the 58 re/insurance and ILS vehicle registrations in 2017 was up considerably on the 42 registered in 2016, reflecting growth not just in the ILS and collateralized reinsurance market but also in other reinsurance related start-ups on the island.

At the same time as the number of vehicles grew, importantly they are also creating jobs for Bermuda, with risk sector companies responsible for 61 corresponding new jobs, including 20 in the long-term (life and annuity) sector, according to the Bermuda Business Development Agency (BDA).

“The BMA figures reaffirm Bermuda’s status as the ‘world’s risk capital’ and also underscore the breadth of our risk-solutions market, as well as the innovation and expertise that distinguish the island as a centre of excellence across each risk sector,” commented BDA CEO Ross Webber. “Most importantly, this trend, encouraged by our business-development efforts, is creating much-needed jobs that help fuel economic growth.”

During the year the registrations of new SPI’s helped to grow the ILS market and took the amount of insurance-linked listings on the Bermuda Stock Exchange (BSX) to a new high of $26 billion, a significant chunk of the market.

The 24 new SPI’s registered in the year was up 41% on the 17 registered in 2016, reflecting resurgent growth in the market despite the impact of the major losses in the third-quarter.

Alongside this, of the 10 intermediary licenses that the BMA handed out during 2017, at least half were definitely related to ILS vehicles and structures.

Greg Wojciechowski, BSX President and CEO, and ILS Bermuda Chair, commented on the ILS activity in Bermuda, “New ILS listings on the BSX totalled 103 securities for the year, with a nominal value of $11.54 billion. This represents annual growth of 69 percent in the number of new securities listed, and 87-percent growth in the nominal value.

“Bermuda’s global market share reached record levels of approximately 84 percent, cementing Bermuda’s continued position as leader in this innovative asset class. The devastating natural catastrophe events in 2017 demonstrated Bermuda’s resilience, tried-and-tested infrastructure, as well as expertise in the property and casualty space.”

Alongside the SPI specific ILS activity, there was evidence of the expansion of investor appetite for reinsurance related risks in 2017 as well, especially with the launch of Langhorne Re by RenaissanceRe and RGA, which will enable investors to access life risks in a structure similar to RenRe’s DaVinci vehicle.

Activity has continued into 2018 which again reflects the robustness of the sector following the major losses of 2017.

BDA Business Development Manager Jereme Ramsay explained, “So far this year, insurance registrations are already off to a solid start, with four new formations, including a captive, an SPI, a life company and small commercial insurer. 2017 was a strong year, and the first quarter of 2018 appears to be following suit. We’re optimistic for what’s to come.”

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