No longer alternative. ILS a partner to re/insurance: Bermuda Convergence

At the ILS Bermuda Convergence 2017 event held this week, industry leaders explained the vital role that insurance-linked securities (ILS) and collateralized sources of reinsurance play in global risk transfer markets, seeing it as a partner to the traditional forms of protection.

Held each year in Bermuda, the Convergence event brings together industry thought-leaders. In 2017 the discussion behind the scenes is all about the industry’s response to recent loss events and how it is managing its claims.

The test provided by the recent tragic impacts of severe hurricanes and earthquakes is the biggest that the ILS sector has faced. But the asset class is providing its capital support to insurer and reinsurer partners, which has helped the risk transfer sector to manage the burden of catastrophe losses more efficiently.

Ross Webber, CEO of the Bermuda Business Development Agency, said it best; “We’ve witnessed Bermuda’s ILS sector go from strength to strength in the global risk sphere, and what was once considered ‘alternative’ is now embraced as a ‘partner market’.”

The ILS sector has truly converged, as Greg Wojciechowski, ILS Bermuda Chairman and President and CEO of the Bermuda Stock Exchange (BSX), said in his welcome speech.

“During these uncertain times, Bermuda’s position as the ‘World’s Risk Capital’ and our ability to continue to provide a solid commercial platform supported by world class infrastructure and a well-respected regulatory framework, contributes directly to Bermuda’s position as a centre of excellence for the creation, support and listing of Insurance Linked Securities vehicles,” Wojciechowski commented.

Kathleen Faries, Deputy Chair of ILS Bermuda Ltd., and Head of Bermuda Branch at reinsurance firm Tokio Millennium Re AG, added; “Bermuda’s intellectual capital and capabilities continue to enable the robust and efficient transfer of risk to capital.”

The ILS market has responded well to recent catastrophe events, with claims being paid out quickly and ILS fund managers all working to ensure continuity for their clients and their investor base.

Opportunities are emerging and the likely outcome would seem to be further growth of the ILS market and the entry of more capacity from the capital markets. All attendees we have spoken with at the event in Bermuda have expressed an expectation that the ILS market comes out of these losses as a larger, more proven and tested solution for risk transfer, with ILS capacity likely much greater as well.

Matt Ball, Director, ILS Consulting Practice at Willis Towers Watson in Bermuda, commented; “Over the last month, as the industry has been tested with significant events, it is good to know that the continued growth in alternative capital over the last few years has increased the industry’s ability to respond.”

Attending and sponsoring the event, Tom Johansmeyer, AVP at Property Claim Services (PCS), said; “Our clients here provide significant support to risk-bearers worldwide. ‘Convergence’ isn’t just a notion of capital. For PCS, it also represents the converging of our clients across the risk and capital supply chain on a foundational jurisdiction.”

As the capital markets converged with insurance and reinsurance the effect had been to make capacity more readily available, efficient and the market cycle has now changed. Ultimately insurance protection is now more accessible and efficient than ever before, a trend that is set to continue as ILS expands its remit even further in years to come.

Bermuda remains at the heart of these trends, is a home to a significant portion of the reinsurance and ILS market, and continues to drive innovation in risk transfer and ILS.