Bermuda at forefront of global reinsurance capital raising: Wightman, PwC

The Bermuda market is intrinsically involved in much of the successful capital raising going on in the global reinsurance sector, with the Class of 2020 well on the way to establishing itself, Arthur Wightman, PwC Territory and Insurance leader has said.

With the COVID-19 pandemic ongoing, the global insurance, reinsurance and insurance-linked securities (ILS) industry is evaluating a changed landscape and how they can best position themselves to be useful to society, as well as to ensure their own sustainability, relevance and growth.

PwC said that organisations across the sector are trying to determine the medium to long-term implications of the pandemic, the changes it will bring to their businesses and how to respond strategically to it.

Part of this is a focus on seizing opportunities in a market where rates are hardening, while also being able to serve the future needs of society with next-generation risk transfer products.

Capital is a key consideration and as-ever Bermuda finds itself at the heart of these discussions, strategic decisions and capital raising activities.

“Bermuda is at the forefront of global capital raising in the reinsurance sector with estimates of approximately $12 to $15 billion of new capital being deployed into the sector in the last several months,” explained Arthur Wightman, PwC Territory and Insurance leader.

“There have been 51 new insurer registrations in Bermuda this year through October, and the Class of 2020 is well on the way to establishing itself – not something that people thought we’d see again since 2005/2006.

“Bermuda has shown once again that it is the place to deploy capital efficiently and effectively and it is the place to innovate.

“The value proposition of the island is sometimes called into question, however the capital markets tend to act as the ultimate arbiter and the island continues to show its resilience as well as its leadership position globally for reinsurance, ILS, life reinsurance and captives.”

Bermuda based companies and companies with Bermuda underwriting operations are expanding their capital, which promises to bring an increasing amount of premiums into the insurance and reinsurance hub, while also securing the island increased relevance on the global stage.

Already a major hub for global catastrophe and specialty insurance or reinsurance, as well as being the center of insurance-linked securities (ILS) activity still, Bermuda now stands a chance to expand its remit on the global risk transfer stage.

The pandemic has heightened risk awareness and also aversion globally, especially among large corporates and investors, with many looking for solutions to financing their risks, or deriving new sources of returns, something Bermuda can assist with on both counts.

Growth is expected to be seen on multiple fronts, as a result.

“The opportunities for growth continue to be in covering natural catastrophes, more broadly – pandemic risk, as well as cyber – where the industry is only offering a fraction of the coverage that it probably needs to cover a proper systemic event, which we haven’t seen yet,” Wightman explained.

On COVID-19, Wightman commented that, “It’s primarily a public healthcare problem, but one with immense immediate implications for business, and for economic, fiscal, and monetary policy. And while the health crisis may be overcome in the short to medium-term, the wider issues have exacerbated five significant problems that existed before the crisis.

“At PwC we consider those problems to be (1) increasing wealth disparity and the erosion of the middle class (2) the pervasive nature of technology and its impact on individuals, society and the climate (3) age demographic pressures on business, social institutions and economies (4) breakdown in global consensus with growing nationalism and populism, and (5) declining confidence in the institutions that underpin society.”

Many of the capital raises we’ve reported on, both on the traditional reinsurance and also ILS sides of the market, have their roots in Bermuda as the base for the company raising funds, or the company has operations there.

As capital flows to quality underwriters of risk, as well as quality providers of risk-linked investment opportunities, Bermuda having specialisms in both stands to benefit from the ongoing attraction to re/insurance and ILS.