Bermuda Stock Exchange (BSX) ILS & cat bond listings surpass $50bn

Record catastrophe bond and related insurance-linked securities (ILS) market issuance in 2021 has helped the Bermuda Stock Exchange (BSX) to increase the value its listings of cat bond and ILS notes by 26% during the year.

Thanks to another very active year and record issuance of catastrophe bonds in 2021, as our report documents, the Bermuda Stock Exchange’s (BSX) ILS specific listings, which consist of catastrophe bonds, mortgage insurance-linked securities (ILS), reinsurance sidecar notes and some listed ILS fund classes rose significantly to 757 listed ILS securities by the end of the year.

Even more impressive is the fact the BSX’s cat bond and ILS securities listings have now surpassed $50 billion, in terms of capital outstanding, for the first time.

It’s one of the biggest years of ILS listings growth for the BSX, as the record levels of cat bond issuance helped to drive the Exchange’s listings value much higher over the course of the year.

BSX Chief Compliance Officer James McKirdy explained to Artemis, “2021 was a positive year for the Exchange. The Insurance Linked Securities (ILS) market continued to grow, with the number of ILS securities listings increasing from 253 in 2020 to 281 in 2021, with a combined nominal value of $19.77 billion compared to $15.77 billion in 2020.”

281 new ILS securities being listed in a single year is a very impressive number and reflects the BSX’s continued importance as the home of ILS and cat bond listings.

So too is the $19.77 billion of newly listed ILS in 2021, which is a huge figure considering cat bonds plus mortgage ILS issuance only came to just over $20 billion during the year (there are some reinsurance sidecar notes included, of course).

Despite emerging ILS domiciles increasingly hosting some ILS and cat bond issuance activity, the BSX continues to dominate the Exchange listing of any insurance-linked securities (ILS) issued anywhere in the world.

For example, the BSX has the listing for the first catastrophe bond issued in Hong Kong and most of the cat bonds and ILS issued in Singapore are also listed in Bermuda.

That’s testament to the hard work and effort of the BSX team over the last decade, in engaging with the global ILS market and ensuring its listing offering is both simple to use, easily accessible and cost-effective for issuers and service providers.

Greg Wojciechowski, BSX President and Chief Executive Officer (CEO), commented to us in an interview, “Thanks to Bermuda’s early innovation in being an early mover in insurance-linked securities (ILS) and then its innovation, in terms of regulation and products offered, we’ve been able to play an important role in facilitating global ILS market growth.

“For around three-quarters of a century, Bermuda based insurance and reinsurance companies have provided important disaster risk capital to the world. Now, risk capital comes in many forms and from many sources and Bermuda has positioned itself as a safe conduit and custodian for risk transfer and re/insurance activities.

“Our success at the BSX is testament to Bermuda’s innovative nature and its commitment to create a centre of excellence for the creation, issuance, support and listing of ILS structures.  While the BSX listing regulations speak to international best practices for transparency and disclosure, the BSX team consistently strives to be commercial and engage with the market to support and nurture the continuing development and growth of ILS.

“At the BSX, we are delighted to continue to support the ILS asset class and we look forward to working closely with market participants as the ILS sector evolves”

As of the end of 2021, the BSX plays host to a very significant proportion of global ILS market activity.

If you consider that estimates of ILS, or alternative reinsurance, capital stand at somewhere between $90 billion and $100 billion, including any trapped ILS capital, the BSX is now home to well over half.

This is even more significant when you consider that so much of the ILS market’s activity is not even listed, being privately transacted, often bilaterally and without a requirement to have the resulting asset listed on an exchange.

With that in mind, it is safe to assume the BSX lists most of the ILS securities that currently have a listing.

Chief Compliance Officer James McKirdy provided some more visibility into the magnitude of the BSX’s position in ILS, saying that 2021 activity, “Represents growth of 11% year-over-year for ILS securities listed in the year and a 26% increase in nominal value listed.

“At the end of 2021, the total number of ILS-listed securities stood at 757, with a combined nominal value of $50.79 billion.”

That’s a very large figure, for what is still a niche market and the BSX has played a key role in supporting the needs of the ILS market through its development and growth.

We look forward to seeing the BSX continue to innovate its offering to ILS markets, as it seeks to add even more value.

BSX CEO Wojciechowski also commented on developments at the BSX in 2021, “It was a pivotal year for BSX and our team, with our core listing business ending the year at record levels despite the impact of COVID-19 on our ability to engage in traditional physical business development activity. BSX moved its administrative and commercial operations to a new location at Exchange House in Hamilton and implemented significant upgrades to the technology infrastructure as we continued the integration with our parent, Miami International Holdings, Inc.

“The BSX celebrated its 50th anniversary in 2021 and we believe we have built a foundation for our next 50 years of innovation and growth. What has become clear over the past year is that the change in how we work, where we work and disruptors such as digital assets and DeFi have been accelerated.

“Bermuda is positioning itself to become a global leader in climate risk finance solutions given its long history of providing catastrophic peril coverage through innovative vehicles such as ILS. The BSX will continue to play a critical role in this area as the leading Exchange for international listing services for ILS securities.”