The Bermuda Stock Exchange (BSX) has listed almost 100 more insurance-linked securities (ILS) and catastrophe bond tranches during the record-breaking issuance year of 2020, than it did in the prior year.
As a result, the BSX’s ILS specific listings, which are largely catastrophe bonds, mortgage insurance-linked securities (ILS), reinsurance sidecar notes and some listed ILS fund classes, soared to a total of 590 ILS listings by the end of 2020.
Catastrophe bond issuance hit record-levels in 2020, as we detailed in our recent report and having analysed the issuance we counted, versus its own listings, the Bermuda Stock Exchange (BSX) said it is now the the listings home for some 93% of the $46.4 billion of cat bond and ILS risk capital outstanding in our Deal Directory at the end of the year.
The BSX listed an incredible 253 ILS securities during 2020, almost 100 higher than the 155 listed in 2019.
This reflects the importance of Bermuda as a hub for ILS and collateralized reinsurance activity, but also the work the BSX has undertaken over the years to make it the most desirable location to list ILS or catastrophe bond securities on a regulated exchange.
BSX Chief Compliance Officer James McKirdy further explained, “2020 was indeed a challenging yet positive year for the Exchange. The Insurance Linked Securities (ILS) market continued to grow, with the number of ILS securities listings increasing from 155 in 2019 to 253 in 2020, with a combined nominal value of $15.77 billion. This represents growth of 63% year-over-year. At the end of 2020, the total number of ILS-listed securities stood at 590, with a combined nominal value of $43.01 billion.”
The BSX had a busy year in many areas of its operations, of which ILS is only one.
BSX President and Chief Executive Officer Greg Wojciechowski commented, “Benjamin Franklin once said, ‘Out of adversity comes opportunity.’ As the ‘World’s Risk Capital,’ Bermuda is familiar with this sentiment. For more than 70 years, Bermudacompanies have provided insurance coverage and paid claims for disasters around the world, thereby not only helping communities and businesses recover from adversity, but also providing resilience for the future. The COVID-19 pandemic has been no different. While there have been great challenges, there are new opportunities ahead for Bermuda and the BSX.
“In a year that included severe natural disasters from wildfires to hurricanes and the increasing impacts of climate change, the global community is now experiencing the social and financial impact of our changing world while adapting to an uncertain future. Bermuda will certainly play an important role in a rapidly changing world — especially in the global transfer of risk. The Bermuda market has seen an influx of new capital of between $12–$15 billion into the insurance and reinsurance market with prospects for a hardening market going forward. The BSX continues to be one of the important pieces in our marketplace that helps communities around the world recover from natural disasters and build resilience.”
Now, the BSX is looking at the relevance of insurance-linked securities (ILS) and reinsurance to Environmental Social and Governance (ESG) and intends to focus on this area through 2021.
Wojciechowski explained, “2020 was a busy and successful year for the Exchange despite the challenges resulting from the COVID-19 pandemic. We are also moving forward with a commitment to raising awareness of and producing guidelines for Environmental Social and Governance (ESG) principles on sustainability.
“ILS has been recognised as a sustainable investment in accordance with the United Nations’ Sustainable Development Goals (SDGs) due to its role in helping private and public organisations to build resistance and resilience to natural disasters and climate change.
“2020 was undoubtedly a challenging year shaped by a global health crisis and extreme volatility in financial markets and exchanges across the world. However, with several vaccines now being distributed to millions of people and economies gradually reopening, exchanges will continue to play a vital role in ensuring access to capital and liquidity. As we begin 2021, it will mark the 50th year in which the BSX has served our domestic capital market. We remain committed to our continued service and development of this sector for the next 50 years and beyond, all the while ensuring that the BSX remains the one of the world’s preeminent offshore securities exchanges and Bermuda the place where business happens.”