Elevating the economy on the shoulders of a supporting jurisdiction

21 Dec Elevating the economy on the shoulders of a supporting jurisdiction

John Huff, President and CEO, Association of Bermuda Insurers and Reinsurers (ABIR), values talent as the number one attribute setting Bermuda apart from its competitors

At the end of last year, Ministers of Finance across the world were taking stock of the true impact of the pandemic and the lockdown in their economies. How optimistic are you about the speed of Bermuda’s recovery and this year’s economic performance?

Bermuda is somewhat fortunate that we have two major pillars for the economy, one being tourism, which was devastated by the pandemic, and the other is our pillar, international business, primarily insurance and reinsurance. That pillar has been very strong for Bermuda. In fact, it has carried the economy through this storm, bearing most of the burden for the local budget. Jobs maintained and taxes paid. Our industry is very strong, and it has attracted international attention from investors, because there is a growing sense the industry is going into a harder market, particularly in the P&C side of business.

When it comes to insurance and reinsurance in particular, you have an unrivalled capacity and a wide choice of products. Diverse range of securities, expertise, special service providers and astute regulator, that understands the needs of the market better than any other. Can you provide your analysis on the dynamism of Bermuda’s insurance market to date?

These are the major themes that make our market so successful. One is the talent. In a very small geographical area, you have some of the best global talent in insurance and reinsurance, including people, who are able to see the innovation, agility and entrepreneurship necessary to keep this market best in the sector. We have a very responsive regulator, world-class internationally recognized Bermuda Monetary Authority, which is becoming more of a leader in the International Association of Insurance Supervisors. Our work is global, and our member companies are present in more than 150 countries. It is important that we work well with others and other jurisdictions, as are members go out to place product.

In your view, what are the main trends in the insurance and reinsurance market over the last 12 months, as we have seen that there are new entries into the general business property and casualty sector? What are the trends in this sector that have been going on in the last 12 months?

In the last 12 months, there has been certainly a flight to quality from the investor community. We have seen that from our own ABIR members that have ventured into the market quite successfully, showing real optimism about deploying additional capital against risk. Investors have ‘put their money where their mouth is’ and invested in these Bermuda companies. At the same time, we have also seen the ‘class of 2020’, start-up companies that have a different flavour than they had in other markets. There are some very experienced and seasoned executives, who have been in our market in previous companies, working now with private capital and investing communities.

When it comes to innovation in your sector, there is a lot of talk around the new insurance marketplace platform, the Digital Asset Business Act and the use of blockchain, acting as a catalyst for new approached in insurance. Can you describe your insights on the developing technology and regulatory innovations in the Bermudian and global marketplace?

We are very fortunate that the Bermuda Monetary Authority is the consolidated regulator for the international business community in Bermuda. As a result, they can see this technology through the regulatory sandboxes, where companies propose a new product or a new line of business. Equally important is the fact that the market is very cohesive. This is a very small island and leaders want to make sure that the best talent is here. The third area that I would raise is the fact that we have so many opportunities in Bermuda for growth in adjacent pillars. If we think about climate risk, for instance, we are a global leader in natural catastrophe risk transfer. This is a natural extension and bridge to climate risk finance. All the products, issues and regulations are going to come out of managing climate change. There are quite a few examples of these opportunities. Another one can be related to cyber, as our market is well-known for its versatility and adaptability towards innovation. The ‘chapters’ on cyber risk have not yet been written, but given the circumstances of competitiveness, Bermuda is posed to lead in that area as well.

What are some of the country’s biggest incentives to attract investors and other comparative and competitive advantages compared to other island economies?

First and foremost, it is about the talent. You will not find any place in the world with this level of talent per capita in the industry. Second, we have always enjoyed this wonderful proximity to markets, particularly the U.S. This proximity, when people start travelling again, will continue to be very important for Bermuda but even now in terms of business-friendly time zone. I have to congratulate the government, given that they have done an excellent job in containing COVID-19 on the island. They are one of the leading jurisdictions in testing, contact tracing, mask compliance and vaccinations. Bermuda is a place where you can feel safe, but always be cognisant of the risks of the global pandemic. Finally, the work of the Bermuda Monetary Authority has been exceptional with world-wide recognition of Bermuda’s regulatory regime to include Solvency II equivalence and the highest recognition from the U.S. as a reciprocal jurisdiction.

Where would you say that are the most interesting opportunities today for foreign investors in Bermuda?

I think that there is a great deal of interest on what we call ‘partner capital.’ In this case, traditional insurers and reinsurers, that have the rigor of compliance, governance and strong underwriting talent, seek ways to leverage those opportunities, using that alternative capital markets to create products for their customers.

What are the main existential challenges for Bermuda? How can the jurisdiction tackle these changing paradigms?

The greatest challenge for any market like Bermuda is the threat of protectionism, where countries and other jurisdictions look internally to solve all their problems, missing all the diversification opportunities available from an international re/insurance market. Protectionism can come in terms of tax, trade and regulation. In those areas, ABIR represents the industry collectively to educate and advocate to regulators, supervisors and policy makers the benefits of an open worldwide market promoting risk diversification for consumers, businesses and governments.

What is your view on the insurance opportunity in the form of understanding the risk associated with the global climate of urgency?

We see tremendous opportunities for the Bermuda and the international markets. A few decades ago, when the Florida market was trying to regroup after Hurricane Andrew, we found some very large carriers that were hesitant to commit to any significant changes, because of the financial and climate volatility. Bermuda reinsurers immediately brought in the analytics of how they could get into that market and bring some change, to keep products affordable and accessible for consumers. That model has been replicated many times since the 1990s and I think that it will continue to be refined to look at climate risk, not only for the insurance and reinsurance sectors, but for the economy at large.

What do you envision in terms of the implications for the economy and to the insurance industry of the Work from Bermuda Residential Certificate programme?

It is a great way to introduce people to Bermuda. If you have not travelled here before, you should try it. When people learn about the close proximity to the US, they tend to visit the country more than just for a long weekend. The proximity is a big driver. If you are going to be working online anyway, it would not hurt to be working from a quite a nice environment. The response from Bermudians has been wonderful. Our Airbnb and hotel networks have been responsive, providing many quality accommodations for people that are making that commitment, from a few weeks up to months or even a year.

What would be your final message towards our readers of Newsweek?

I think that the three major areas to watch coming out of Bermuda would be climate risk, cyber risk and the unrivalled, Bermuda capacity in the re/insurance market. If Bermuda decides to get behind a new area of risk in the future, they are going to have a meaningful impact.