Bermuda States It Will Fight to Remain Top Domicile for ILS

January 28, 2015

The Bermuda Stock Exchange (BSX) has issued a lengthy defense of its primary position as the “domicile of choice” for insurance linked securities (ILS); pointing out that 57 percent of such securities issued in 2014 were handled on the island, and that it is “committed to retaining its top position for the creation, listing and servicing of the vehicles in 2015.”

The BSX noted that “Bermuda was an early leader in embracing and supporting the ILS asset class by creating the right environment for the vehicles to thrive – and from a standing start in 2009 has grown to be the leading global domicile for ILS with nearly $16 billion listed on the Bermuda Stock Exchange (BSX) at the end of 2014.”

Such a success, however, has spawned competition, as other jurisdictions realize that Bermuda has had such a head start. According to BSX President and CEO Greg Wojciechowski, “Bermuda must continue to innovate to remain ahead of the curve and retain its position as the premier ILS domicile in the world.”

He also stated that as more jurisdictions recognize that the value of ILS reached record levels in 2014, they “are trying to win more market share. ” He said Bermuda is facing strong competition from newcomers such as Malta, Gibraltar and Puerto Rico that are targeting ILS, as well as from the more established players such as the Cayman Islands, Guernsey and Dublin.

Wojciechowski said that the record level of ILS listings on the BSX in 2014 underscored the island’s position as the premier jurisdiction in the world for the setup, listing and support of ILS structures.

The Bermuda Stock Exchange broke ILS records last year as it listed more than $15 billion in securities for the first time, which the announcement described as a “banner year for the ILS sector.” Listings increased by 53 percent from 77 in 2013 to 118 in 2014, further cementing its position as the jurisdiction of choice for ILS structures. Meanwhile, the value of these securities grew to $15.91 billion from $9.71 billion from the same period last year.

“Bermuda has proven time and again to be an innovative environment that encourages the growth of all forms of ILS – from catastrophe bonds to sidecars and collateralized reinsurance vehicles,” said Wojciechowski, claiming the island has “nimbly responded” to changes in the industry to offer clients olutions for their commercial needs.

“The jurisdiction has positioned itself at the forefront of the global development of the ILS asset class and the outstanding amount of ILS issued in Bermuda represents 57 percent of the worldwide stock of ILS,” he added.

In October 2009, the Bermuda Monetary Authority amended existing insurance legislation and brought in new standards for insurers, making the setup of special purpose vehicles a more straight forward process.

“The regulatory framework and the operational infrastructure in Bermuda offers institutional investors a level of comfort that no other jurisdiction can provide. The Island’s deep experience and longevity in supporting the ILS sector has contributed to Bermuda becoming a center of excellence and the jurisdiction of choice for the ILS market,” said Brad Adderley, Partner at Appleby (Bermuda) Ltd.

The bulletin also indicated that the island has “developed ancillary businesses and specialized service providers that can further support the growth of the ILS asset class – such as accountants, attorneys, fund structures and investors. This is further fortified by respected regulators in the Bermuda Monetary Authority and the BSX.”

“This cottage industry has been cultivated from Bermuda’s experience in the reinsurance industry that has evolved to support the ILS sector,” Wojciechowski added. “This existing foundation makes Bermuda the intuitive place to list ILS structures.”

The bulletin cited Aon Benfield Securities’ report that $8.03 billion of property catastrophe bonds were issued in 2014 – the highest ever figure in the history of the sector. In addition, there has been a record amount of collateralized reinsurance capacity put to work – reaching $36.2 billion at 30 June 2014, which was up approximately 23 percent from the $29.4 billion seen a year earlier.

As of 31 December, 2014, there were a total of 762 securities listed on the BSX. Included in the new listings in 2014 were several additional variable rate notes and programs from Alamo Re, Azora Re, Citrus Re, Gator Re, Golden State Re II, Kilimanjaro Re, Kizuna Re II and URSA Re.”

The bulletin cited remarks by Aon Benfield Securities CEO Paul Schultz that “maintaining liquidity in the ILS sector is hugely important to sustaining this growth, and in this regard the BSX has since 2009 been very helpful. The listing of catastrophe bonds on the BSX has become an efficient, well regulated process, and the exchange has proved itself in being able to house the expertise necessary to satisfy the demands both of our clients and ILS investors.”

The island will host the third ILS Bermuda Convergence in 2015. The event is a two-day networking event for leaders from the alternative reinsurance, convergence and the ILS marketplace.

Source: Bermuda Stock Exchange (BSX)

Was this article valuable?

Here are more articles you may enjoy.