Bermuda’s continued leadership within the insurance-linked securities (ILS) and reinsurance markets was a topic of discussion at the ILS Bermuda Convergence conference today, with the island’s ability to stay ahead, through its reputation for adaptability, collaboration and foresight, highlighted as key.
Moderator of the session, Richard Lowther, Managing Partner at Integral ILS, an independent alternative investment manager focused on natural catastrophe insurance and reinsurance investments, asked the panellists what is going to keep Bermuda at the forefront of the ILS and the re/insurance markets going forward?
Kathleen Reardon, CEO at Hiscox Re & ILS, commented: “I definitely echo that the Bermuda environment has a lot of attractive qualities: the forward-looking regulator, the infrastructure and the talent here is fantastic.
“What we need to do is consistently engage with the regulators. We do need to keep evolving, just as we’ve done from the captive market into excess casualty, into cat and into ILS. We have a great track record of success there. I think what we want to focus on more is digital infrastructure. We do need to keep up with other hubs that are probably further along than we are in areas like AI. So, that will be an area to focus on.”
Reardon also stressed that talent is another key area that Bermuda needs to continue to focus on.
“Ultimately, talent is another key thing to focus on. We’re currently going through another ‘war for talent,’ and we do this every couple of cycles. We have homegrown talent and talent brought in from overseas but nurturing that talent and making sure they’re constantly learning is important.”
Building on that theme, Jessica Laird, CEO at Nephila Capital, one of the world’s largest and longest-standing ILS managers, shared a similar view, emphasizing innovation as a key driver of progress.
“I think innovation is born out of a need. There’s a need for something, how are you filling a value gap, and that’s challenge to allow us to build something new and think differently about how to solve a problems,” she explained.
“I think where the market’s at right now is just with the quality of insurance portfolios have been re-underwritten and are in a healthier state in terms of the quality, terms and conditions, and attachment points. We understand risk better; we’ve got greater confidence in terms of how insurers are managing certain perils. There’s just greater confidence in that risk assessment which allows us to be more creative in terms of the solutions we offer. The solution for one counterparty may be very different from that for another. So, figuring out the value proposition is key, and all of that is really underpinned by people,” Laird explained.
She continued: “For us, there’s a large focus and investment in how AI can do that. AI isn’t here to do our jobs for us, but it can help us think more broadly, brainstorm more creatively, come up with different solutions and try new things.
“So, how can I make someone’s job more interesting, how can it make the place that you work more interesting, so you that you’re compelled and pushed out of your boundaries and limitations that your used to working and build a new path forward.
“I think there’s a lot with AI, tech and tools that allows us to attract more people that create new solutions and innovation which is really the draw to bring people into Bermuda and provide worthwhile solutions for cedents and a great place for capital to be deployed.”
Steve Velotti, CEO & CIO at Pillar Capital Management, the Bermuda-based specialist collateralized reinsurance and ILS investment manager, acknowledged that AI has its place in the sector.
“AI has its place. For example, a PM isn’t going to go through 10 million houses in a portfolio and try to analyse that from last year. You can get the machine to do that and create a summary of some of the changes. In the middle, you have the broker in there. Some investors ask about an efficient frontier in reinsurance. It’s not an efficient market because there’s too many human interactions that kind of muddy up the process for good and for bad, so AI will probably not replace that.”
While Velotti outlined AI’s practical but limited role, Brian Duperreault, Executive Chairman at Cedar Trace, shifted the conversation back to Bermuda, and addressed the challenges centered around the cost and competition for talent.
“I’ve seen this place (Bermuda) a lot over 30 years, and it is really a great pool of talent. It’s an expensive place to do business, so we have to continue to address that. Talent is expensive. If ILS is going to get into these other lines, they’re going to have to get the talent to do it. So, that’s going to be demand for housing underwriters, cyber underwriters and going into the into the cyber world,” Duperreault said.
“So, you can see the issue of this push and pull of ‘I need the talent, talent is expensive, where are we going to put them’? That has to be continually addressed. It’s been addressed over the last 30 years. I expect it will be, but it isn’t just snap a finger and you can create something new here. There’s a lot of work around that you have to think through,” he concluded.
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