Hamilton, Bermuda
28 January 2015
Reporter: Stephen Durham

Bermuda to fight for title of ILS domicile of choice


Bermuda was the domicile of choice for 57 percent of insurance-linked securities (ILS) during 2014.

From a standing start in 2009, the island’s ILS sector has grown exponentially, with nearly $16 billion listed on the Bermuda Stock Exchange (BSX) at the end of 2014.

With the value of ILS reaching record levels in 2014, BSX president and CEO Greg Wojciechowski claimed a number of other jurisdictions are trying to win more market share.

As a result, Bermuda is facing strong competition from newcomers such as Malta, Gibraltar and Puerto Rico, 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.

In a banner year for the ILS sector, the BSX saw a 5 percent increase in its ILS listings from 77 in 2013 to 118 in 2014. Meanwhile, the value of these securities grew to $15.91 billion from $9.71 billion from the same period in 2013.

“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 collateralised reinsurance vehicles,” said Wojciechowski.

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.

Brad Adderley, partner at Appleby (Bermuda), commented: “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 centre of excellence and the jurisdiction of choice for the ILS market.”

According to Aon Benfield Securities, $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 collateralised reinsurance capacity put to work (reaching $36.2 billion by 30 June 2014), which was up approximately 23 percent from the $29.4 billion seen a year earlier.

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

“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,” said Paul Schultz, the CEO of Aon Benfield Securities.

“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.”

Bermuda will host its third ILS Bermuda Convergence in 2015. The event brings together leaders from the alternative reinsurance, convergence and the ILS marketplace.

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