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Bermuda:Re+ILS Spring 2016

27 Spring 2016 Bermuda:Re/insurance+ILS LIGHTSPRING / SHUTTERSTOCK.COM Bermuda’s success in securing Solvency II equivalence will give it an edge when competing for business in countries including many in Latin America, where some regulators will be embracing similar solvency-based regimes. That is the view of Tom Kelly, managing director at KPMG in Bermuda. He notes that many of the opportunities that have presented themselves for international re/insurers in Bermuda have historically been driven by regulatory changes in these markets. It is not unreasonable to expect a similar outcome from Latin America as Solvency II-type regimes are put into place. “Legislative change has often been the driver of opportunities for international players as this has led to markets opening up,” he explains. “I anticipate that, as regulators across the region embrace Solvency II or similar principles, this will again mean opportunities. “Many local insurers will likely either require more capital or see other forms of capital relief such as reinsurance. The fact that Bermuda-based players are also regulated by a regime regarded as equivalent to Solvency II will help them gain better footholds in certain regions.” First-hand experience Kelly has travelled extensively to Latin America in recent years, often with trade missions organised by the Bermuda Business Development Authority (BDA). He says there is a growing interest in the region, particularly from brokers, around expanding and extending their array of risk transfer techniques to offer clients more versatile insurance solutions. “It is quite pleasing to hear that Bermuda is widely recognised as a place for innovative solutions,” he says. It is difficult to generalise, he adds. Each country in Latin America presents its own unique mixture of opportunity and risk. While countries such as Mexico and Colombia are relatively developed and sophisticated in their approach to risk transfer, many other countries have potential but are less developed, with much depending on the nature of the regulatory regime. The strength of the broker network is also pivotal to the development of insurance solutions in each region. A long-term strategy and approach to the region is essential, he says, noting that the likes of XL, ACE and AIG have been operating in Latin America for many decades already—and very consistently. In contrast, other players have been more opportunistic, moving in when there have been opportunities in specific lines such as propertycatastrophe business but withdrawing again, when markets soften. “It should be a long-term proposition based on solid research and the belief that your upfront investment of both capital and time will pay dividends,” Kelly says. “You really need a belief in the long-term macroeconomics of the region. You need to believe it will continue to grow and its As the Latin American markets develop and seek increasingly sophisticated risk transfer solutions, Bermuda’s re/insurers should be in pole position to benefit, Tom Kelly at KPMG in Bermuda tells Bermuda:Re+ILS


Bermuda:Re+ILS Spring 2016
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