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Bermuda:Re+ILS Spring 2016

Spring 2016 Bermuda:Re/insurance+ILS 28 economies will follow the model of Europe or the US where insurance became increasingly important as discretional spending increased.” Bermuda has some natural advantages, he says. Its proximity to the region—in contrast with London, for example—makes it a natural destination for companies and insurers seeking expertise around risk as well as capacity. He adds that companies targeting the region need people on the ground—and they need to be the right people. “There are big cultural differences and in most countries the expertise is relatively tight-knit. International insurers need to fully understand the risks they are being presented with. “It is no different from entering any new marketplace or product line: you need to have a good understanding of local laws, do solid due diligence and most important, have the right people on the ground.” A long-term commitment is also benefi cial given the complexity that can exist in terms of getting premium out of the region. In many cases, a double front is needed to bring the premium to the capital provider in Bermuda, so good working relationships with trade partners is essential. “It can be complex and costly to extract the premium and place it in Bermuda. There are barriers to overcome and they all attract costs,” he says. A patchy landscape Kelly notes that many Bermuda players are already operating successfully in the region, which can be seen in the aftermath of some big losses such as the 2010 earthquake in Chile, for example. It is estimated that more than 40 percent of claims were covered by Bermuda-based reinsurers. In other countries, he says, many reinsurers feel there is great potential to cover similar scenarios but reinsurers are not able to participate as much as they might like. “We offer pretty good property coverage in places such as Argentina and Brazil but we could do more. I don’t think anyone feels they have cracked Brazil yet,” he says. There is an even bigger gulf between what companies could offer and what they are able to on the casualty side. “Many markets do not have the same concept of workers’ compensation and general liability business as you fi nd in more mature markets,” Kelly says. There are exceptions to this rule and markets including Mexico, Colombia and Chile are increasingly embracing more advanced risk transfer techniques, he says. A key focus of the BDA trade missions Kelly has participated in has been to build up awareness around the use of captives. While the concept is not yet widely used or accepted in the region, this is changing. Brokers in particular are embracing the idea of having something different to offer their clients. “There is a lot of competition between brokers and some insurance lines are pretty pricey,” he says. “This gives some brokers an edge— something different for their clients to consider. We are picking up some good leads on the back of this.” He names a number of lines that are well suited to captive insurance including construction, mining, trade risk and surety. “They have low loss ratios and would be suitable to place in a captive,” he says. Kelly adds that cyber is another line of business that is currently challenging not just Latin America but the whole world. This too could lead to business for Bermuda. “Where you have coverage that is diffi cult to place, a captive is not a bad place to start,” he says. “If Bermuda could get ahead of the curve on this it would be a potentially big business.” Whether it is for captives or an innovative solution and expertise relating to commercial insurance or reinsurance, he argues that Bermuda can take a leading role in engaging with the region. “Bermuda has the edge in a couple of ways. It has the expertise and the distribution channels as well as the proximity. Things don’t happen overnight, but Bermuda is a natural insurance partner for the region and I believe we will see good things happening in the long term.” �� Tom Kelly is the managing director of KPMG in Bermuda. He can be contacted at: thomaskelly@kpmg.bm “Things don’t happen overnight, but Bermuda is a natural insurance partner for the region and I believe we will see good things happening in the long term.”


Bermuda:Re+ILS Spring 2016
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