“The island of Bermuda feels alive and open for business.”
The advent of independent wholesale distribution in Bermuda should
change that, through the introduction of new technologies. By trading
electronically, a carrier in Bermuda can now see a great deal more
relevant business, and assume a much larger and more diversified book
as a result, without absorbing the enormous costs of engaging and
housing an enlarged underwriting team. The Bermudian government
has done a very good job of selling the Island’s technology message;
we need now to embrace those technologies. It will then be our job to
keep selling, and to sell hard to independent clients everywhere, not
just in the US but in Latin America, Europe, and even in Asia. We need
to explain that their risks can and will find an excellent home here, and
that they can be delivered almost effortlessly.
Behind this lies another opportunity, one which takes advantage
of the desire for capital—and particularly for alternative capital—
to get closer to the insurance market’s original customers and their
risks. Many major retail brokers and wholesalers have built managing
general agent (MGA) platforms with appropriate local licensing. Only
rarely do Bermuda markets supply their capital to such underwriting
operations, despite the real opportunity that exists, especially with
Bermuda’s expertise in convergence capital.
A huge, largely untapped opportunity lies in tripartite partnerships:
traditional carriers take advantage by lending their risk expertise to
alternative capital suppliers, perhaps through sidecar relationships,
to support MGAs in selected classes of short-tail speciality risk. That
would remove a significant share of the existing distribution chain’s
burdensome acquisition costs, to reserve more premium for risk.
Such opportunities will appeal to Bermuda’s underwriters during
the current hardening market, since they face a challenge to balance
their risk exposures. Embracing new classes and sources will support
efforts to build sustainability and eliminate the costly ebb and flow
of business to and from Bermuda. An open approach backed by a
small number of independent brokers will be good for clients and
markets, and for Bermuda as a whole.
The island of Bermuda feels alive and open for business. Meanwhile,
customers around the world seek greater choice. The recently landed
independent brokers are well placed to champion Bermuda as an
alternative, and to build innovative new channels that cost-effectively
feed quality risk to Bermuda capital—conventional and convergent.
Doing so will help to create an island ecosystem that is sustainable in
the long term and welcomes the world.
Chris Bonard is chief executive officer of Ed Broking—Bermuda. He can
be contacted at: email@example.com
now very heavily skewed towards reinsurance and retrocession business,
particularly for natural catastrophe business. The largest brokers play a
very important role in the production of this business, but they are not
the only possible source. To create sustainability, Bermuda must embrace
additional distribution through independent wholesale brokers.
The US, Bermuda’s main source of original risk, is occupied by a wealth
of independent brokers. They may be focused on wholesale, retail, or
reinsurance risks. Most have visited our island, but left when they found
that independent distribution was largely lacking. Few returned.
That is beginning to change. Ed is not the only independent
wholesale broker to set up shop in Bermuda in recent months; several
have made a genuine investment here. That is extremely positive news
for the market’s risk carriers, since these new arrivals create channels
for the independent distribution of risks originating with independent
intermediaries in the US and further afield. In other words, six months
ago an independent broker who needed Bermuda also needed to
engage a competitor to place it. Now they do not.
Through this new channel, a broad range of business from nonaligned
sources can now reach Bermuda under any market conditions,
not just during times of global market stress. But to bring in business
in the face of competition, Bermuda needs to sell itself to independent
distributors much more intently. The market has fantastic levels of
service, enormous expertise, enviable claims performance, a track record
of longevity, Solvency II equivalence, and a strong and dedicated capital
base deployed in part by almost all of the world’s major carriers.
Seeing the benefits
Bermuda should already be an easy sell, but we need to do more to
make independent re/insurance distributors in the US and elsewhere
understand all its benefits and see Bermuda for what it is. As an
independent wholesaler, we will be playing an important role in that
job of persuasion and edification. We will ensure that we present
Bermuda to clients around the world as a long-term, stable market
with a broad and deep risk appetite.
To make Bermudian carriers even more attractive, and make the
most of our opportunities, we will have to improve our market’s
trading infrastructure even further. Everyone is aware that Bermuda
is an expensive place to set up and operate a business. Because of that,
markets underwriting traditional property business have focused on
the higher excess layers of the Fortune 1000. That is understandable,
since it is difficult to build cost-effective capability to accept middlemarket
business. As a result, producers think only of sending the very
largest risks to Bermuda, and then only when they could not be placed
domestically, either in the London market or with the Europeans.