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Bermuda, Global Insurance Capital
By David Fox, Bermuda Insurance Development Council (IDC)
 Almost anywhere in the world, people seem to pose the same question to travelling businesspeople from Bermuda: “Why would anyone leave paradise to come here?” How do you answer that? Whether it is in New York, London, Bahrain, Miami, Glasgow or Barcelona, it’s always the same: “Tourism must be your major industry,” they say. Most are surprised to find out that international business is the principal foreign exchange earner, and that insurance is not only a big player on the island — but that the island’s insurance industry is a big player in the world.
It is astounding that so much of the world’s risk capital — money set aside by corporations and insurance companies to pay premiums and by reinsurers to ultimately pay claims — is touched by Bermuda companies. Equally surprising is the total of insurance and reinsurance risks assumed by a business community in the one-square-mile City of Hamilton on a mere 21-square-mile North Atlantic Ocean destination.
This old and venerable British territory has a trio of risk-taking industries: the leading captive insurance market to allow corporations more efficiency in retaining and financing risk; a thriving commercial insurance market that provides leading corporations creative and much-needed alternatives with regard to laying off high-level specialty risks; and a reinsurance community that shares the risk load for the world’s insurance companies.
Bermuda’s emergence as an insurance capital was a natural progression, and Bermudians know that as much as it came as a blessing, it is highly contributory to the current affluence of Bermuda. It was the development of the captive insurance industry in the 1960s and ’70s that started it all. By the mid-1980s, ACE Ltd and XL Capital had been formed and now have grown into truly global, diversified insurers. They were followed by the creation of several highly capitalised reinsurers in the ’90s and more insurers and reinsurers in 2002 and 2005.
The Association of Bermuda Insurers and Reinsurers (abir.bm) has a membership of 23 Bermuda domiciled insurers and reinsurers out of a total of nearly 1,000 Bermuda insurance entities — mostly captives and other managed entities. These 23 alone write nearly $61 billion in global premium and employ nearly 16,000 people in the United States, 1,800 in Bermuda and more than 31,000 worldwide.
Overall, Bermuda’s reinsurers paid nearly 30 percent of the insured losses from 2005 Hurricanes Katrina, Rita and Wilma — some $22 billion to rebuild the U.S. Gulf and Florida coasts after the hurricane seasons of 2004 and 2005.
Bermuda’s carriers provide more than 60 percent of the hurricane reinsurance in Florida and Texas, and an estimated 40 percent of all U.S. property catastrophe reinsurance capacity. They provide up to one-third of U.S. crop reinsurance in key states, and support 25 percent of the U.S. medical liability insurance and reinsurance market.
These companies generate income from more than 100 countries, write 27 percent of the broker-placed European reinsurance and represent 40 percent of the European property catastrophe reinsurance market. Bermuda companies provide 30 percent of the premiums for Lloyds of London.
It is evident that investors in these various enterprises have always reacted to market demand for new carriers, asking, “In what domicile do we launch it?”
Now, that’s a question we can answer: “Bermuda, the World’s Risk Capital!”
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