Bermuda’s ILS Resurgence

Charles G.R. Collis, Michael Frith • Posted 02/12/2011 • Under Articles

Bermuda is at the heart of the convergence of the capital markets and insurance/reinsurance industries, and has seen a surge in insurance-linked securities (ILS) products and the establishment of ILS funds specialising in investment in these products.

Bermuda has long been recognised as a sophisticated and responsibly regulated international financial centre. With a well-developed infrastructure, proximity and convenient air links to the US, Canada and the UK, and a wealth of experienced and sophisticated service providers, the island has naturally become a focal point for innovation in the financial sector.

In particular, Bermuda is considered the centre of catastrophe reinsurance expertise, and is one of the largest reinsurance markets in the world, estimated to provide over 50% of the worldwide property catastrophe capacity, along with other innovative general and long-term insurance business products. The combination of an extraordinary concentration of insurance talent with a responsive and flexible regulatory environment has led to the island leading the industry in the development of sophisticated insurance and reinsurance structures.

In addition to its breadth of insurance industry experience, Bermuda is also a major centre in the international investment fund industry, with over US$200 billion of fund assets domiciled there, and over 2,000 investment funds registered in and operating from Bermuda. There are also a significant number of unregulated investment funds, (primarily closed-end investment companies and limited partnerships).

All this positions Bermuda at the heart of the increasing convergence of the capital markets and the insurance/reinsurance industry, making Bermuda a natural jurisdiction for the development of sophisticated insurance-linked securities (“ILS”) products and the establishment of ILS funds specialising in investment in such products.