The Bermuda insurance and reinsurance market continues to go from strength to strength and is well positioned to take advantage of hardening market conditions.

Recent years have seen new entrants, increased diversification and new and expanding product lines with the life reinsurance sector and cyber coverages being notable areas of growth. As a result of high operating costs in Bermuda and work permit restrictions, the use of technology and other working practices to manage dependency on location-specific personnel has long been a priority for Bermuda (re)insurers. When the reinsurer, Convex, established itself in Bermuda in 2019 (with US$1.8 billion of capital) it highlighted its intention to put technology at the forefront of its business. These practices put Bermuda in good stead when it came to navigating COVID-19 restrictions and the market barely missed a beat through the July 1 renewals.

Although appetites may shift in light of recent catastrophes and uncertain COVID-19 exposures, in 2019 some Bermuda insurers began looking to underwrite at lower attachments, including in professional and financial lines where the London Market has seen a dramatic reduction in primary and low excess capacity. More recently, there has been speculation that technological innovations may enable Bermuda insurers to accommodate new product lines and to underwrite risks with higher expected claims frequency.

The captive and self-insurance sector in Bermuda has endured a long soft market during which low cost commercial insurance was increasingly attractive to insurance buyers. However, that sector is expected to grow in the hard market and is being increasingly utilised to provide risk management solutions for emerging sectors such as a cannabis and crypto.

External influences

Bermuda is, however, exposed to external threats. Brexit is not considered to be a material issue for Bermuda which had already been accorded regulatory equivalence by the EU. New EU-driven 'economic substance' laws are also a minor issue for Bermuda's 'bricks and mortar' (re)insurers and brokers. A global initiative to harmonise minimum rates of corporate tax may present a greater threat but the impact is unclear at this time and the Bermuda market distinguishes itself irrespective of any tax advantages by its vast capacity, wide choice of products, diverse range of security, expertise, specialist service providers and a single regulator who understands the needs of the market better than any other regulator. No other country has insurance at the centre of its economy and society as Bermuda does.

As always, there is significant claims activity albeit with an emphasis on severity rather than volume. Reinsurers have responded to a number of weather-related events and insurers have seen particular activity in relation to claims arising from opioids and other prescription drugs, chemicals and pesticides.

Although Bermuda insurers are dealing with COVID-related business interruption claims at the direct level, much higher exposure could come at the reinsurance level if insured losses for small and medium sized businesses accumulate in light of pending court cases in the United States, UK and elsewhere. Traditionally the Bermuda reinsurance market has been "dispute shy", trading on its reputation for paying claims, but that may change if losses become capital, as opposed to earnings, events.

Kennedys' Bermuda partners, Mark Chudleigh and Nick Miles, contributed the Bermuda chapter to the International Comparative Legal Guide to Insurance & Reinsurance 2020 including summaries of Bermuda laws and regulations relating to insurance and reinsurance. A copy of the chapter can be accessed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Kennedys operates in Bermuda in association with Kennedys Chudleigh Ltd.