Does the powerful growth in insurance-linked securities actually benefit the Bermuda economy?

While questions remain about the job-making potential of a sector that has produced a proliferation of capital structures to meet reinsurance needs, rather than waves of new companies that hire people, Bermuda Business Development Agency CEO David Cash believes the Island benefits in tangible ways.

“The projected growth of ILS will directly benefit Bermuda, as businesses will be required to increase capital spending by hiring people and services in order to meet client needs,” Mr Cash said in a statement yesterday.

“This in turn affects our economy through increased consumer consumption and spending. Government revenues will also increase thus growing Bermuda’s overall GDP. We’ve seen the economic benefits derived from our insurance, reinsurance and captive businesses; ILS presents a similar opportunity and the BDA is focused on enabling this growth.”

The ILS and alternative reinsurance capital could grow by $100 million in the next five years, according to Aon Benfield, raising the total value of the market to $144 billion.

The report came out during last week’s Security Industry and Financial Markets Association’s (SIFMA) 2014 IRLS Conference in New York, where around 70 Bermuda-based executives travelled, including representatives of the ILS industry, the Bermuda Monetary Authority (BMA), the Bermuda Stock Exchange (BSX) and the Bermuda Convergence 2014 committee members, according to the BDA.

Bermuda has become a leader in the ILS market with 44 percent of the worldwide stock of ILS now listed here. In the fourth quarter of last year, Bermuda attracted more than two thirds of all ILS issuances, $1.3 billion of $1.9 billion, the BDA stated yesterday.

At the end of 2013 the Bermuda Stock Exchange saw a record volume of $9.7 billion Insurance-linked listings with the value predicted to grow further in 2014.

EY Bermuda partner Craig Redcliffe told this newspaper earlier this week that the Island’s expertise in both reinsurance and asset management gave it an edge over other jurisdictions in the race for ILS business.

The Bermuda delegation that represented the Island in New York comprised of senior executives from the ILS industry, the Bermuda Monetary Authority (BMA), the Bermuda Stock Exchange (BSX) and the Bermuda Convergence 2014 committee members.

At the SIFMA conference, BDA hosted a ‘Bermuda Reception’ at the conclusion of the event where more than 100 executives gathered, including approximately 40 representatives from international firms with an interest in Bermuda.

Jason Carne, co-chair of ILS Bermuda Ltd, told attendees: “ILS is an exciting industry for Bermuda as it aligns perfectly with our responsiveness to an ever-changing business environment and highlights our drive to maintain the Island’s position as a leading domicile for financial services and worldwide centre of excellence for ILS and Convergence.

“We have a highly supportive Government that is working closely with our industry to enable innovation and growth. Indeed, there has never been a better time to do business in Bermuda.”

BSX CEO Greg Wojciechowski said Bermuda has made a determined effort to position itself as a centre of excellence for ILS.

“The increased use of Bermuda and the BSX for existing and new launches indicates that critical mass for which Bermuda is known in the reinsurance industry is spanning into its ILS/ART sector.”

Robert Eastham, managing director of Kane (Bermuda) Ltd, said: “The event provided an excellent opportunity to meet market participants and further promote Bermuda’s role as a key player in the ILS industry. A wide cross-section of the market was in attendance and it was an excellent opportunity to have meaningful discussions with ILS participants.”

The BMA’s licensing and authorisations director Shelby Weldon said: “The 2014 SIFMA ILRS Conference was a great opportunity for the BMA to hear first hand the matters of importance to the industry. This knowledge is essential to the BMA. As the industry grows, so will our insight and ability to apply practical and pragmatic regulation in line with global standards.”

Kathleen Faries, committee member of ILS Bermuda Ltd and CEO of Tokio Solution Management Ltd, said: “Bermuda continues to see increased interest from investors on a variety of Bermuda-based reinsurance structures and partnerships. We are looking forward to another great networking session in Bermuda in November where risk takers and risk makers will converge.”

Bermuda will again make a mark at ‘Bermuda Convergence 2014’ after a successful 2013 inaugural event that attracted close to 300 delegates from around the world.