Every year, global insurers and pension funds entrust Bermuda with a core task: calculating the risks of hurricanes, earthquakes and floods for all other regions, and setting reasonable risk prices. Bermuda has performed this work for decades, mastering it completely. But this paradise has long delayed applying this world-class professional expertise it has perfected to its own local infrastructure risk coverage needs, a step that is long overdue.

Bermuda hosts the world’s largest disaster risk capital market: as of the second quarter of 2026, the total listed scale of catastrophe bonds and insurance-linked securities on its Bermuda Stock Exchange reached approximately $70.5 billion, accounting for more than 90 per cent of the global outstanding market for such products.

Yet the Government of Bermuda’s own public infrastructure still relies on the most traditional methods to bear risks: either purchasing property and casualty insurance from commercial insurers and waiting for payouts when a disaster strikes or squeezing funds from general government revenue to fund repairs; if those are insufficient, the Government can only take on debt.

To cite the 2026-27 fiscal year budget, the Government allocated a total of $182 million in capital expenditure specifically to repair disaster-damaged roads and other infrastructure, while Bermuda’s total government debt had reached $3.29 billion in the same period (KPMG, 2026). None of that draws on the capital market instrument Bermuda has spent three decades perfecting for other nations.

First, let me clarify the scope of this article to avoid misunderstanding: this piece is not intended to criticise Bermuda for having no risk coverage at all for its public assets. In fact, the Government has long held standard property and casualty insurance for all its assets. Beyond that, Bermuda is a founding contributor and formal member of the Caribbean Catastrophe Risk Insurance Facility (CCRIF). This regional mutual insurance mechanism has been issuing indemnity payments to member governments hit by disasters in accordance with pre-set parametric standards since 2007, and it can help member governments address part of their urgent needs.

There are two things Bermuda has never done: first, it has never issued a single such bond of its own on its home exchange, which hosts the vast majority of the world’s catastrophe bond and ILS capacity; second, it has never raised a single sum from the capital market that is earmarked exclusively for its domestic infrastructure. The core question this article discusses is never “does Bermuda have any insurance at all” —rather, it asks whether, if Bermuda began to do these two things now, this new coverage model could outperform the Government’s traditional approach on key dimensions: cost, speed of payout, and certainty of fund usage. That is the real question that deserves to be clarified.

An export business with a small domestic footprint

Bermuda’s catastrophe bond industry is fundamentally an export business. Premiums, listing fees and professional service revenues all remain in Bermuda but the core benefit of business relief funds disbursed after a disaster strikes flows almost entirely to policyholders in California, Japan, and the US Gulf Coast. Put plainly, Bermuda earns revenue from the whole world through this mature business but the indemnity funds it pays out when disasters occur go almost exclusively to clients in other countries and regions, with no consideration to reserve those funds for its own use.

The core public infrastructure in Bermuda most vulnerable to disaster impacts is the LF Wade International Airport terminal. When it was built, this terminal was designed to withstand wind speeds of up to 172mph (approximately 277km/h), just enough to withstand a Category 5 hurricane (Aecon, n.d.). But from its completion to the present day, it has never utilised the relevant tools of the local capital market, whose operating location is a short walk from the terminal’s entrance. Despite being so close, the risk coverage tools Bermuda has mastered for the whole world have never been applied to its own most critical airport.

Bermuda’s share in the Caribbean Catastrophe Risk Insurance Facility is very small. This mechanism has only several billion dollars in total payout capacity, which must cover 19 member states across the Caribbean and Central American regions. This share is less than a rounding error compared to the $70 billion market Bermuda manages for the rest of the world; the scale gap between the two is enormous.

Tried and tested

In March 2025, the UK’s Flood Re issued its first catastrophe bond, Vision 2039, locking in £140 million in collateralised flood reinsurance capital from capital market investors (Flood Re, 2025). In the same period, it also launched another support package, the “Build Back Better” programme, which requires participating partner insurers to provide policyholders with an additional maximum of £10,000 when they submit standard flood claims, specifically to fund flood-resistant reinforcement work on their homes. The funds for this resilience-boosting mechanism come from the overall insurance project pool and have no direct connection to the payouts generated by that catastrophe bond.

Fema's FloodSmart Re has also proven that transferring flood risk to the capital market is feasible but its original design was narrow from the start: this model exists solely to protect the balance sheet of the US National Flood Insurance Programmes. It was never intended to allocate funds directly to infrastructure repairs.

Canada's Disaster Mitigation and Adaptation Fund has invested billions of dollars in core disaster prevention infrastructure such as seawalls and urban drainage systems, but all funds come from government fiscal allocations; the entire funding framework never touches any capital market financial tools.

And the CCRIF, the regional disaster coverage mechanism that Bermuda first helped capitalise in 2007 and remains a member of to this day, operates under different rules than all the aforementioned programmes: it allows member states to use the parametric payouts they receive for long-term infrastructure upgrades, rather than restricting funds solely to post-disaster emergency relief.

When we lay out these regional experiments, each jurisdiction has built part of what Bermuda needs. None has combined disaster risk transfer with legally ring-fenced infrastructure spending sized to its own risk, because none of them sits, as Bermuda does, at the centre of the market that prices this risk for the rest of the world.

Mitigation

Mitigations are visible to Bermudians, which do not require another framework, perhaps just to register a restricted Special Purpose Insurer under the BMA’s rigorous existing regulation they use everyday in transactions. RIB (resilience infrastructure bond) should be listed on Bermuda Stock Exchange and negotiated with the same global ILS investors to purchase it.

Again, multilaterally, co-operate with bodies such as World Bank or Caribbean Commercial Bank Corporation to provide or facilitate credit enhancement as was done for the airport project years ago — not my favourite choice, though, as the finger of God needs to be activated against corruption if transparency is ignored. If an implementation arrangement is made, bondholders can experience threshold as other nations investors in the catastrophe bond to receive coupon payment and investment returns.

More importantly, this mechanism should only be triggered if preset conditions are met such as hurricane wind speed exceeds the pre-agreed thresholds, this will allow it to be transferred to a ring-fenced account and, by law, only be used for repairs or infrastructure development only.

There is no need to rebrand new capabilities as tons of expertise abounds on the island. All it has to do is to rechannel this marvellous IB expertise it exports globally to itself and perhaps enact a realistic law on the usage of the funds from the bond by channelling it only to maintenance and economic development of this paradise with a watchful eye against misappropriation.

• David Annan is an economics lecturer at Bermuda College