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Bermuda Stock Exchange boosts its ILS dominance

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Greg Wojciechowski, president and CEO of the BSX (File photograph)
Thomas Gallagher, chairman of the BSX (File photograph)

The number of insurance-linked securities listed on the Bermuda Stock Exchange increased by 63 per cent year-over-year in 2020, the organisation announced in its annual report.

James McKirdy, chief compliance officer of the BSX, said ILS listings increased from 155 in 2019 to 253 in 2020, with a combined nominal value of $15.77 billion.

At year-end, the total number of ILS-securities on the BSX was 590, with a combined nominal value of $43.01 billion.

Mr McKirdy said ILS publication Artemis reported that global ILS issuance outstanding market size was $46.4 billion at year-end, of which approximately 93 per cent was listed on the BSX.

The BSX said the number of international debt listings increased from 200 to 206 in 2020, but the nominal value of the listings grew by $12.76 billion, or 144 per cent, to $21.63 billion, as maturing securities were replaced by larger issuances, in nominal terms.

Mr McKirdy said the value increase was due to the BSX seeking to attract premium international securities.

The BSX listed seven new collective investment vehicles in 2020, and three new equities. A further three subsequent issues were also processed by the BSX.

At year-end, there were a total of 1,126 listed securities, compared to 1,004 in 2019.

The RG/BSX Index closed the year down at 2,031.86, a decrease of 15.5 per cent over 2019.

Trading volume on the domestic market increased in 2020 to 4.9 million shares traded. Correspondingly, share value traded ended the year at $25.3 million. Overall, the BSX ended the year with a total market capitalisation of $255 billion.

Neville Caines, operations manager at the BSX, said the Bermuda Securities Depository at year-end held 46 per cent of all domestic listed securities in custody, down three per cent from 2019.

The year saw the BSX list one of the world's first exchange-traded funds designed to track digital asset investments – the Hashdex Nasdaq Crypto Index ETF. The BSX said it looks forward to supporting market participants in this developing area.

It also saw Miami International Holdings, which acquired a majority stake in the BSX in November 2019 take 100 per cent ownership of the local exchange last month.

Greg Wojciechowski, president and chief executive officer of the BSX, said: “This acquisition will assist MIH in expanding its world-class technology, derivatives trading and regulatory expertise to address emerging markets, such as digital assets, and provide the BSX with additional support in the evolving global reinsurance risk market.”

Thomas P Gallagher, chairman and CEO of MIH and chairman of the BSX, said: “The future presents excellent opportunity for both MIH and the BSX, as both entities are now focused on making major investments in the BSX in 2021 and 2022, including the opening of new executive offices, marketing and training facilities in downtown Hamilton, and substantial upgrades to the exchange’s technology infrastructure.”

Looking back on an eventful year, Mr Wojciechowski said: “Benjamin Franklin once said, ‘Out of adversity comes opportunity’. As the ‘World’s Risk Capital,’ Bermuda is familiar with this sentiment. For more than 70 years, Bermuda companies have provided insurance coverage and paid claims for disasters around the world, thereby not only helping communities and businesses recover from adversity, but also providing resilience for the future. The Covid-19 pandemic has been no different. While there have been great challenges, there are new opportunities ahead for Bermuda and the BSX.”

With the BSX’s exchange platform being fully electronic and securities being dematerialised and held in electronic book entry form, addressing business interruption and resiliency was built into the BSX platform from the beginning, the exchange said, adding that the BSX was prepared to address business interruption from the Covid-19 pandemic with minimal impact on the exchange’s operating systems, which proved efficient and robust during a year of unusual market operation.

Mr Wojciechowski added: “In a year that included severe natural disasters from wildfires to hurricanes and the increasing impacts of climate change, the global community is now experiencing the social and financial impact of our changing world while adapting to an uncertain future. Bermuda will certainly play an important role in a rapidly changing world – especially in the global transfer of risk.

“The Bermuda market has seen an influx of new capital of between $12-$15 billion into the insurance and reinsurance market with prospects for a hardening market going forward. The BSX continues to be one of the important pieces in our marketplace that helps communities around the world recover from natural disasters and build resilience.”

When the pandemic and lockdowns curtailed business activities, the BSX said it continued to “function and list new securities, support daily trading, settlement and operation of the securities depository, which is in line with the World Federation of Exchanges’ mandate that capital markets are essential in mitigating the effects of economic disruptions such as the Covid-19 pandemic”.

Mr Wojciechowski said “2020 was a busy and successful year for the exchange despite the challenges resulting from the Covid-19 pandemic”.

He added that the BSX is “moving forward with a commitment to raising awareness of and producing guidelines for environmental social and governance principles on sustainability”.

He added: “ILS has been recognised as a sustainable investment in accordance with the United Nations’ sustainable development goals due to its role in helping private and public organisations to build resistance and resilience to natural disasters and climate change.”

Mr Wojciechowski said 2020 “was undoubtedly a challenging year shaped by a global health crisis and extreme volatility in financial markets and exchanges across the world. However, with several vaccines now being distributed to millions of people and economies gradually reopening, exchanges will continue to play a vital role in ensuring access to capital and liquidity.

“As we begin 2021, it will mark the 50th year in which the BSX has served our domestic capital market. We remain committed to our continued service and development of this sector for the next 50 years and beyond, all the while ensuring that the BSX remains one of the world’s pre-eminent offshore securities exchanges and Bermuda the place where business happens.”

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Published January 12, 2021 at 8:00 am (Updated January 21, 2021 at 5:01 pm)

Bermuda Stock Exchange boosts its ILS dominance

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