The Bermuda market’s relevance to the global reinsurance industry remains undiminished, even as the number of companies on the island has shrunk through consolidation.

That is the view of Arthur Wightman, PwC Bermuda leader and regional insurance leader, who points to the greater size, strength and influence of the companies that remain, as well as the innovations in areas such as insurance-linked securities.

Last week, RenaissanceRe agreed to buy Tokio Millennium Re in a proposed $1.5 billion deal, the latest in a series of takeovers and mergers that has roughly halved the number of Bermudian-based, publicly traded re/insurers over the past six years.

The likes of Alterra, Allied World, Endurance, Flagstone Re, Montpelier Re, Partner Re, Platinum, Validus and XL Group have all been acquired by larger organisations, as well as Ariel Re and Ironshore.

However, remaining Bermudian companies like Arch, Athene, Axis, Enstar, Everest Re and RenaissanceRe have grown, partly through acquisitions, inside and outside Bermuda.

In an interview, Mr Wightman said the consolidation was a natural progression for a market as reinsurance came into line with the norms of other industries.

“It tends to be the case that for a company to be successful in any given industry, they either need to be a scaled, multidisciplinary organisation, i.e. a large company that offers its customers various different things, or they tend to be a niche player,” Mr Wightman said.

“Players trading in the middle either tend to have to become a niche player or scale up.

“What we’ve been seeing over the past five or six years is the reinsurance market starting to move to that model of scale or specialisation.”

He said that in the past, many Bermudian companies had market capitalisations in the $2 billion to $6 billion range, but now they were getting either larger or more specialised. He added that consolidation inevitably impacted employment as well.

“I always look at the Bermuda market in terms of how relevant it is to the world economy and society at large,” Mr Wightman said.

“While we have fewer companies, we have much larger organisations that actually have much greater influence over the reinsurance market worldwide.

“Similarly, our own innovation and evolution, which has come mainly through alternative capital, really underscores the importance of Bermuda to the world market for risk transfer.

“We’ve also seen changing markets in decades past and this is just an evolution in which Bermuda does seem to be retaining its importance in the world reinsurance market.”

Mr Wightman was speaking on the sidelines of last week’s PwC Insurance Summit, where there was much discussion of technological change in the industry.

While greater use of technology could reduce the need for people in some areas, it could also open up new opportunities, he said.

“In those areas where the industry has a lot of data and access to technology to analyse it, those corners will become more commoditised,” Mr Wightman said.

“That will take out some, if not all, of the need for human intellectual capital, which is a very positive thing because it frees the intellectual capital within the industry to be harnessed in other areas.

“There are significant risks in the world that aren’t insured at all and risks that are underinsured. This is a massive opportunity for the industry.”

Some insurance leaders are uneasy about competition from giant technology companies, such as Google, making them more conscious of the need to innovate.

“Industry outsiders who may be more proficient at grabbing data and more proficient at technology and analytics can come in and disintermediate the existing industry,” Mr Wightman said.

“Insurance executives are very much intent on preserving their role in the insurance market and in society, but they realise they have to do that either in partnership with the technology companies, or invest much more in digital talent within their organisations.”

In order to attract such talent, the industry had to better communicate its value to the world to purpose-driven millennials, he added, and also to better define the roles for that talent to fill.

“We as an industry need to be thinking about digital talent, technology capability, data analysts and being much more actuarially driven,” Mr Wightman said. “Those are the types of people the industry needs to be drawing in much greater numbers.

“There’s a fear that started at the top end of organisations around change — that fear is less felt by younger people.

“I give the example of a company installing a new system. It seems to be the more mature demographic and the C-suite who struggle with that, but the implementation seems to go much better with younger people.

“The question is: how do you harness that change agility that sits within your organisation to better enable that change to perpetuate?”

• Chief financial officers speaking at the PwC Insurance Summit expressed optimism about growth in the reinsurance market, but said the industry must be more innovative and aggressive in developing new products and solving the insurance protection gap.

CFOs on the panel included Jeffrey Sangster, former CFO of Validus Holdings, Mario Bonaccorso, CFO of PartnerRe, and Stephen Robb, CFO of Axa XL.

According to PwC’s 2018 CEO Survey: Insurance, over 90 per cent of reinsurance and insurance chief executives are confident about their own organisations’ revenue prospects over the next three years.

Matthew Britten, PwC insurance partner, said: “In reflecting on the panel I am going to walk away with a sense of growing, but cautious optimism, built upon the view that the industry is poised to capitalise on the potential that technological advancement can bring to solve important problems such as narrowing the protection gap, and developing and pricing the products that are needed to address the emerging, intangible risks that customers are facing.

“However, insurers and reinsurers need to increase their flexibility and willingness to experiment and take risks to ensure that these advancements do not remain only around the edges.”

He added: “There are significant growth opportunities for insurers and reinsurers in assisting governments in de-risking, narrowing the protection gap, and developing new products to address emerging intangible risks, such as cyber.”