SRS managing director is bullish on opportunities for Bermuda
Insurance industry executive Jonathan Reiss believes Bermuda could see material growth in terms of opportunities and jobs in the next two years.
And he intends to assist in securing a flow of business to the island in his roles as managing director at Strategic Risk Solutions, and as chief executive officer with newly formed insurance fronting business Concert Group Holdings Inc.
SRS, which has offices in Bermuda, is the largest independent manager of insurance companies in the world. It is well-known in the captive insurance industry, and of its approximately 800 managed insurance clients, about 600 are captives.
Mr Reiss has almost 30 years of experience in the insurance industry. He is the son of Fred Reiss, who is regarded as the father of the captive industry having created the world's first captive in 1953, and being instrumental in establishing Bermuda as a hub for captives in the late 1950s.
Mr Reiss, who joined SRS from Hamilton Insurance Group last year, sees a parallel between Bermuda’s journey from pioneering captives to its position today as a major centre for the re/insurance industry, and the trajectory of SRS.
He said: “My being hired is a signal that SRS is going to be focused more on building out its broader insurance capabilities. The strength of the captive team is not going to be diminished at all – we are adding to the infrastructure.
“Bermuda was once first and foremost a captive jurisdiction. The infrastructure, the lawyers, the accountants, around the captive industry was really what was able to support the growth of so much more beyond that. Bermuda is now known as a broad insurance and reinsurance centre, not just captives.
“It is a very similar analogy here with the growth of SRS.”
He joined SRS as it is an “incredibly well-positioned organisation for the transformation that is going on in the industry”.
He said: “It is well-known that the insurance industry is highly inefficient, there are a lot of layers of intermediaries. Frankly, too many cents of every dollar of the customer’s premium gets spent on administration, and not covering the risk.”
A lot of effort is being made to make the industry more efficient, and some of that is evident in leaner insurance linked securities businesses and the arrival of insurtechs.
Companies that have “real customer relationships” are going to survive, Mr Reiss said, while reinsurance companies whose relationships are just with broker distribution networks and intermediaries, are more at risk to changes now happening in the industry.
“Look at SRS, with its hundreds of sophisticated captive clients with which it has deep, trusted relationships. I’m building out SRS’ capabilities in ILS. SRS’ position is a natural part of being successful in the transformation we are going through. I want to be part of that, and SRS is really a fantastic place for me to be.”
At Bermudian-based Hamilton Insurance Group, he was a member of the founding management team and group chief financial officer. He also held the position of president, strategic partnerships.
Before Hamilton, he was with EY from 1993 to 2012, the last six years as leader of EY’s insurance practice in Bermuda, Bahamas and Cayman.
One of the things he has focused on at SRS is building out ILS capacities. He said: “Bermuda is a leading ILS centre. I’m hiring a best in class team of ILS specialists: Anna Pereira, who is quite a visible figure in ILS in Bermuda. I’m delighted that she joined us in March. Also, we have Matt Charleson who has deep insurance and ILS experience.”
Another member of the team is Derek Bridgeman, managing director of SRS Europe.
Mr Reiss said: “We are seeing a significant amount of pipeline activity in terms of people looking to set up innovative types of insurance and reinsurance entities. The market has hardened. This is the stage of the cycle where there is more likely to be new entrants. There has been reference to a Class of 2020. There is quite a lot more in the pipeline. Not everything may come to fruition, but it’s very active. I feel very bullish about the prospect of some material growth in Bermuda in terms of opportunities and jobs in the next 12 to 24 months.”
He said opportunities have arisen due to consolidation in the industry, in terms of intermediaries and insurance carriers.
"When big companies get bigger and consolidate, there are segments of the market that suddenly become underserved.“
Generally, when people come to SRS for insurance management, they come because they have some new, innovative structure, Mr Reiss said.
“It might be some new, more efficient digital way to access customers, or be an ILS platform looking to deploy capital to specific opportunities. The common theme is most of these businesses want to be nimble and efficient, and they don’t want to deal with the infrastructure and regulatory requirements of the insurance industry.
“That’s where we come in. People can outsource their compliance and the infrastructure needed to be an insurance risk taker. Some times they want to dial it up or dial it down. They come to SRS. We help the people who want to be efficient and lean. We can handle all aspects of the insurance business that they don’t want to handle.”
It was announced yesterday that new insurance fronting business Concert Group Holdings had secured agreement to raise additional capital from its founders.
One of the founders is Brady Young, founder and CEO of SRS, who last month topped the 2021 Captive Review Power 50 rankings. The other founders of Concert are Wes Duesenberg Jr, CEO of Southern Insurance Underwriters, and Christopher Collins, CEO and founder of Corinthian Re, in partnership with Century Equity Partners and WT Holdings Inc.
Concert is not an SRS company. The business will provide access to the US insurance market for both traditional products and alternative risk transfer structures. It offers insurance fronting and related services.
Concert has completed the acquisition of CEM Insurance Company, which will serve as one of the growth platforms for its operations. CEM has been renamed Concert Insurance Company and is a licensed admitted insurer domiciled in Illinois.
When asked where Concert fits in to the market, Mr Reiss said: “In the US people often need fronting, and captives almost always need fronting.”
A captive insurance company writes risk and often feeds half of that risk into its own self-insurance vehicle.
“Often times that will be a Bermuda company. But they still need a licensed insurance company in the US to be able to issue the policy. That’s what a fronting company does, it provides that front-end service. It is really just handling the administration of the policy issuance and the claims handling, and it is not bearing any risk. That’s where the term fronting comes from. The risk passes through. Almost every insurance company in the world does some kind of fronting,” Mr Reiss said.
He explained that the captive industry uses fronting extensively, and it is not the only one. Someone who wants to write a risk but isn’t licensed might turn to a fronting company that is licensed.
Insurance sector consolidation has left a big, underserved area of the market.
"Very few of the incumbents in the fronting industry have developed a reputation for being customer-centric and doing a really good job,“ Mr Reiss said. This presents an opportunity for Concert.
“Concert is still under way and we have been getting calls every day from clients and others. It is a US thing, it is going to be in the US. But eventually I do see a tie to Bermuda. The fronting business will need reinsurance and ILS capital to support the risks that are going to be written, but passed through to reinsurance companies and ILS carriers. I do intend that Bermuda sees a good flow of that business, because of the innovative insurance we have here, and the ILS.”
Mr Reiss also said there is a trend where ILS want to be closer to the customer, and a clear trend where large corporations want to tap into ILS capital.
“We at SRS are very well equipped to bring those parties together. We are joining all the dots together here. There are tremendous opportunities for Bermuda’s ILS business by working with us at SRS, and at Concert.”