Bermuda is set to introduce a new class of insurer dedicated to parametric coverage, a move the Bermuda Monetary Authority says will strengthen the island’s leadership in climate risk.

Taijaun Talbot, assistant director of supervision at the BMA, told delegates at ILS Bermuda Convergence 2025 yesterday that the regulator is “in an advanced stage of developing a new special-purpose insurer class for parametric triggers”.

The new class, he said, will be “fully collateralised and built on the foundations of the current SPI class”, with additional features such as “the use of swaps, derivatives and basis risk to enhance parametric covers”.

Parametric insurance provides rapid payout for policyholders based on predetermined thresholds such as wind velocity or rainfall, rather than damage sustained. Globally, it is expected to surge more than 12 per cent in the next decade.

The new class, he said, is expected to draw investors seeking climate and weather-linked returns through these automatic triggers, which can provide rapid capital deployment and settlement.

It will mark the first major addition to Bermuda’s insurance framework in several years. Mr Talbot noted that the regulator has learnt from earlier initiatives, saying that when the BMA “introduced the collateralised insurer class back in 2020, it didn’t take off, and we really didn’t expect it to, but the market has grown an appetite for” casualty business. He added that the authority now reports “beyond double digits in collateralising” insurers, “predominantly driven by the interest in casualty that we’re seeing”.

The move comes as climate-related disasters grow more frequent and insurers look for new ways to close protection gaps. Mr Talbot said the goal is to promote “parametric covers to fill protection gaps”, allowing faster payouts after disasters and reducing basis risk compared to traditional indemnity models.

Bermuda’s timing is also strategic as it faces growing competition from Singapore and London. “We have quite a bit from a regulatory side that we can do” to retain the island’s edge, Mr Talbot said.

He added that the authority is also reviewing “specifically, ILS funds and how that regime can benefit the whole sphere of ILS”, signalling more updates ahead to the regulatory framework.