Bermuda can expect to see consolidation among its long-term reinsurers in the near future, the Bermuda Risk Summit heard this week.

During a panel discussion on life reinsurance, moderator, Jamie Schmerer, senior vice-president, enterprise risk, at Fortitude Re, raised the question of near-term consolidation in the burgeoning Bermuda long-term market, first putting the question to James Claxton, partner and principal, EY Bermuda.

Mr Claxton said there were many companies chasing the same liabilities and not everyone could be successful: “The cost of doing business has gone up. It's definitely more expensive to run a shop.”

He said companies will be forced into doing things that will either reduce their footprint or improve their investment return.

“Yes, I would expect to see consolidation. There's a lot of players out there looking for the (same) liabilities.”

Also on the panel and agreeing with that assessment was Andrew Sooboodoo, chief risk officer, of the relatively new specialist InEvo Re, established by London’s Macquarie Asset Management.

He said: “Yeah, I agree with that. The cost of business has definitely increased. To cover expenses, you really need to build scale. And with companies struggling to build scale, then we might see that.”

Michelle Moloney, executive vice-president of Capital Solutions at Pacific Life Re remarked at the increasing complexity of deal structures, compared to the past, when there were bilateral negotiations.

She said a third party may have been a bank for the financing, but today it's unusual not to have three or four companies involved.

“The complexity,” she said, “has just increased tenfold at least.” She also noted innovation in the use of hedging was far more effective than in the past.

Mr Sooboodoo also commented on how artificial intelligence has been among the most significant recent changes for the industry.

“The tools available to assess your risk are just so much more comprehensive than they were a few years ago,” he observed.

He said: “The computing power, and the capabilities we have now, to summarise the legal terms, on the assets and the liability side, is probably the biggest innovation that I've seen over the last 12 months, that can really enhance our risk management, enhance our modelling and understanding how our business changes, and the different economic conditions.”

Meanwhile, discussing the retirement gap — the difference between the money people will need in old age and the money they are likely to have set aside — Julie McDonald, chief risk officer of Global Atlantic Re, believes its is a market need that the industry can address.

“To get some context around that,” she said, “research does suggest that almost half of working households can't afford to maintain their lifestyle in retirement.”

She said it was companies like hers that were able to help cedants manage their capital in a more efficient manner.

Global Atlantic Re is wholly owned by Kohlberg Kravis Roberts & Co, the American global private equity and investment company.

KKR manages assets across private equity, real estate, infrastructure, and credit. It aims to reach $1 trillion in assets under management by 2030.