A group of reinsurance leaders involved in launching a wave of new companies in Bermuda 20 years ago believe the island is unlikely to see such a cluster of start-ups occurring again.

All of those on the Class of 2005 panel at the Bermuda Risk Summit said today’s industry structure mean any surge of new capital would most likely come in forms other than new companies — such as sidecars and insurance-linked securities.

The Bermuda market has seen new waves of companies form after several insurance market dislocations, sparked by events including Hurricane Andrew in 1992, the 9/11 terrorist attacks in 2001, hurricanes Katrina, Rita and Wilma in 2005, and the Covid-19 pandemic in 2020.

John Berger, chairman of Coaction Specialty Insurance Group and the founder and former CEO of Harbor Point Re, said: “If somebody came to me today and said, I want to start a reinsurance company, I’d say ‘don't do it’. There’s no need for you.

“You’re going to be an A- rated small guy and, unless you’re meeting a very specific need, you’re going to struggle. The world has changed. There's a lot more money out there. The intelligence level has gone up.”

If he were a young entrepreneur looking to seize upon an opportunity in the market today, Mr Berger said he would launch a managing general agent — a specialised insurance intermediary granted significant authority by insurers to underwrite, bind, and manage policies on their behalf.

Chris McKeown, chief executive, reinsurance, ILS, and innovation, at Vantage Risk, said the rise of alternative risk transfer meant new companies were unlikely to form again in response to capital losses, like those that occurred in 2005,.

Since then, ILS and sidecars have created efficient channels for capital market investors to invest in reinsurance, without having to go through all the formalities of building a new company, such as assembling a staff and acquiring a rating.

“Nephila was probably the biggest beneficiary of that,” Mr McKeown said. “Now at we've got 20-odd ILS managers on the island, and each one of those has a tap into the financial markets.

“So whenever there's some sort of disaster, there is plenty of capital out there that can find its way to all sorts of different people. Maybe there'll be a different type of Class of 2030, but probably not in response to capital.”

Ryan Mather, chief executive officer of Ariel Re, said: “The barriers to entry for investors looking to get into the sector are mostly gone, so the capital can come in without any of the reserve risk.

“When you start a new company, the first two years are tough when you’re earning that premium. Certainly for Ariel, we had $1 billion of equity, but we managed to write only $142 million of premium in Year 1.

“Because we had a 42 per cent combined ratio, we made a lot of money and the capital providers were happy in the end — but it was difficult starting.”

In 2005, the Bermuda business environment, as well as the reinsurance landscape, was very different.

Every function was effectively in-house and office space was scarce. Conan Ward, CEO of Solis Re, recalled that when he started with Validus Re, the company was initially housed in a cramped space in Mintflower Place on Par-la-Ville Road.

“When the music stopped, there were three people left without chairs,” Mr Ward quipped.

Staffing was also an issue. Getting in the people the new market entrants needed often meant luring them from rival Bermudian reinsurers.

“The headwinds we had to go through in terms of building staff and everything else were pretty strong,” Mr Ward said.

“Nowadays, I think it would be a lot more difficult to repeat that, because you've got so many more people under contract with required notice periods.”

Poaching was rampant at the time. Mr Mather recalled chatting with one friend in the industry at the World Rugby Classic in 2005. “He said he had received about 25 job offers — I’d only had five or six.”

The new companies could not do business without a strong credit rating and Mr Ward recalled a visit from rating agency AM Best, during which he was grilled over the company’s projections.

“As they walked away, my screen and every one of the other 15 screens went blank — we had an IT meltdown,” Mr Ward said. “I wonder to this day if she’d been about 30 seconds earlier, maybe we wouldn’t have got a rating.”

Asked by moderator Mairi Mallon, CEO of Rein4ce, whether he thought Bermuda would be the place for any future wave of new companies, Mr Ward replied: “I think so, Bermuda has great regulation, it’s a great marketplace.

“We all owe Bermuda a huge debt — the BMA [Bermuda Monetary Authority] helped us all. You know, they recognised that there was a problem in the industry, and we were all here to try and solve it.

“And for them to adopt Solvency II in such a way that the global standards relative to those of the BMA are very similar, and so our jurisdiction here trades as well as anybody across the world.

“That wasn’t always the case. Europeans were really sceptical of the regulatory environment in Bermuda, and I think BMA did a great job in getting us on equal footing.”