It’s a sign of the health of the Bermuda re/insurance market that it’s welcoming new entrants and new capacity – and while different sectors of the market are at different points in the cycle, overall conditions are looking good.
In conversation with ReInsurance Business at the Bermuda Risk Summit, Andrew Smith (pictured), chief risk & sustainability officer at the multi-line reinsurer Conduit Re shared his perspective on what’s happening in the market. “If you look at where we are now compared to say four years ago, you can see how conditions have improved,” he said. “Rate is definitely healthier now than it was then, albeit that the rate of increase depends on which part of the market you’re looking at, and some areas might be softening.”
There’s significant uncertainty in the market today around rate, he said, with concerns about pre-2019 casualty reserve strength continuing to impact how people think about casualty. On the property side, it will be interesting to see what happens, particularly in the aftermath of events such as the California wildfires, and the lingering question over how such incidents might shift market appetite and translate into rate changes later in the year.
“I don’t think it’s going to be one answer for all of property and one answer for all of casualty,” he said. “The market tells a nuanced story, one made up of micro-cycles within each line of business. Specialty is certainly telling an interesting story today. It has become a greater component of Bermuda as a market. We’ve seen a lot of growth in terms of on-island specialty writers and also brokers. Where you’ve got that kind of ecosystem, it tends to provide opportunities.
“It’s always difficult to predict where rates will go, and whether terms and conditions will hold. But overall, it’s a very uncertain environment and a very interesting one.” In the midst of that uncertainty, Conduit Re is seeing a lot of opportunities, particularly when it comes to multi-line business. A core part of the firm’s strategy has always revolved around working closely with its chosen partners, a focus which is now deepening when it comes to those multi-line opportunities.
Having your team in one location is instrumental in being able to respond with agility and make decisions quickly, he said, because it opens up access to all key decision makers. In line with the firm’s ongoing expansion, the business has taken up more floor space in its Bermuda headquarters. “Unlike in London where many people work from home one or two days a week, everybody is in the office in Bermuda basically every day, which I think does give a cohesion that can be difficult to achieve in other places.
“The foot traffic that we have in Bermuda is very high and higher than it used to be between both the people that are based here permanently and the ones visiting.” The high foot traffic is a key element of what sets Bermuda apart as a re/insurance hub, Smith said, as is the high-trust relationship between the regulator, the government and industry on the island.
“The industry is very important to Bermuda’s economy, and the regulator and government are very proactive in making sure it has the access it needs to get things done,” he said. “We saw that in action with Solvency II equivalence, then again with the NAIC reciprocal jurisdiction status – and you see the work more recently with the corporate income tax. With all these things, the industry has been given a very strong voice in helping the jurisdiction to maximize its opportunities.”
Smith noted that with Conduit Re well beyond the start-up phase, the focus now is on what’s next for the group. When Conduit Re was first established it was very clear about what it did and didn’t do, he said, and now there’s scope for thinking carefully about where there are new opportunities in the market. “A lot of what we’re focusing on at the moment is seeing how different pockets of the industry can fit and work together.”
It has been around a year and a half since Conduit Re did its first cat bond and Smith expects to see further opportunities on that front. Whether it’s on supply of capacity, or distribution, the focus is on finding where the opportunities are, and, as an established business, it’s in a position to explore those opportunities with no fixed outcome in mind.
“We're still in a position where we're growing into a balance sheet and we still have capital to deploy,” he said. “We still have room to grow but now it’s on a strong foundation – and we have the bandwidth to explore other ways of growing as well. The other focus for us is on being ready for cycle management and recognizing that this cycle management might look different for different lines of business which have different time horizons.
“So our focus is really just about looking at opportunity and being flexible to the way the world is changing because the world is in quite an uncertain place. It’s about making sure you’ve got all the right tools in your toolbox to be able to respond to market conditions and a changing external environment – and having the right agility and flexibility to do so quickly.”
