Bermuda reminds us of beatiful beaches as well as the Bermuda Triangle (Devil’s Triangle).

Hurricane Katrina in 2005 was the costliest insurance loss in history. Hurricane Rita and Hurricane Wilma also occurred in 2005 and caused massive insurance losses. There losses were shared by reinsurers across the world. Reinsurers based in Bermuda paid 30% of all the losses.

Bermuda is called the “World’s Risk Capital” since it provides huge Catastrophe reinsurance capacity. Out of the top 40 global reinsurers, 15 of them are based in Bermuda.

Initially, low tax regime was what attracted reinsurers to Bermuda. It was also believed to be a less regulated market. However, Insurance Amendment Act of 1995 tightened the Solvency requirements as well as reporting requirements. Also, taxes have increased over the years. There is always a threat of US Government taxing US sourced business even if the reinsurer is based in Bermuda. Despite all these developments, Bermuda continues as a very strong reinsurance market. It is due to the ability of this market to innovate risk management solutions and bring in changes so much required in the field of insurance and reinsurance.

One of the excellent innovations by the “Association of Bermuda Insurers and Reinsurers and the “Bermuda Insurance and Reinsurance Brokers Association” is the “Contract Certainty Code of Practice”.

Insurance Linked Securities needs expertise in both Insurance and Asset management areas. Again, Bermuda is a leading creator of innovative ILS products.

A great case-study for policy makers in India who are planning to make GIFT City into a reinsurance hub.

Blog by Atmaram Cheruvu