Bermuda is gaining a competitive foothold over London in attracting insurance business
London needs to be watchful and able to react swiftly to market developments if it is to remain a competitive place to do business.
Bermuda’s influence has grown quickly in the past few years. Its share of global reinsurance capital nearly doubled in the four years from 2000 to 2004, and, according to a recent survey of global reinsurance business, Bermuda’s top 12 reinsurers wrote almost $22bn of premium in 2006.
There are many reasons for Bermuda’s success, and the regulatory environment is just one. Recent research from Ernst & Young indicated that Bermuda is steadily challenging the pre-eminence of London based on its ability to innovate and use new technology.
Given the different regulatory and market conditions of the two insurance markets, it would be natural to assume that views on both would have been quite polarised. In reality, chief operating officers (COOs) had a more balanced view of jurisdictions.
For example, Bermuda ranked highly for the insurance placing process primarily, closely followed by innovative insurance solutions, access to capital markets and the appropriate degree of regulation. London scored highest for the availability of skilled, qualified staff, closely followed by access to business, and operational costs (excluding regulation) in third place.
In weighted terms, London retains its reputation as the location for international technical expertise in specialist lines and where most lines of business can be accessed. But Bermuda is gaining a competitive foothold in world markets through its innovation and efficiency of the placing process. Consolidation within the global reinsurance industry is emphasising Bermuda’s threat to London.
Much market effort has been put into process reform. The majority of respondents felt positive about the work of the market reform groups and the recent achievement of the former G6 grouping.
But there exists an interesting split in terms of support for market change initiatives affecting London market brokers. All COOs said brokers were supportive in terms of their ‘words’ but only half were when the question focused on their actual actions. Clearly, there is a dividing line between the aims of the management of brokers to support market reform and the day-to-day operational reality. Which side of the line do you stand on?