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Marketing Bermuda's influence spreads MGAs look to Bermuda for new opportunities By Michael J. Moody, MBA, ARM
At this point in time, the alternative insurance market, specifically captive insurance companies, appears to be headed for yet another banner year. Both feasibility studies and captive formations are up over last year. And with the recent catastrophic events on the Gulf Coast, the property and casualty insurance market is once again poised to begin raising rates in the near term. This should add increased interest to the alternative market. In the past, many industry groups have expressed an interest in exploring the growing alternative market. The first step in this exploration needs to be an analysis of the various aspects of the alternative market. Information regarding the domiciles, and their respective regulatory environment as well as the individual service providers and other portions of the service infrastructure is essential when reviewing this important market segment. New interest Research over the past few years suggests that it is the mid-sized agents and brokers who have been leading this new interest in the alternative market. The driving force for many of the captive formations recently has been Main Street agents and brokers that are investigating the feasibility of captive formations on behalf of their better customers. But recently, another insurance marketing segment, the managing general agents, has also been reviewing the alternative insurance market. According to Bernd Heinze, Esq., executive director of the American Association of Managing General Agents (AAMGA), “The AAMGA is taking a leadership position in looking at the alternative markets and sources of capital so that we can find more creative and innovative responses to securing the required protection for the exposures that exist in the marketplace.” Such was the case recently when two dozen members of the AAMGA attended a three-day symposium in Hamilton, Bermuda. According to AAMGA President Francis Johnson, the association is eager to start a relationship with the Bermuda market. “For us, Bermuda is an untapped market which represents enormous potential,” Johnson said. “It is important for us to begin to explore the potential of this market, and then make certain that we share that information with our members.” The three-day event was organized and hosted by Alan Waring, president of Price Forbes (Bermuda) Ltd. and other members of the Bermuda Insurance Association. Broad overview
The first day of the three-day educational meeting began with a presentation by several key regulatory officials of the Bermuda market. The Hon. Paula Cox, JP, MP, Minister of Finance, provided regulatory insight into the Bermuda insurance market. Minister Cox noted that first and foremost, “The Bermuda market is a unique partnership between the government and the private sector.” She indicated that her role in government was to protect the financial economy of Bermuda, while “making certain that we prove daily that we are the world’s premiere insurance domicile.” She also said that Bermuda regulators are keenly aware that they must walk a delicate line where they must “emphasize high quality, without pricing themselves out of the market.” Jeremy Cox, BSc, CPA, supervisor of insurance, gave the AAMGA delegates a summary of the Bermuda Monetary Authority’s (BMA) function and its “distinctive role in the island’s insurance regulations.” Cox noted that while Bermuda is home to more than 1,600 insurance companies, it is the 1,200 captives that are the backbone of the economy. He stated that regulation of all Bermuda insurance companies changed dramatically in 2001 when the BMA was separated from the other regulatory authorities of the government. Cox said that it was “important to separate the functions of the BMA and the Minister of Finance to show they were independent of government” and, as a result, “better able to maintain Bermuda’s reputation as a user friendly domicile.” And thus a free and open exchange of information between the BMA and potential captive owners is possible. David Doyle, JP, partner at Conyers Dill & Pearman, also added some details regarding the evolution of the insurance regulation that makes up the Bermuda landscape. Doyle noted that, while many believe that the first insurance regulations were advanced in 1978, there were several earlier regulations in 1923 and 1950 that set the stage for the landmark Insurance Act 1978. He also noted that the Bermuda regulations continue to evolve, and this feature allows Bermuda to continue to progress in the international insurance arena. Several members of the Admissions Committee, which is made up of outside insurance professionals, also provided a brief review of their role. The committee assists the BMA by vetting proposed captive programs. Among other things, committee members will determine if there is a valid reason for formation as well as the key features of the captive structure. This will include an analysis of such things as quality of fronting carriers and reinsurers and any loss forecasts that are provided. Overall, the Admissions Committee serves as the first review of a captive’s feasibility. The second day was spent with several insurance markets that are domiciled in Bermuda. Much of Bermuda’s growth on the international stage has been due in large part to the major reinsurance companies that now call Bermuda home. A number of representatives from these reinsurers were available during the second day. The session began with AAMGA President Johnson providing an overview of the AAMGA to the various reinsurance representatives. This was followed with the AAMGA members spending time with each reinsurer during roundtable discussions exploring areas of mutual interest. Among the reinsurers that were represented were the Imagine Group, Alea Group, MaxRe, Quanta Insurance, Axis Insurance Group, Catlin Insurance, ACE Insurance and XL Insurance. Interest was high in these roundtable sessions and a number of AAMGA members got an opportunity to explore potential opportunities. The final day was set aside to explore the specifics of the alternative insurance market. Several members of the Bermuda Insurance Association provided details on a number of alternative insurance approaches. Price Forbes’ Waring noted how the Bermuda market had changed over the past few years—moving from a captive domicile towards becoming the “Convergence Zone” for the financial and insurance markets. Details regarding the formation and operation of traditional captives as well as rent-a-captives were presented during the session. Many of the advantages of a Bermuda formation were highlighted. Specific examples of how these programs could involve MGAs were emphasized. Good start The three-day conference is a continuation of an overall effort that the AAMGA is making to “get better acquainted with and establish relationships with key players in the Bermuda market,” according to Johnson. He says that they do a similar thing with the London market and he believes it’s important to keep in touch with Bermuda. “It may take some time to figure out how best to work with the Bermuda market, whether its on an alternative risk basis, or finding some primary paper in the U.S., but we will find a way to work with them,” he notes. Tony Glotzbach, president of United Brokers, Inc., and AAMGA member said, “These meetings were an excellent start and a valuable experience, but it will require some time to truly understand how we can best work with the Bermuda market.” Johnson stated that there were several things that stood out in his mind regarding the sessions. He said that he was happy with the reception that the Bermuda market gave them during their visit. “They want to do business, but do it in the right way,” he said. He noted that Minister Cox put it best when she said, “We want to be a big market but we also want to be a solid, stable market as well.” And of course, he pointed out, “The key to the whole thing is the financial strength that the Bermuda market has. It’s this financial strength that is vitally important to us.” He stated that the integrity and professionalism exhibited by Bermuda, “was also very big for me.” Glotzbach said one of the things that stood out for him was that Bermuda was “a model of a public-private working relationship that results in a productive and efficient environment.” He also mentioned the value that the Bermuda market placed on trust. “For me, this is similar to the trust that our companies place in us to underwrite good business, and as such it is very important to any MGA.” “The Bermuda meeting was just another example of what distinguishes the AAMGA in the marketplace,” according to Heinze. “We afford our members the opportunity of having direct access to those experts in the marketplace and those innovators in our industry, who can best assist the MGA in establishing an advantage over the competition.” After all, Heinze says, “Insurance is just the DNA of capitalism and a free market economy,” and not all exposures fit a standard coverage template, so we must continue to be at the cutting edge of the industry. The Bermuda meeting was evidence of that commitment. * |
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