bermuda insurance update 2011 vol4

Latest news from The World’s Risk Capital

2011 Vol. 4

1

Bermuda’s regulation of its major international(re)insurers is largely equivalent with theEuropean Union’s new Solvency II rules,according to a draft report by European assessors.

The report by the European Insurance andOccupational Pensions Authority (EIOPA),published this summer, was hailed by leadingindustry figures as “an important milestone” andas “a tremendous result for Bermuda”.

EIOPA’s findings bring industry regulator, theBermuda Monetary Authority, a large step nearerits goal of winning “third-country equivalency” so

Bermuda international (re)insurers will not be competitivelydisadvantaged when they do business in the EU after Solvency IItakes effect in 2013.

EU assessors visited the Island last May to vet the BMA’s insuranceregulation. Along with Japan and Switzerland, Bermuda is in the firstwave of non-European jurisdictions to be assessed.

The report now advises that Bermuda is largely equivalent – withsome caveats – in its supervision of Class 3A, 3B and 4 insurers on

each of the three assessment criteria of solvency, group supervisionand solvency in the context of European Economic Area groups.

The Association of Bermuda Insurers and Reinsurers (ABIR), whichrepresents 22 major international firms, welcomed the report.

“The BMA has crossed an important milestone as it was found tobe largely equivalent to Solvency II with regard to the prudentialregulatory requirements applied to the internationally active insurancegroups,” said ABIR President Bradley Kading.

“The EIOPA report was particularly important with its findings onsubstantial equivalence for the Bermuda Solvency CapitalRequirement (BSCR) and with the new group supervision regime.

“We recognize much work remains to be done – some technical,some substantive – but we are confident that the BMA will reach itsgoal with regard to equivalence for the internationally active insurancegroup sector, which represents a major source of (re)insurance capacitythat helps makes global insurance markets more competitive,providing real value to consumers.”

EIOPA’s assessors found that supervision of the Class 1, 2 and 3companies of the captive sector was partially or not equivalent withSolvency II under the various criteria.

Continued on page 6 �

Euros lean toward Bermuda acceptance

Bermuda has been a key jurisdiction inthe evolution of insurance and reinsurancemarkets, and the Island will figure substan-tially in the next market development. Thisview was expressed in a wide-ranginginterview with the Bermuda InsuranceUpdate by David Cash, CEO of EnduranceSpecialty Holdings Ltd., a global specialtyprovider of insurance and reinsurance.

Mr. Cash stated: “Bermuda holds aposition within the global reinsurance andinsurance industry that is the envy ofdomiciles such as Zurich and Singapore andI do not see that changing in the next 10years.” He added that the Island had provenits value to global markets and withinvestors.

He said, “I have no doubt that at the nextmarket turn, Bermuda will be at theforefront of the restructuring, both in termsof developing new products/solutions andas the focus of any new investment thattakes place within our industry. There is noother domicile or market that can claim tohave as much support from the financingcommunity as Bermuda does, and thatalone guarantees Bermuda’s relevance to theglobal insurance and reinsurance marketswell into the future.

“The Island has three major roles withinthe global insurance and reinsuranceindustry. Bermuda is the pre-eminentcatastrophe reinsurance market in theworld, a critical large commercial risk

insurance hub and amajor center for newcapital formation withinthe global (re)insuranceindustry.

“It is my sense that eachof these activities willonly become moreimportant in the future.We may be in a near termpricing trough, but thatdoes not change the factthat long term trends towards greaterproperty valu es and increased need forcommercial insurance point towardsgrowing demand for Bermuda’s products.”


CEO says demand for Bermuda products will grow

The Official Journal of the Bermuda Insurance Industry Bermuda Insurance Development Council

Bradley KadingPresidentAssociation ofBermuda Insurersand Reinsurers

David CashCEO Endurance SpecialtyHoldings Ltd.

Latest news from The World’s Risk Capital 2

The Official Journal of The Bermuda Insurance Industry 2011

BCOA members winconcessions

Frequent corporate visitors to Bermuda maysoon take advantage of a program that couldreduce frictional costs of doing business on theIsland.

The Bermuda Insurance ManagementAssociation (BIMA), the umbrella organizationfor captive insurance management in Bermuda,has conducted discussions with the BermudaHotel Association that should lead to a loyaltyprogram for owners of Bermuda captives.

BIMA President Tom McMahon said the dealwas being arranged specifically for the captiveindustry, but if successful, he saw no reason

why this may not be extended to other frequent visitors.Many Bermuda Captive Owners Association (BCOA) members

typically travel to the Island repeatedly every year to participate incaptive company meetings and because they find other usefulinsurance products from the Bermuda insurance market. The planin the works would allow members to obtain superior hotel rates.

CEO of the Bermuda Hotel Association John Harvey said, “TheBHA is delighted to have the opportunity to work with our friendsin the international insurance industry with a view to causing theirhotel experiences to be enjoyable, competitive and successful.”

Mr. McMahon said, “It makes sense that captives with a strongconnection to Bermuda might be recognized by the Island’s hotels

and obtain preferential rates for their executives who come hereseveral times a year.

“They don’t have to choose Bermuda as a domicile for theircaptives, and even then, they don’t have to host their meetings here.They made a conscious decision to bring their business to us.”

The BCOA is the fledgling captive owners’ association that isexpected to eventually provide local officials with more dialogue onissues of particular interest to captive owners. There are a thousandpotential members of the organization and their consensus wouldcarry substantial weight.

Mr. McMahon said, “We can also use that organization to get theowners more engaged so that we can use them as a sounding boardand get their input on matters such as regulatory changes.

“We will be talking about the program to captive owners in theweeks ahead by sending correspondence through their managers toensure they are registered as BCOA members.

“My hope is that we can get this program extended beyond thehotels. I’ve already had some initial discussions with some golfcourses and restaurants. We want these corporate visitors to berecognized for their contribution. They are not just one-off tourists.They are repeat visitors – sometimes four or five times, or maybeseven or eight times a year.

“I think it could go a long way if such repeat visitors felt like theywere being recognized as those who chose Bermuda as a domicile inwhich to do business – and are doing business on the Island overmany years.”

“This type of program provides some recognition that they areconnected to Bermuda and there is a little appreciation that they areremaining with Bermuda in a time when there is a lot ofcompetition for this business.” ❂

Tom McMahonPresident Bermuda InsuranceManagementAssociation

Predictions of a spike in hurricane activityand a rising curiosity at the recent spate ofearthquakes may have correlated with ajump in catastrophe bonds in Bermuda.

Thirteen new Special Purpose Insurers –some of which are catastrophe bonds – wereregistered in Bermuda recently over a fiveweek period, signaling a substantial futurefor new business, as more appear to be ontheir way.

The Bermuda Monetary Authority definesan SPI as: “A special purpose, singletransaction or single customer insurancecompany which assumes (re)insurance risks,and which typically fully funds its exposureto such risks through the proceeds of a debtissuance or some other financingmechanism, where the repayment rights ofthe providers of such debt or otherfinancing mechanism are subordinated tothe (re)insurance obligations of thatvehicle.”

Catastrophe bonds are risk-linkedsecurities that transfer a specified set of risksfrom a sponsor to investors. In earlier daysof risk securitization, cat bonds wereconceived as a way for insurers to ease therisk load they faced from a major

catastrophe that might incur claims thatcould not be covered by premiums andinvestment returns. Cat bonds are typicallyused by insurers in addition to traditionalcatastrophe reinsurance.

The SPIs were a part of a total of 31insurance companies registered in Bermudain the first seven months of 2011 – upnearly 30 percent – and compared to a totalof 36 newly registered insurers for all of2010.

BMA CEO JeremyCox, the Authority’sChief Executive said 12new SPI’s had registeredby the end of July(another one registeredin August), compared toeight SPI registrationsfor the whole of 2010. Anew regulatoryframework toaccommodate SPI’s was

emplaced by the BMA in 2009.Mr. Cox said, "It was exciting to see the

board of the California EarthquakeAuthority (CEA), that state’s quasi-governmental residential earthquake insurer,approve a $150 million catastrophe bondissue via a Bermuda SPI, Embarcadero Re.”

“The choice of a Bermudian reinsurer for

this latest CEA cat bond issue was adeparture from previous normal practice forthem, and a positive indication that marketsseeking quality supervision remainconfident in Bermuda. Our work continueson ensuring the framework enhancementswe are putting in place build upon theeffectiveness of Bermuda’s regulations andalso remain consistent with internationalstandards.”

Shelby Weldon, theBMA’s Director ofInsurance, Licensing &Authorisation, explainedthat most of the newSPI’s were being formedin relation to the record-setting level of globalcatastrophes experiencedduring the first half of2011.

Mr. Weldon added that insuranceregistrations to date are also reflecting newbusiness in both the captive and commercialinsurance sectors of the Bermuda market.

“Compared to 2010, Bermuda has alsoseen a rise in the level of Class 3 and Class3A insurers being registered here,” he said.

The National Oceanic and AtmosphericAdministration predicted just prior to the


Shelby WeldonDirector, Insurance,Licensing &Authorisation - BMA

Cat bonds in play

Jeremy CoxCEOBermuda MonetaryAuthority



Bermuda has already built a center of excellence for SpecialPurpose Insurers (SPIs), its fastest growing industry segment.

Andre Perez, CEO of insurance managers and advisors, HorseshoeGroup said, “We’ve seen increasing activity in the area of catastrophebonds, because investors are largely aware of the sterling Bermudabusiness reputation and our new tailor made regulations for thisbusiness.

“What you have right is now is the increased emergence ofInsurance Linked Security funds. You have fund managers who arenot investing in stocks and bonds, but rather investing in catastropherisks. Several of them, like Nephila Capital, are in Bermuda. Theyare like competitors to the traditional Bermuda reinsurance markets.

“It is surprising how much of these new deals involve the Island.Bermuda has become a central player in this space in the last sixyears. We are involved in one way or another with most of the dealsthat are being considered. This source of growth is a testimony tothe innovative spirit of the Bermuda reinsurance market, and areflection of the sophisticated market participants on the Island.”

He said, “A lot of cat bond sponsors and investors are in Bermudaand more companies are comfortable doing fully collateralizedinsurance structures.

“Horseshoe is a true insurance management company and doesnot manage captives. We saw this as an opportunity when weopened in 2005, as the market and the structures becameincreasingly sophisticated.

“SPI is the fastest growing segment at the moment and the way ofthe future for new business where obligations are fully collateralized.It’s geared mostly toward short tail property and marine catastrophereinsurance business. SPI use is typically focused on collateralized

reinsurance, sidecars and cat bonds. We expect SPIs to be themajority of growth in new company formations in Bermuda, unlesswe get a very large loss event.

“It is difficult to assess the magnitude of collateralized reinsurancedone in Bermuda, as a significant portion of that market is donethrough existing transformers or segregated cell companies.”

The collateralized reinsurance market may compete with Bermuda’sleading catastrophe reinsurers, because they too finance catastropherisks. Cat bonds however are more at the tail-end of the riskspectrum and to a certain extent bring in different capital providersto the reinsurance industry.

Investors once formed new reinsurers, obtained great under-writing and investment returns, then went the IPO route. But therewere underwriting, investment, execution and other risks. Newinvestors sought vehicles that would allow them to take just theunderwriting risks on a fully collateralized basis.

Mr. Perez said, “This is how sidecars were developed. There wereinvestors who didn’t wish to run a company, build an infrastructureand get the big pay-off down the line when the company wentpublic. They liked cat bonds, sidecars and collateralized risk becausethey bear very little correlation to the other parts of their investmentportfolio. When the investment markets went down the tube,reinsurance was fine. So they see this as having a great diversificationbenefit for their portfolio.”

2010 Trading Risk magazine Adviser of the Year, Horseshoemanages several sidecars, transformers, collateralized reinsurers, andcat bonds. It helps hedge funds and pension funds to participate inthe collateralized reinsurance market through their SegregatedAccount Company (SAC), Horseshoe Re. ❂

Island attracts new cat business

The Bermuda InsuranceInstitute (BII) isdeveloping a world classLeadership DevelopmentProgram to be offered inBermuda, in collaborationwith an accrediteduniversity.

This was announced bythe President of the BII,John Wight, at the

opening of the Institute’s Bermuda InsuranceUnderwriting Conference, a two-day forumat the Fairmont Hamilton Princess hotel onthe Island.

The forum was so well received by leadingmarket executives that registration had to becut off early, due to overwhelming demand,after having already becoming oversubscribed.

Opened by the Premier of Bermuda theHon. Paula A. Cox, the forum delved into thesubstance of Bermuda Market responses toemerging issues in excess liability, professionallines, property insurance, healthcare andpolitical risks. It also discussed the state of theBermuda market.

Bermuda brokers considered the notion ofadding value to the insurance transaction,

while leaders of insurance industry associa-tions outlined the focus of their organizations.

The conference culminated with a round-table discussion featuring market executiveswho explored best steps practitioners couldtake to maintain a competitive environment.

But during his remarks, Mr. Wight statedthat he and BII Committee members metwith about 15 leaders of Bermuda’s largestand most prestigious companies, to discussplans for the Leadership DevelopmentProgram.

He said, “It was important to obtainfeedback from the BII’s member companiesto ensure the program developed will meetthe needs of their future leaders.

“The objective of this program is to providemeaningful leadership skills for individualswhom employers have determined have greatpotential to lead divisions or companies. Insome cases, these may be individuals who arevery technically competent. Howevertechnical expertise does not in itself ensurethat a manager can successfully lead others.

“The response that we have received fromour member companies and other importantstakeholders has been extremely positive, andwe are very much looking forward to sharing

with Bermuda more about this LeadershipProgram as it gets further refined.”

Mr. Wight recounted the origins of theinsurance business in Bermuda and the role ofthe BII, a 40-year old school for insurancestudies that also carries charity status.

He said, “Our role in the market is tofacilitate local training and education of ourinsurance workforce. We offer seminars,workshops and classes and offer exams forinternationally recognized insurance designations. Thousands of people inBermuda have used the services of the BIIover the years, and we are very proud to havesupported their careers in this way.

“We organize networking lunches, andannually recognize individuals at a gala blacktie event for lifetime achievement, insuranceor reinsurance person of the year, and younginsurance or reinsurance person of the year.”

To give some perspective on the success ofthe BII in assisting the educational goals ofrising insurance professionals, he referred to this year’s BII’s annual awards luncheonwhich recognized those who successfullycompleted exams through the BII in 2010.

He said, “A total of 127 people achieved Continued on page 14 �

Leadership initiative

John WightPresident of theBermuda InsuranceInstitute



Bermuda’s “Class of 2001” survivorscelebrate their 10th birthdays this year, adecade after the Island came to the rescue ofthe global property and casualty(re)insurance industry.

The September 11 attacks, in whichterrorists flew hijacked airliners into theTwin Towers of Manhattan’s World TradeCenter and the Pentagon, left the worldstunned and the insurance industry severelylacking in capacity.

In response to the emergency, more than$11 billion in capital poured into Bermudain the space of three months, as the bestbrains in the business decided the Island wasthe right place to create their new insurancecompanies.

Those that still exist as stand-alone entitiesinclude AXIS Capital, Arch Capital, AlliedWorld Assurance Company, EnduranceSpecialty Holdings and Montpelier Re. Allhave expanded their operations far beyondBermuda’s shores and some have evolved intotruly diversified companies, both by businessline and geography.

They have passed the tough survival test ofthe past decade, which included the heavyhurricane losses of 2004 and 2005, thefinancial crisis of 2008 and consequentrecession, and the record first-halfcatastrophe losses of 2011.

Frank D’Orazio, Allied World’s President,Bermuda and International Insurance,believes theuniquecircumstancessurrounding9/11 helped theClass of 2001lay firmfoundations.

“Theenormity of theimpact of 9/11on the marketwas heightenedby the fact thatit immediatelyfollowed the extended soft market and poorunderwriting results of the late 1990s,” Mr.D’Orazio said. “The market had alreadyrecognized a need for correction and hadbegun a process of slow transition.

“However, the September 11 attackscorrelated market-changing loss across a spectrum of product lines and disciplinesfairly instantly. The result was a prolongedand comprehensive market opportunity for Class of 2001 companies to form and thrive.”

The 9/11 losses spanned a range of

business lines on a scale and complexity thathad never before been experienced by theindustry.

“There were simultaneous losses inproperty, aviation, terrorism, businessinterruption, workers' compensation, lifeand personal accident line, creating broadcapacity shortages and corresponding broadopportunities for the newcomers.

“Nearly instantaneously, brokers and clients were introduced to a new group ofcompanies focused on providing meaningfulcapital to capacity-strained product lines –and they could all be accessed within theconfines of a few city blocks,” Mr. D’Oraziosaid.

“The Class of 2001 launched multilineinsurance and reinsurance platforms andquickly diversified their operations bothgeographically and by product disciplinebringing balance and additional scale to theBermuda market.”

Bermuda had seen capital influxes before2001 – most notably during the excessliability insurance crisis of the mid-1980sand in the wake of Hurricane Andrew in1992.

But Mr.D’Orazio saidthe late 2001wave“accentuatedthe appeal ofBermuda” inthe globalmarketplace.

“Expediencyin bringingcapital to themarketplacewas criticaland Bermudaproved to be the perfect incubator,” headded.

Caroline Foulger, Insurance Leader andPartner at PricewaterhouseCoopers in Bermuda, said 9/11 was somethingcompletely different from other market-dislocating events in that it altered theperception of risk, raised awareness of thepotential impact of terrorism and sparkedsharp premium rate increases across manylines.

“This was the largest of the ‘Bermudawaves’ in terms of both capital dollars andnumber of new starts and catapultedBermuda into the group of top threereinsurance jurisdictions and the cat riskcapital of the world,” Ms Foulger said.

“This significant boost in both reputation

and scale has been a key contributor tointernational business in Bermuda and therelated economic growth of our country overthe last 10 years.”

Of the major players to emerge from theClass of 2001, the biggest today is AXIS.Last year, it wrote $3.75 billion of grosspremiums and by June 30, 2011, it hadshareholders' equity of $5.3 billion.

Led by CEO and founder John Charman,it employs some 700 people and has offices in the US, Europe, Canada, Australia and Singapore, as well as Bermuda.

Arch, which focuses on specialty lines ofinsurance and reinsurance, wrote grosspremiums of $3.27 billion in 2010 and hadbuilt up shareholders' equity of $4.12 billionby the middle of 2011. It writes businessthrough Bermuda, North America andEurope, and has also accessed the MiddleEast market through Gulf Re, its $400million joint venture with the GulfInvestment Corporation.

Allied World, created by AIG as a $1.5billion start-up has expanded strongly tohave shareholders' equity of just over $3billion by the middle of 2011 and wrotegross premiums totaling $1.76 billion lastyear. Allied maintains substantial operationsin Bermuda despite moving its holdingcompany to Switzerland in 2010, andprofessional liability coverage is one of itsstrengths.

Endurance is a diversified specialty insurerand reinsurer which wrote $2.05 billion ingross premiums last year and at June 30 hadshareholders' equity of $2.67 billion. Its 800employees write business through offices inBermuda, the US, Europe and Singapore.The company is led by CEO David Cash, aBermudian who joined the company atinception as Chief Actuary.

Montpelier Re wrote $720 million in grosspremiums last year and had accumulatedshareholders’ equity of $1.62 billion by themiddle of 2011. The company underwritesbusiness in all major markets through itsLloyd’s Syndicate 5151 and Bermudaplatforms.

What’s next for the Class of 2001? Therecould be exciting times coming up,according to what Mr. Charman told Risk &Insurance magazine.

“In the next five years, you will see thesecond stage of development of the strongerplayers from 2001,” Mr. Charman said."There is going to be some M&A activityand two or three very major globalbusinesses will emerge." ❂

Market growth observed

Frank D’OrazioPresidentBermuda and InternationalInsurance, Allied World

Caroline FoulgerInsurance Leader and PartnerPricewaterhouseCoopers



New head of BCCThe success of the Bermuda Captive

Conference has forced the organization to amore de-centralized approach to running anevent that has grown quickly in seven years.

And as part of this advance, Jill Husbands,the Marsh Head of Office for Bermuda, hasstepped down as the Chairman of theBermuda Captive Conference after severalyears to take on more specific duties on theBCC Committee.

The new Chairman is Peter Willitts, thePresident of Liberty Mutual Management(Bermuda) Ltd., and a former President of theBermuda Insurance Management Association(BIMA).

Coming off a great conference whichfeatured nearly 600 participants and some 65owners, Mr. Willitts complimented MsHusbands on having done a superlative job ofestablishing the event on the captiveconference calendar.

He said, “Jill will remain involved, headingup an important sub-committee. She has

made such a great contribution to the Bermuda market, not justwith the development of the BCC, but also as an ExecutiveMember of the Bermuda Insurance Development Council (IDC).”

Mr. Willitts said that new business development, particularly inCanada, Latin and South America might require a wider focus forthe BCC Committee. We see a lot of future growth there, as wellas growth in traditional markets. We must provide programmingthat is relevant to all parties interested in captive formation.

“Not just a captive domicile, we have one of the largestreinsurance markets in the world in Bermuda.

“Also, we take legal and regulatory controls much moreseriously than some other captive domicilesand as a result we have the A-list of captives.We must continue to cater to that market ofleading clients.

“We’ve done well to attract top companies and that will always be our drive. We have nodesire to win a race to the bottom for captives.We are best suited for the serious-mindedcompanies that have business reasons forestablishing their captives.”The new Committee includes sub-committeeschaired by industry stalwarts:• Finance – Marie Harte, Liberty Mutual• Information Technology – Renee Lewis, HSBC• Vendor Committee – Jill Husbands, Marsh• Education Committee – Tom Kelly, KPMG• Events Committee – David Gibbons, PwC• Marketing Committee – Cyril Whitter, IndependentManagement Limited• Agenda and Sponsorship Committee –Tom McMahon, CedarManagement Ltd., BIMA President. ❂

Jill HusbandsMarsh Head ofOfficeBermuda

Peter WillittsPresidentLiberty MutualManagementBermuda Ltd.

Marie HarteSub-CommitteeChair, BCC

A hard market could bring a slew of new property catastropheparticipants to the Island, and a Bermuda insurance manager hasnoted that there appears to be substantial sums of inactiveinvestment money waiting for the right opportunity.

Terrett M. West is President of Windward Management Ltd., anindependent firm that provides customized insurance consultancy,brokerage solutions and risk and asset management services fordemanding risk profiles.

He told Bermuda Insurance Update, “There is a lot of capital sittingon the sideline waiting to form new companies – maybe to supportthe ILS (Insurance Linked Securities) market. But that is still a waitand see situation, with some more of the hurricane season to go.

“There is no doubt that there are plans being made and some havea sense that the market is going to turn and we might see anothertranche of new Bermuda entities.”

There have been differing opinions expressed recently about thelikelihood of a hard market, and Mr. West said that his contacts werebetting against it.

But he said, “When the last storm pushed its way up the EastCoast, many thought that it would prove to be the trigger, but itdidn’t.

“A hard market would be great for the captive insurance industry,because it would emphasize to corporate executives the value of acaptive insurer.”

Mr. West said that there was a changing landscape in the insurancebusiness. In captive insurance, there were something like 50domiciles now competing for captive insurance business, whileSwitzerland and other countries were seeking to grow their insuranceand reinsurance business.

He said the successful jurisdictions goingforward will be the ones who best balance theincreasing push toward more onerous regulation,with regulatory efficiency and flexibility.

He said, “Companies don’t have to form acaptive, or site it in your domicile. The captiveindustry will have to demonstrate the cost benefitto a client of setting up a captive. And thencompeting domiciles can’t make it too difficult for people to commit to setting up that company in their locale.

“What grew the captive and insurance management business wasflexibility and personal contacts. Of course flexibility is reduced asregulation grows. There’s always a balance between a successfuleconomy and the level of regulation. There is plenty of evidence toshow that the less-regulated and the most efficient communities dobetter than the highly taxed and highly regulated jurisdictions atattracting and growing successful companies in this business.

“Even Bermuda, having been hugely successful by providing easyaccess to innovative insurance products, has to understand that themore regulation, the more requirements, the more inflexibilitydemonstrated, the less likely business will be obtained. That’s beentrue from day one and it will continue to be true.

“Bermuda has to be careful not to move too far to the heavilyregulated and heavily structured side, beyond which clients will findit more cost effective to do business elsewhere.

"The industry's professionals and the government are workingtogether to evolve the right practices and policies to meet ourinternational obligations and offer the highest quality of service andfunctionality." ❂

Terrett M. WestPresident WindwardManagement Ltd.

Environment seen as key to new business



By Jeremy Cox CEO – The Bermuda Monetary Authority

The market is aware by now that theEuropean Insurance and OccupationalPensions Authority (EIOPA) has publishedpreliminary recommendations based on itsSolvency II equivalence assessment ofBermuda. EIOPA concluded that Bermuda’s

supervisory regime for commercial insurers, that is Class 4, 3B and 3Afirms, is broadly equivalent with Solvency II principles with somecaveats, which we anticipated.

In its report, EIOPA also made a distinction between the commercialsector regime and supervision of the captive sector, i.e. finding thecaptives’ regime non-equivalent with Solvency II principles. This wasalso anticipated and, in the Authority’s view, appropriate given thevastly different risk profiles of the commercial and captive sectors.Importantly, EIOPA found alignment of our regime with Solvency IIprinciples in key areas, such as the scope of group supervision and thesolvency regime for groups.

So what does this mean for Bermuda? In practical terms, thisoutcome means there will be no change to the general direction andplans we have already shared with the market on regime enhancementsfor Class 4, 3B and 3A firms. Also, we have not drastically changed thetimelines set for the development and roll-out of these initiatives. We are, however, monitoring developments in the EU, andinternationally, and will build in more flexibility to our timeline, if and when it becomes appropriate to do so.

Overall, the EIOPA report validates the work we have alreadyidentified for action and is helpful in identifying specific areas forfurther enhancement in the Bermuda regime. Given that some of thework streams were still in progress at the time of the assessment, werecognize that our work-plan, while well advanced, must continue tomove forward. We’re actively developing proposals to address the

caveats, and remain on track with our existing plans for frameworkdevelopments. As always, we will conduct this work in full consultationwith industry.

Therefore our original timetable for completing the major regimechanges for the commercial market by the end of 2012 remains inplace, and also aligns with the next steps in the Solvency II process.

EIOPA has pledged to review their preliminary assessments after theLevel 2 implementing measures for Solvency II are finalized.

Issuing of the final Level 2 implementation measures will helpprovide clarity on practical application of the Directive to all parties.Currently this is planned to take place in the second half of 2012, afterwhich EIOPA will send their final advice to the EU Commission. Thefinal decision on equivalence rests with the EU Commission at the endof 2012.

The outcome from EIOPA’s preliminary assessment is a positive firststep in the equivalence process for Bermuda. As we continue toprogress our regulatory agenda, we remain focused on ensuringBermuda correctly balances workable supervisory regimes withinternational expectations. Our priority is to maintain a pragmatic,risk-based and proportionate approach to regulation for firms inBermuda.

Consistency with international standards means broad equivalence interm of regulatory outcomes, not a line-by-line duplication ofrequirements. We are mindful of EIOPA's position regarding theirSolvency II assessments – that all applicable criteria under the Directiveneed to be met for a positive equivalence assessment; however, apositive assessment does not require that every indicator be fulfilled.Preliminary results from EIOPA's Solvency II equivalence assessment ofBermuda support this position.

While we recognize there is still work to do on our regulatory changeprogram, we are well advanced in our progress. We appreciate thesupport we have received from the industry throughout this process,and will continue to consult as we remain focused on doing what isright for Bermuda. ❂

From the Desk of the Regulator

Euros lean toward Bermuda acceptance�Continued from page1

The differentiation between the sectors in the report has raised hopesthat Bermuda can secure equivalency for its commercial insurancesector while still maintaining less stringent supervision of captives, inkeeping with their lower risk profile.

Richard Lightowler, who is the Lead Partner inKPMG’s Insurance Department in Bermuda,suggested the report sets the stage for a “segmentedequivalence” approach and added: “This is atremendous result for Bermuda.

“Of real significance is the fact that the draftessentially provides for segmented equivalence, thatis, equivalence for the commercial sector withoutrequiring the unnecessary burden of a Solvency IIequivalent regime for the captive sector.

“All constituents of the market should be able totake comfort that they will be appropriately

regulated. The commercial sector will be required to meet the exactingstandards of Solvency II, with the Class 1, 2 and 3 companiescontinuing to be regulated commensurate with their limited purposeand therefore risk.

“In my view, this outcome truly reflects the concepts of risk-basedand proportionate regulation.”

The BMA and the captive industry believe that Bermuda’s current

regime for captive regulation is appropriate, and that stricter SolvencyII-type regulation is not necessary for companies that predominantlyunderwrite the risks of their own corporation owners.

Thomas McMahon, President of the Bermuda InsuranceManagement Association, an organization which represents thecaptive industry, had a positive view of the assessors’ initial findings.

“I believe the EIOPA report contains welcome indications for theBermuda market,” Mr. McMahon said.

“For our commercial sector, the news is very positive for equivalence.For our captive sector, I think that the fact that the distinction hasbeen made by EIOPA between our commercial sector and our captivesector is a significant development and obviously makes sense whenone looks at the entirety of the Bermuda market.”

The BMA announced that it would work on EIOPA’srecommendations for further regime enhancements in the comingmonths. The Authority also noted EIOPA’s comments on differentmarket segments.

“EIOPA has appropriately recognized the diversity of the Bermudamarket by providing views on both captive and commercial insurersupervision in Bermuda,” the BMA stated.

“This was not unexpected, given the significance of both segments ofthe market here, and it was useful to note EIOPA’s recognition that theBermuda captive market has a strong focus on the US as opposed tothe EU market.”

The European Commission has reserved a final decision onBermuda’s third-country equivalence bid for 2012. ❂

Richard LightowlerLead PartnerKPMG InsuranceDepartment



At a Special General Session, energymutual Oil Insurance Limited (OIL)shareholders approved various changes tothe basic property, well control andpollution coverages as well as for theDesignated Named Windstorm (DNW)program. All proposals passed by theshareholders will take effect January 1.

Concurrent with the shareholders votingto establish separate Aggregation Limits forDNW and for all other events, the board ofdirectors authorized the per occurrencelimit to increase to $300 million from $250million for all events besides DNW. DNWper occurrence limits will remain constantat $150 million part of $250 million. Theboard also set the newly split AggregationLimits to $900 million for non-DNWevents and $750 million for DNW events.

CEO Robert Stauffer commented: "Withover 50 of the world's largest energycompanies as members, OIL continues tobe one of the world's largest providers ofproperty, well control and third party

pollution cover to the energy industry.“During our most recent membership

survey, the majority of our members askedthat we consider increasing our peroccurrence and aggregation limits. As amutual, it is critical that we remainresponsive to our member needs and toprovide meaningful capacity to the industry,especially as our member's asset exposurescontinue to increase.

“As such, we believe these limit increasesand modifications are extremely valuable toour current membership and will also beattractive to those considering membershipin the future".

COO George Hutchings stated "TheCompany has and will continue to regularlyevaluate the overall value proposition itprovides to its members with an eye toperiodically improving it over time. We arecertainly pleased to have the members'support in providing these increased limits."

OIL offers more than eleven billion

dollars in totalproperty capacitywith more than 90percent of coverageeither being placedor advised by theglobal energybrokerage network.Members aremedium to largepublic and privateenergy companies with at least $1 billion inphysical property assets and an investmentgrade rating or equivalent.

Products include Property (PhysicalDamage), Windstorm, Non GradualPollution, Control of Well, Terrorism,Construction and Cargo.

The industry sectors that OIL protectsinclude Offshore and Onshore Exploration& Production, Refining and Marketing,Petrochemicals, Mining, Pipelines, ElectricUtilities and other related energy businesssectors. ❂

Energy insurer approves changes to cover

George HutchingsCOOOil Insurance Limited

Torus takes on new planTorus Insurance Limited was poised to complete a series of

strategic moves designed to build a foundation for future growth.The latest step was seeking the acquisition of London-based

Lloyd’s Syndicate 1301 and its corporate members BroadgateUnderwriting Limited and Broadgate Underwriting 2010Limited.

An approved acquisition would enable Torus to write specialtybusiness in Lloyd’s as early as the start of the new year.

This comes after Torus earlier dealt its renewal business for theirbook of property catastrophe reinsurance to Bermuda-basedreinsurer Montpelier Re.

With the latest move, Torus will retain Broadgate’s current teamof underwriters, claims handlers and syndicate management underthe direction of Active Underwriter, Bob Katzaros.

Clive Tobin, Group Chief Executive ofTorus said the Lloyd’s acquisition was animportant milestone for the company.

He said, “With the acquisition of Broadgatethe key global platforms required to achieveour strategy of building a leading specialtyinsurer are essentially now in place.”

Broadgate specializes in a range of nicheshort tail business across several product lines,including accident and health, property directand facultative, property treaty, specie,property schemes and bloodstock.

“The Broadgate team is highly experiencedand we see excellent opportunities to link their products anddistribution with Torus’ current product offerings in the US andEurope. There is a strong strategic and cultural fit and we look

forward to working with the team to further client and marketrelationships,” he added.

Mr. Katzaros commented, “This agreement aligns twocomplementary insurance platforms and will allow the Broadgateteam to continue augmenting its specialty capabilities as part ofTorus’ growth plans in this area.”

In a related move, Torus had previously reached an agreementwith Montpelier Reinsurance Ltd., the Bermuda reinsurancesubsidiary of Montpelier Re Holdings Ltd., a leading provider ofshort-tail reinsurance and other specialty lines, to sell the renewalrights of its property catastrophe reinsurance book of business.

Under the agreement Torus will also provide sidecar capacity toMontpelier, effective January 1, 2012.

Mr. Tobin said, “Torus’ strategy remains to build a globalspecialty insurer with niche exposure to reinsurance. With thecontinued expansion opportunities we see in our insuranceoperations, along with our modest ambitions for nichereinsurance, we have determined it is more effective for ourcatastrophe reinsurance business to beintegrated into the larger Montpelier portfolio,and for us to continue our catastrophereinsurance participation through a sidecararrangement.

“We will continue to write casualty andspecialty reinsurance through our Bermudateam under the experienced leadership ofDavid Whiting.”

Christopher Harris, President and CEO ofMontpelier commented: “The acquisition ofthese renewal rights and accompanying sidecarcapacity further enhances our position in one of our core markets at a time when conditionsare visibly improving.” ❂

Clive TobinGroup ChiefExecutiveTorus InsuranceLimited

David R. WhitingSenior CasualtyReinsuranceUnderwriterTorus InsuranceHoldings Ltd.



Today, in excess of $100 million in limits isavailable for product recall coverages from theBermuda insurance market. Coverage is typicallyoffered on an excess basis, the wording can be ona follow form or stand-alone basis.

Vice President of Artex Intermediaries, CarlDaly, explains why this is importantinformation.

Recent deaths in Germany to the E.Colibacteria have again underscored the ease andspeed with which contaminated food can

affect populations across large areas. Consumer confidence in aparticular product can be literally decimated overnight. Beingengulfed in such a firestorm is every food company’s nightmare.

The threat to consumer health and the potential for costlylitigation are obviously major concerns; however, the moreimmediate considerations include what actions are needed tominimize the risk exposure? What are the costs of recalling thecontaminated products? And what is the loss of profits followinga multi-country product embargo?

Even with a crisis plan, such an event can have a severe negativeimpact on a company’s bottom line. The potential damage tobrand and reputation from incorrectly handling a crisis can beequally catastrophic.

Increasing ScrutinyProduct recalls are increasing as companies come under greater

scrutiny from regulators, consumers and the media in a bid toensure that products placed on the market are safe. In the United States, this resulted in the passage of the Food SafetyModernization Act (FSM) in January 2011. This act gives theFood and Drug Administration (FDA) authoritative jurisdictionover food contamination issues to ensure that the food supply issafe. The objective is to shift the empowerment of federalregulators from responding to contamination to preventingcontamination.

FSM Act’s first new regulations were introduced in July,empowering the FDA to:1) detain for up to 30 days any food it believes to be adulteratedor misbranded, and,2) require importers to inform them if any country has refusedentry to the same product.

Such regulation is long overdue and will no doubt lead tosimilar regulations whose aim will be to reduce the chance ofcontaminated food stuffs reaching consumers. Food and beveragecompanies whether they be manufacturers, processors, growers,packers or branded finished product manufacturers, will all besubject to an increased level of scrutiny and heightenedsusceptibility for recall.

Need for plan UpdatesIt is imperative that all impacted food companies update their

crisis plan to take into account for increased recall risk. Part ofthis planning process should include an evaluation of the productsrecall coverages that are currently available and an understandingof what the coverage provides.

The most comprehensive policies currently available providecoverage in the event of the following:

• accidental contamination• malicious contamination• product extortion• forced and/or government recall• adverse publicity

Covered losses can include but are not limited to:

• pre–recall expenses• loss of gross profits• product rehabilitation• increased cost of working expenses• monetary demand arising out of product extortion• recall costs involved in withdrawing and transporting

products, reworking or replacing products, relabeling, redistribution and consultant fees.

Additional unique services that insurers can provide include:

• emergency hotline• priority 24/7 crisis response• Initial free consultation and familiarization• Pre-incident consulting projects including areas such as

recall/crisis planning/HACCP review/training and mock recalls. ❂

Carl DalyVice PresidentArtexIntermediaries

Insurance against product recall

Subscribers of Meetings & Conventions,one of one America's most influentialmagazines for meeting planners andprofessionals, recently voted the BermudaDepartment of Tourism as one of theworld’s best at accommodating corporateand association meetings, trade shows andincentive travel programs. Through anannual survey, the meeting plannersrewarded the destination with thepublication’s 2011 Gold Service Award.

This most recent recognition marks the20th time the Island has won the covetedaward.

“We are incredibly honored and excitedthat Meetings & Conventions’ readers haveselected Bermuda for the 2011 Gold ServiceAward,” said Billy Griffith, Bermuda’sDirector of Tourism. “Our group salesdepartment takes great pride in highlightingwhat the Island has to offer for planners –from proximity and top-notch meeting

space to a range of accommodations anddiverse attractions for groups to explore.” Published with the November 2011 issue,the supplement announcing the industry’sbest is used throughout the year bysubscribers planning meetings, incentivesand conventions. Bermuda is also a memberof the Meetings & Conventions’ GoldService Hall of Fame. This elite club onlyaccepts tourism boards that have won atleast 12 Gold Awards and truly measures adestination’s excellence and endurancewithin the meetings industry. ❂

Kudos for tourism planners



Howden Broking Group, part ofinternational insurance and reinsurancedistribution group Hyperion, has openeda new wholesale and retail operation inBermuda, headed by Bermuda marketbroker Kari Minugh.

Ms Minugh joined Howden after over10 years of wholesale and retail brokingexperience on the Island, having worked

for a number ofbrokers in themarketincludingMarsh, HSBCInsuranceManagementandFreisenbruch-Meyer InsuranceServices.

She stated:“The benefits to

both wholesale and retail clients areimportant ones. We will offer Bermudianretail clients London market access andexpertise in sectors where Howden isalready extremely strong – for example inthe provision of management liabilityinsurances to the fund and investmentindustry – and will combine it with localservice from one, streamlined team.

“Howden’s wholesale network providesaccess to innovative products andexpertise in key insurance markets.

“Bermuda is home to the largestoffshore insurance market and thus ourBermuda operation will enhanceHowden’s global capabilities, offeringclients direct market access and in-depthmarket intelligence.

“With operations in every majorinsurance market and expertise in eachindustry sector, Howden will be able toeffectively coordinate our clients’programs in the global marketplace. It isan exciting prospect, and I am lookingforward to working with the market tofurther develop our proposition.”

Tim Coles, Chief Executive Officer ofHowden Broking Group commented:“Establishing a permanent presence inBermuda is another exciting step in theGroup’s growth strategy.

“Bermuda is an important internationalmarket, particularly for our wholesaleclients in North America, and havinglocal expertise allows us to furtherstrengthen the solutions we are able tocreate for them.”

Mr. Coles added: “Kari’s experience inthe Bermuda insurance market along withher reputation for client service and herentrepreneurial spirit are an excellent fitfor Howden.”

Howden is a global provider of a rangeof specialist insurances with over 470people in more than 25 offices across theworld. The group comprises a wholesaleand reinsurance model built on a series ofglobal hubs, and a local retail capability ina number of countries.

The company, which was namedInsurance Broker of the Year at the 2011British Insurance Awards, joins 30existing brokerage firms on the Island.

Ms Minugh said, “The Bermudamarket is a proven leader in coveragesolutions and financial strength and hasbeen able to effectively respond to thelargest industry catastrophes. A Bermudaoperation enables us to offer our clientsdirect access and expertise now in eachkey market, a streamlined approach toprogram placement.

“Howden's global wholesale practiceoffers placement and claims settlementservices to brokers and intermediariesworldwide. We have specialized teamsacross major lines of insurance – property,casualty, professional lines and in variousindustry sectors including Energy,Utilities, Transportation, Commercial/Residential Real Estate, Healthcare,Manufacturing, Financial Institutions, toname a few.

“While our client list includes brokersfrom around the globe, the majority ofour wholesale business is derived fromNorth American brokers. The Bermudaoffice will also offer retail services byassisting local companies with their D&Oand Professional Indemnity insuranceneeds.

“Bermuda's reputation for being aleading financial jurisdiction has attractedand continues to attract many companies,– investment companies, fundadministrators, financial servicescompanies, trust companies, etc. We willoffer clients direct market access forD&O and Professional LiabilityInsurance.

“I started my insurance career in 2001,with the majority of the years spent as anexcess casualty broker with large brokinghouses on the Island, handling Fortune500 accounts across various industrysectors.” ❂

New Bermuda broker Law firm winsaward

International law firm Appleby has wonthe International Legal Team of the Year for2011/2012 at The Society of Trust andEstate Practitioners (STEP) Private ClientsAwards.

Appleby landed the award at a specialceremony held in London in Septemberattended by over 670 professionals in trusts,estates and private client work.

The award reinforced Appleby’s position asa leading provider of private client and trustsservices. The firm said in a statement that ithad achieved recognition worldwide for itsservices, offering clients choice, flexibilityand practical solutions.

In addition to the International LegalTeam award, Appleby was also shortlistedfor the 'Owner-Managed Trust Team of theYear' by STEP at the ceremony, and theGroup was recently named one of the top 25most admired companies 2011, by PrivateClient Practitioner magazine.

The statement said the STEPPrivate ClientAwards highlight excellence among privateclient solicitors/attorneys,accountants,barristers, bankers,trust managers and financialadvisers.

The awards werejudged by a panel of 16 supported by a panel of experts whichinclude over 100 industry professionalsworldwide.

The judges commented that Applebystood out as being highly client driven, withan emphasis on providing holistic adviceencapsulated by a focus on achieving ‘trustedadvisor’ status.

The Society of Trust and EstatePractitioners (STEP) is a unique professionalbody providing members with a local,national and international learning andbusiness network focusing on theresponsible stewardship of assets today andacross the generations.

STEP provides education, training,representation and networking for itsmembers. Members advise clients on thebroad business of the management ofpersonal finance. ❂

Kari MinughDirector, Howden InsuranceBrokers (Bermuda) Limited

Vanessa SchrumPartnerAppleby



The first “Health Information Czar”, Dr. David J. Brailer is theguest speaker at the Bermuda Market luncheon this year at theAmerican Society for Healthcare Risk Management (ASHRM)Annual Meeting (October 16-19) in Phoenix, Arizona.

The former United States public health official received thenickname under the administration of President George W. Bush.

Dr. Brailer is largely credited with ushering the America’s healthcare industry into the digital age.

His Bermuda market speech may focus on innovation and thefuture impact of technology in health care delivery. The wideinterest in this area comes as the implementation and meaningfuluse of electronic medical records has also become a hot topic.

The event is sponsored by the Bermuda Insurance DevelopmentCouncil and the Bermuda Healthcare Market – a network ofBermuda-based brokers and underwriting companies, whospecialize in tailor-made healthcare professional liability insuranceand reinsurance for hospital clients.

The Bermuda market has been writing health care liabilityinsurance on a high excess basis since its beginnings in 1986.However, the events of September 11, 2001 and the resulting hardinsurance market prompted a large influx of insurance companiesinto Bermuda, dubbed the “Class of 2001”.

These companies helped to stimulate and expand Bermuda’shealth care insurance capacity and underwriting flexibility. Formany US health care providers, Bermuda’s capacity remainsindispensible to this day.

A statement from the Bermuda Healthcare Markets noted: “Inrecent years, we’ve enjoyed spirited talks at the luncheon fromWashington insiders who have discussed emerging issues of (andobstacles to) US health care reform. This focus has not changed.“Now, more than ever, health care reform remains at the forefrontof all US health care providers’ minds.

“The Bermuda market anticipates a great deal of interest in this,especially as another very “hot topic” within the health careindustry is the implementation and meaningful use of electronicmedical records.”

Currently Dr. Brailer is Chairman of Health Evolution Partners,a health care private equity firm based in San Francisco,California. Under President Bush, his official title was NationalHealth Information Technology Coordinator after beingappointed on May 6, 2004 as a result of an executive order whichcalled for widespread deployment of health informationtechnology within ten years.

He remained in his government post for two years following theproscribed period, but started a private equity fund in 2007 calledHealth Evolution Partners with a stated purpose of pursuing"investments in cost-effective, high-quality health care". TheCalifornia Public Employees’ Retirement System (CalPERS)invested $700 million in the fund.

For ten years prior to his appointment in the Bushadministration, Dr. Brailer directed CareScience, Inc., a providerof care management services which was focused on reducingmedical errors.

He led the company in establishing the nation's first health careApplication Service Provider (ASP) and creating a caremanagement business process outsourcing partnership. He alsodesigned and oversaw the development of one of the firstcommunity-based health information exchanges in Santa BarbaraCounty, California.

Dr. Brailer was a Senior Fellow at the Health Technology Centerin San Francisco, a non-profit research and education organizationoffering information and resources to health care organizationsabout the future impact of technology in health care delivery. In2010 he joined the board of Walgreens. ❂

Healthcare info czar to speak

RenRe CEOempanelled

The Chief Executive of a company thathas been one of the world’s most successfulwriters of reinsurance has joined a panel fora high level discussion at the next annualmeeting of the Property Casualty InsurersAssociation of America (PCIAA).

Neill A. Currie,President and ChiefExecutive Officer ofRenaissanceRe HoldingsLtd. will take part in adiscussion on “AssessingReinsurance Risk in anIncreasingly VolatileWorld”.

During the conference,he will be arepresentative of the

Association of Bermuda Insurers and

Reinsurers and the Bermuda InsuranceDevelopment Council (IDC).

The panel will bring together executiverepresentatives from among reinsurers andbrokers to tackle the complex issue of riskand assessment management from theirperspective. They will focus on howexecutives should measure and mitigate riskin an era of continuous disruption andcatastrophic loss.

Neill Currie was a co-founder ofRenaissanceRe in 1993, and served as aSenior Vice President until he retired fromthe company in 1997. He re-joined thecompany in July 2005 as an Executive VicePresident, to oversee the firm-widemarketing and client relations activities, aswell as leading the Specialty Underwritingbusiness.

In November 2005, Mr. Currie assumedthe role of Chief Executive Officer ofRenaissanceRe Holdings Ltd. He becamePresident and CEO in 2008. Mr. Currie hasserved as a director of the company since

November 2005.Mr. Currie previously served as a director

of Platinum Underwriters Holdings, Ltd. Prior to joining RenaissanceRe in1993, he was Chief Executive Officer ofG.J. Sullivan Co. Atlanta, a privatedomestic reinsurance broker. From 1982through 1992, Mr. Currie served as


Neill A. CurriePresident and CEORenaissanceReHoldings Ltd.

General Peter Pace (Ret.) USMCFormer Chairman of the Joint Chiefs of Staff



CEO says demand forBermuda products willgrow�Continued from page 1

With regard to recent developments, Mr. Cash believes the experience of HurricaneIrene occasioned an increased appreciationby public officials as to the threat thatcatastrophe’s pose to the public at large.

He said, “For a city such as New York, afull force hit by a storm such as Irene wouldhave been terribly damaging and almostcertainly would have cost the public manylives. With that as a backdrop it was clearthat both municipal and federal officialswere very focused on ensuring there was aproper response in terms of alerting thepopulation to the danger and ensuring thatresources were standing by to react. Theperformance in New York was in markedcontrast to that of New Orleans in 2005and was a great step forward in terms ofgovernment preparedness.”

Mr. Cash commented that the public atlarge appears to have a good understandingof the benefits that insurance provides andan appreciation that it is the individual’sresponsibility to purchase the insurance.

He said, “In the case of Irene, manyhomes were damaged by flood waters, aperil not covered in the standardhomeowners policy and consequently, therewill be instances where individuals gouncompensated for the loss as they had notpurchased flood cover from the FederalFlood program. As I have watched the presscoverage of Irene, it has been noteworthy tome that in most cases the media, whilesympathetic to those homeowners that havesuffered an uninsured loss, is not suggesting

that the insurance industry let thosehomeowners down.

“If we can call the absence of criticism agood thing, then it does appear to me thatour industry took a step forward in the eyesof the public this year.”

He agrees that insurance purchasinggrows in relative magnitude as societiesdevelop. In developing countries there isinvariably a phase of growth during whichindividuals and businesses start to allocate ahigher percentage of their income topurchase property insurance, life insurance,commercial insurance and in time, liabilityinsurance.

He said, “This effect is increasinglyevident in Asia and I suspect we will see adramatic growth in the reinsurancepremiums that are ceded from the regionover the next decade.

“The developing world aside, if one looksat western nations, there too, we see alonger term trend to purchase moreinsurance. This is driven by a range offorces such as increased wealth, greaterconcentrations of property values, anincreased focus on healthcare and a steadyexpansion in the definition of legal liability.The rate of growth in demand for insurancein these nations is not as pronounced as it isin less developed regions, but at the sametime there is almost never a time whendemand for Bermuda’s product shrinks.”

While demand for Bermuda’s coreinsurance and reinsurance productscontinues to grow, it hasn’t necessarilymeant higher prices. Supply has grown withdemand – actually outstripping the growthin demand in recent years, and softeningthe pricing.

Said Mr. Cash, “It is a further anomalythat in an environment where prices arecoming down, there is still a considerable

amount of capital that is prepared to enterthe specialty insurance and reinsurancespace when and where prices are attractive.This opportunistic capital follows, and attimes participates in our industry to a muchgreater degree than has historically been thecase.

“Some of this interest comes from theexistence of very short term tradableinsurance instruments such as catastrophebonds, which allow active capital managerssuch as hedge funds to take a short termview on our industry. It is also the case thatmany of the funds that have the expertise toinvest in cat bonds are also often willing toinvest in new company formations.

“Their knowledge of the catastrophespace increases their knowledge of the(re)insurance space and their willingness toinvest in companies as well as risk positions.This trend towards opportunistic capital isnot likely to abate.”

The company executive believes in thestaying power of large risk insurance andreinsurance as products, but he sees thecontinuing soft market in the insurancecycle as the greatest near term challenge forthe industry.

He said, “In the longer term our industryis going through a transition away fromsmall specialty insurers and reinsurersoperating in narrow markets to a globalindustry where companies compete acrossmultiple reinsurance and insurance marketsand products. This is forcing companies toexpand outside their core areas ofcompetence and this in turn is puttingpressure on companies’ underwriting,operating and cultural models. Companiesthat can build cultures and operations thatallow them to compete successfully acrossmultiple markets will be the most successfulover the next 10 years.” ❂

MUSIC for selectiveMontpelier Re Holdings Ltd., a

leading provider of short-tailreinsurance and other specialty lines,has entered into a definitive agreementwith Selective Insurance Group, Inc.for the sale of Montpelier U.S.Insurance Company (MUSIC), theCompany’s US excess and surpluslines insurance business.

Consideration for the transactionwill reflect MUSIC’s net asset value atclosing and will be payable in cash.

Based on MUSIC’s net asset value at June 30, 2011, thetransaction is valued at approximately $55 million and is expected

to result in an increase to Montpelier’s current tangible book valueper common share of approximately $0.24.

Christopher L. Harris, President and CEO of Montpelier, said:“We are pleased to reach an agreement with Selective on the saleof MUSIC. In the current environment, we believe now is anappropriate time to sharpen our underwriting focus on our coreshort-tail reinsurance lines.

“This transaction will make us more nimble and will allow us toredeploy additional capital into our Bermuda and Londonplatforms, where we are seeing increasingly encouraging marketconditions.”

The transaction, which is subject to regulatory approvals andcertain customary closing conditions, is expected to close in thefourth quarter of 2011.

Montpelier, through its operating subsidiaries, is a premierprovider of global property and casualty reinsurance and insuranceproducts. ❂

Christopher L. HarrisPresident and CEOMontpelier Re Holdings Ltd.



Michael R. Eisensonhas been appointed to the Board ofMontpelier ReHoldings Ltd, a leadingprovider of short-tailreinsurance and otherspecialty lines.Mr. Eisenson fills thevacancy left by thedeparture of Clement

S. Dwyer, Jr., who resigned after servingsince 2006.

Mr. Eisenson is currently the ChiefExecutive Officer and a Managing Directorof Charlesbank Capital Partners, LLC, aprivate equity firm located in Boston,which currently controls 9.3 percent of theMontpelier's outstanding common shares.

Bermuda-based specialty provider ofproperty and casualty insurance andreinsurance, Endurance Specialty Holdings Ltd. has appointed Bermudian

Stephen Young to leadEndurance's GlobalCatastrophe Reinsurancebusiness.

Mr. Young joinedEndurance's Bermudabased reinsurance team in 2002 as an under-writer. In 2005 heassumed responsibility for Endurance's UScatastrophe reinsurancebusiness and in 2010 hisrole was further expandedto include all propertycatastrophe under-writing in the Americas.

In 2011, Mr. Youngtook on additionaloperationalresponsibilities for theproperty catastrophereinsurance business.

Endurance also

appointed John L. O'Connor to the newrole of Chief Administrative Officer forEndurance Specialty Holdings. Mr.O'Connor will be responsible for leadingEndurance's key global service functions as well as ensuring the efficient operationand delivery of critical internal services andactivities to Endurance's globalunderwriting operations.

Bermuda reinsurer Montpelier ReHoldings Ltd has recruited ChristopherSchaper to be the new President ofMontpelier Reinsurance Ltd., pendingregulatory approvals.

Mr. Schaper will be responsible for theunderwriting strategy, profitability andgrowth of the company’s Bermuda-basedbusinesses, including reinsurance andinsurance accountability.

Mr. Schaper has 25 years of experiencewithin the insurance and reinsuranceindustry, most recently with Endurance,where he was head of reinsurance and chiefunderwriting officer for EnduranceBermuda. ❂

Market Moves

The Bermuda Government kept busy thissummer signing bilateral Tax InformationExchange Agreements with the Czech Republic,Argentina and South Africa. It brought the totalnumber of signed agreements to 28 – with otherswaiting in the wings.

Premier and Minister of Finance the Hon.Paula A. Cox said the agreement with Argentina

made it a crucial market particularly for Bermuda’s reinsuranceindustry.

She said “This treaty relationship enhances the dealings betweenthe two countries and enables us to pursue more matters of mutualinterest. Our TIEA with Mexico has recently come into force andtoday’s TIEA with Argentina is also communicating the message thatBermuda recognizes the value of opening trade relationships with theLatin American market.”

She said, “We welcome the signing with Argentina as anotheropportunity to emphasize that Bermuda’s business model is a positiveand well-balanced component of the global financial systemcommitted to international cooperation to prevent illegal activitysuch as breaking any country’s tax law and simultaneously fosteringlegitimate global trade and doing our part to return the globalfinancial system to full strength.”

“Bermuda looks forward to building upon the treaty relationshipwhich had been established with Argentina. We will work to enhanceour strategic relations with the Argentineans and with Latin Americanmembers and so create a better understanding of Bermuda and ourpositive role in global finance,” she said.

Welcoming a number of senior representatives from Bermuda’sbusiness community who were on hand to witness the TIEA signing,

the Premier said that all were vitally important in helping to generateeconomic activity in Bermuda.

The agreement with South Africa may also bring broad economicbenefits. Premier Cox stated: “The Joint Declaration by our twoGovernments refers to the broadening of the political and economicrelationship between South Africa and Bermuda. In the JointDeclaration, the Government of the Republic of South Africawelcomes Bermuda as a member of the community of nationscommitted to international cooperation and information exchangeon tax matters, and affirms that Bermuda will be treated accordinglyby the South African authorities.

“Following the entry into force of this Agreement, South Africaand Bermuda will continue to examine what further measures can beadopted to further enhance our political and economic relationship,including further clarification of elements of double taxation,discrimination and other undesired tax barriers, investmentprotection and mutual recognition of our recognized stockexchanges.

“South Africa is an economic powerhouse and the only countryon the African continent that is a member of the G-20.”

At the signing of the agreement with the Czech Republic shecommented: “Bermuda looks forward to building upon the treatyrelationship with the Czech Republic. We will work to enhance ourstrategic relations with the Czech’s and with EU members and socreate a better understanding of Bermuda and our positive role inglobal finance.”

The Czech Republic is the 11th member of the EU to have asigned TIEA with Bermuda, and negotiations with several othershave already concluded.

The Premier said the signings further emphasized Bermuda’sbusiness model is a positive and well balanced component of theglobal financial system committed to international cooperation. ❂

Forging global ties

The Hon. Paula A.Cox JP, MP, Premierand Minister ofFinance

Michael R. EisensonCEOCharlesbank CapitalPartners, LLC

John L. O’ConnorChief AdministrativeOfficerEndurance SpecialtyHoldings Ltd.

Stephen YoungEVP, Head of GlobalCatastropheReinsuranceEndurance SpecialtyHoldings Ltd.



The Bermuda Insurance Institute continued its role of providinghigh quality insurance education, recently awarding 137 certificatesto 127 industry employees at the BII Insurance Education Awardsat the Fairmont Hamilton Princess.

They were congratulated by the BII President John Wight andDirector of Education and Training Julie Preece.

Keynote speaker was Validus Re Vice President and ControllerGavin Bishop, who just months before was honored by the BII asYoung (Re)insurance Person of the Year.

Mr. Bishop encourages young Bermudians interested in a careerin insurance, even though he said he joined the industry through“blind luck.”

He conceded that it took discipline and commitment to pursuethe educational objectives, but it would always be useful to haveworld class designations to fall back on. He said, “We are all looking for self-improvement, being better

than the next person and making our own mark. It takes disciplineand commitment but it’s definitely worth it.”

Awards presented included the American Institute’s CharteredProperty Casualty Underwriters (CPCU), the Chartered InsuranceInstitute (CII) Diploma in Insurance (Dip-CII) and AdvancedDiploma in Insurance (ACII) and the Professional LiabilityUnderwriting Society’s (PLUS) Registered Professional LiabilityUnderwriter (RPLU).

Other recipients were presented with certificates for theInsurance Institute of America’s Associate in General Insurance,Associate in Claims, Associate in Reinsurance, Associate inInsurance Services, Associate in Insurance Accounting and Finance,Associate in Commercial Underwriting, Associate in Regulationand Compliance, Associate in Management, Associate in RiskManagement and Associate in Risk Management – ERM. ❂

Insurance students succeed

Bermuda exhibitors at the Canada RIMS Conference in Ottawawere not surprised to find an increased interest in the Island fromdelegates.

Since the signing of a Tax Information Exchange Agreement (TIEA)between Canada and Bermuda, a number of Canadian interests arelooking more closely at the quantity of business opportunities on theIsland. Canadian firms which have international operations areparticularly interested in the self insurance route of captive insurance.

The Canadian RIMS Conference attracts about 1300 people andthis year was held in Ottawa, Ontario.

A number of professionals from Bermuda were on hand to answerquestions. Pictured at the Bermuda exhibit from left are ManagingDirector of Willis Management (Bermuda) Ltd. Oliver Heyliger;Director of Conyers Dill and Pearman Limited Charles Collis;Christianne Kenny-Post of Attride-Stirling & Woloniecki; JLTBermuda President Kilian Whelan; Clare Spearing and Anna Pereirafrom HSBC Bank – Bermuda; Shelby Weldon, Director, InsuranceLicensing & Authorisation for the Bermuda Monetary Authority;Rick Manuel from Butterfield’s Bank; and Jason Carne from KPMG. ❂RIMS Canada

Chairman of theBoard of AXIS CapitalHoldings LimitedMichael A. Butt wasrecently appointed anOfficer of the Order of the BritishEmpire (O.B.E.) tocommemorate hisdistinguishedcontributions over the

past 20 years toward the building of theBermuda reinsurance industry. He has over44 years of insurance industry experience.From 1982 to 1986, Mr. Butt was theChairman of Sedgwick Limited and ViceChairman of the Sedgwick Group plc. From1987 to 1992, he served as Chairman andChief Executive Officer of Eagle StarHoldings plc and Eagle Star InsuranceCompany. From 1993 to 1998, he wasChief Executive Officer and President ofMid Ocean Limited. From 1998 to August2002, he was a director of XL Capital Ltd.Mr. Butt also is a former director of theFarmers Insurance Group, BAT Industriesand Instituto Nazionale delleAssicuranzioni. He also served as Chairmanof the Association of Bermuda Insurers andReinsurers from January 2008 throughDecember 2009.

The XL Group ofCompanies is awaitingfinal regulatory approvalto open a new insuranceoperation, XL SegurosBrasil S.A. in Sao Paulo to offer a range ofCasualty, Property,Professional and Specialtyinsurance products. Thecompany already hasreceived prior approval from the Brazilianinsurance and reinsurance regulator,Superintendencia de Seguros Privados(SUSEP) for insurance operations there.The new office will expand XL’s capabilitiesin Brazil, where its Reinsurance segment hasoperated for over a decade.

XL’s CEO Mike McGavick, said: “The

Brazilian contribution to the globaleconomy continues to grow and will onlybecome more central to our clients’ goals.

“We look forward to expanding ourofferings in the country and helping thedevelopment of the local and regionalmarketplace.

“At XL we are continually focused on therate of change, the increasingly inter-connected world and the need to help our clients advance wherever their businessoccurs.”

“Of the approximately 1700 GlobalPrograms we participate in, more than thirtypercent have at least one policy in LatinAmerica, and we are committed to buildingout our regional presence. We will continueto work closely with SUSEP and prepare forthe full opening of our insurance operationsincluding the recruitment of additionalunderwriters and support teams.”

White Mountains Insurance Group, Ltd.has reorganized and re-branded its globalreinsurance business. All reinsuranceoperating entities will be consolidated underSirius International Insurance Corporation(Sirius International) and the reinsurancegroup will operate as the Sirius Group(formerly White Mountains Re Ltd.). SiriusInternational’s regulatory capital willincrease to $2.2 billion pro forma for thereorganization.

Sirius America Insurance Company (SiriusAmerica, formerly White MountainsReinsurance Company of America) will beowned by Sirius International. It will retainapproximately $600 million of statutorysurplus and will receive $300 million ofadditional capital and stop loss support fromits parent Sirius International.

In the Insurance Linked Securities (ILS)space, insurance industry veteran JohnBerger has joined the new Bermudareinsurer Third Point Re as ChiefInvestment Officer. He is expected to be akey asset for the venture, headed by founderof Third Point LLC Daniel Loeb.

Mr. Loeb is creating a reinsurer, as a wayto raise capital for his hedge fund that isn’t

subject to client redemptions. “We believe that the combination of Third

Point’s longstanding exceptional assetmanagement returns, Mr. Berger’s standoutunderwriting track record, and a reinsurancemarket that may improve following multipleevents in the past 12 months, make it apromising time to launch Third Point Re,”an investors’ letter notes.

Mr. Berger has almost three decades ofexperience in the reinsurance business,having previously been President andfounder of Chubb Re Inc. and was mostrecently the CEO of Bermuda-based AlterraCapital Holdings Ltd.

International specialty insurance andreinsurance underwriter Argo GroupInternational Holdings, Ltd. hasestablished a locally domiciled insuranceoperation in the heart of the DubaiInternational Financial Center (DIFC).

The new company – Argo Re (DIFC) Ltd.– is a subsidiary of Argo Re, Ltd. inBermuda, and a fully licensed insurancemanager and intermediary in Dubai. Theoperation, which will serve as Argo Group’shub for the Middle East and North Africa(MENA) Region, will focus initially oncasualty, professional and financial linesinsurance. Regional Chief UnderwritingOfficer Lina Hantas and Casualty Under-writing Manager Samir Hemsi will beleading the operation.

“A presence in the MENA market is a keycomponent of our international expansionstrategy,” said Argo Group Chief ExecutiveOfficer Mark E. Watson III. “Dubairepresents one of the world’s fastest growingglobal financial centers and a local presencethere serves to enhance the scale, flexibilityand value we offer to our customers.” The product suite Argo Group will offer inthe MENA Region will consist of a broadrange of casualty, professional and financiallines coverages, including major constructionprojects and energy risks.

Dubai is the latest international businesscenter in which Argo Group has establishedoperations, following the opening of officesin Paris and Sao Paulo earlier this year. ❂


Bermuda Shorts


Leadership initiative�Continued from page 3

147 exam successes, truly impressive figures.As successful as the BII has been to Bermuda

for 41 years, future success will only bemaintained if we adapt to the changing needsof our members.

“This Underwriting Conference, initiatedby our Council member Roger Gillett andorganized with Council members Chris

Fisher, Judy Gonsalves, Robert Stubbs, andoutside consultant Rochelle Simons, is a firstof its kind in Bermuda and we think, with allthe underwriting talent in Bermuda andimportant issues to discuss, timely andoverdue.” ❂

Michael A. ButtChairmanAXIS CapitalHoldings Limited

Mike McGavickCEOXL Group ofCompanies



Cat bonds in play�Continued from page 2June start of the Atlantic “hurricane season”that the Atlantic basin would face 12 to 18named storms (winds of 39 mph or higher),of which six to ten could become hurricanes(winds of 74 mph or higher). NOAA alsopredicted three to six major hurricanes(Category 3, 4 or 5; winds of 111 mph orhigher). Each of these ranges has a 70percent likelihood and indicate that activitywill exceed the seasonal average of 11 namedstorms, six hurricanes and two majorhurricanes.

A NOAA statement said: Climate factorsconsidered for this outlook included:• The tropical multi-decadal signal since1995 which has brought ocean andatmospheric conditions conducive fordevelopment in sync, leading to more activeAtlantic hurricane seasons.• Warm Atlantic Ocean water. Sea surfacetemperatures where storms often developand move across the Atlantic are up to twodegrees Fahrenheit warmer-than-average.• La Niña effects such as reduced windshear.

And in addition to multiple climatefactors, seasonal climate models alsoindicated an above-normal hurricane seasonwas likely, and even suggested activitycomparable to some of the active seasonssince 1995. ❂

THE BERMUDA INSURANCE MARKET CONFERENCE SCHEDULE

Goldman Sachs Asset Management’s Nov. 158th Annual Conference for Bermuda Reinsurers Hamilton, [email protected]

Bermuda Captive Conference June 3-6Fairmont Southampton HotelSouthampton, Bermudawww.bermudacaptive.bm

American Society for Healthcare Risk Management (ASHRM) Oct. 16-19Phoenix Convention Center, Phoenix, AZwww.ashrm.org

Property Casualty Insurers Association of America (PCI) Oct. 23-26Sheraton New Orleans Hotel, New Orleans, LA www.pciaa.net

The 24th Professional Liability Underwriting Society Nov. 2-4(PLUS) International ConferenceManchester Grand Hyatt San Diego, CA www.plusweb.org

Captive Insurance Companies Association International Conference - 2012 Mar. 11-13Westin Kierland ResortScottsdale, Arizonahttp://www.cicaworld.com/EventsEducation/EventsIntConf.aspx

Risk & Insurance Management Society, Inc. (RIMS) Apr. 15-19Annual ConferencePennsylvania Convention CenterPhiladelphia, PA www.rims.org

Vermont Captive Insurance Association Conference Aug. 7-9Burlington Sheraton Hotel & Conference CenterBurlington, VT www.vcia.org

RIMS Canada Conference September Sep. 9-12Saskatoon, Saskatchewan, Canadahttp://www.rimscanada.ca

Bermuda Events - 2011

Bermuda Events - 2012

Overseas Events - 2011

Overseas Events - 2011

RenRe CEO empanelled�Continued from page 10Senior Vice President at R/I and G.L.Hodson, predecessors to Willis GroupHoldings Ltd.

The IDC is a sponsor of the PCIAAAnnual Meeting, which is being heldOctober 23-26 in New Orleans, Louisianaat the New Orleans Sheraton.

The sponsorship includes a presentationentitled “Global Security: Decision Makingand Threat Analysis” by General Peter Pace(Ret.) USMC, Former Chairman of theJoint Chiefs of Staff.

General Peter Pace retired from activeduty on Oct. 1, 2007, after more than 40years of service in the United States MarineCorps.

As the sixteenth Chairman of the JointChiefs of Staff, he served as the principalmilitary advisor to the President, theSecretary of Defense, the National SecurityCouncil and the Homeland SecurityCouncil.

Prior to becoming Chairman, he servedas Vice Chairman and is the first Marine tohave served in either of these positions. ❂

Latest news from The World’s Risk Capital

Information in this publication is not an offer to sell (re)insurance. If such information is required please contact a broker.

Bermuda Insurance Update© is published by the Insurance Information Office of the Bermuda InsuranceDevelopment Council (IDC). If you would like to receive the Update, or notify us of a change of address, emailus at [email protected], fax it to (441) 295-3532 or complete this coupon and post it to: Bermuda InsuranceDevelopment Council, P.O. Box HM 2911, Hamilton, HM LX, Bermuda.

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