The narrative is one that Lloyd’s chief of markets Patrick Tiernan last week described as a lazy label, and often runs along the lines that London’s high-cost base is draining business to Bermuda (although Bermuda housing costs rival even the UK capital’s overcooked market), or that Bermuda’s new taxes will risk its attractiveness.
Naturally there is an element of competition between the two, but it doesn’t have to be a zero-sum game – there is room for collaboration, as the new initiative from Lloyd’s and the Bermuda Monetary Authority last week showed.
One could draw a parallel between the ILS and traditional reinsurance markets. Participants in the intersection of these markets often highlight their complementary nature and argue that using ILS capital supports the underlying market’s growth, rather than taking away market share.
Similarly with London and Bermuda, the reality is that there is a degree of interdependence on the flight path from London to Hamilton. Many in the market will spend time between the two, or pass part of their careers on the island before returning to the UK. Conduit is listed in the UK, yet underwrites on the island.
The partnership centres on bringing together different aspects of each hub’s expertise: on the Lloyd’s side, the Lab capital to support new development and a larger networking pool from which to offer training; on Bermuda’s side, reinsurance endeavours that will participate in the H1 2025 Lloyd’s Lab cohort.
The reinsurance thread speaks to a theme we have often discussed before, in terms of the London market’s need to address competitiveness within this segment, as more multi-hub underwriters put business through Bermuda.
During a session at the Bermuda Risk Summit discussing the collaboration, Tiernan said that each party had a “stronger together mindset”.
“And that's a testament to the confidence that we have in each other's markets and the friendship and the kinship that we have as well,” he added.
Half of Lloyd’s syndicates have some presence on the island and 20% of its managing agents write business directly from their bases in Bermuda, via a service company.
Premium written by the Lloyds service companies has increased fivefold over the last three years, he added.
“From [a] Lloyd's perspective, Bermuda is one of our most valuable counterparties from a reinsurance perspective,” he said, noting that close to a third of the business written in Lloyd’s is ceded back to Bermuda.
“Perhaps our closest tie is our capital providers and investors who have huge amounts in common.”
Kirsten Mitchell Wallace, head of portfolio risk management at the Corporation, added that certain global issues such as climate change, cyber, geopolitics all “need to have global solutions”.
Axis CEO Vince Tizzio added that having “access to both markets is incredibly important”.
Competitive impetus
However, despite the positive tone of the collaboration and the complementary aspects between the two hubs, there will always be an element of competition that remains. Indeed, this tension is healthy and can drive both places to be better homes to the sector.
Witness the last Lloyd’s market message, in which Tiernan took the time to underscore the pace of the Lloyd’s responsiveness on reshaping business plans, etc – the subtext there was clearly the fabled speed of Bermuda regulators.
CFO Burkhard Keese also said the Corporation is working on an “optimised” cost and funding structure to try to deliver larger players benefits of scale.
To recur to the ILS parallel, yes there are still competitive tensions between the two markets: buyers trade off the relative costs of doing deals in either market upon renewals, and at times when cat bond rates begin falling, traditional cat underwriters grow wary.
These themes will clearly be a focus in upcoming renewals, as a runaway ILS market in Q1 could be on track to bust past prior record volumes this year.
Sister title Insurance Insider ILS reported from an ILS event this week that leading ILS manager Fermat believed the cat bond market could potentially see $20bn of new deal volumes this year – which would be $4bn ahead of last year’s $15.8bn record.
However, the reality is that the ILS market is enmeshed within the catastrophe reinsurance space now, 20+ years into its evolution.
And even if competitive pressures remain a reality in the London-Bermuda relationship, so too will mutual benefits be acknowledged.
There are various other global insurance hubs but none that identify as such as strongly as Bermuda and London – so if we are depicting here a competitive London-Bermuda triangle, the third point is really the reflection of each other’s mutual aspirations and jealousies.
Insurance Insider delivers global wholesale, specialty, and (re)insurance Intelligence that enables you to act first. Redeem your complimentary 14-day trial for more premium content from Insurance Insider.
Scan here to download the app