Bermuda Stock Exchange Insurance Linked Securities 2011 Year in Review

By added on 09/01/2012

The Bermuda Stock Exchange (BSX) broke its record for Insurance Linked Securities (ILS) listings, for the first time reaching over $3 billion in listed securities at the end of 2011.

During a busy year where the exchange marked its 40th anniversary and saw the investment in the BSX by the TMX Group, the owners of the Toronto Stock Exchange, 25 ILS with a total value of $3.373 billion were listed on the exchange as of December 31, 2011.

“We are absolutely delighted with how 2011 has been for the BSX,” said Greg Wojciechowski, President and CEO of the BSX. “We set out in 2010 to firstly raise the profile of Bermuda and the exchange, and secondly to attract more ILS to the island and to list on the exchange. We feel we have achieved a great deal in the last two years.”

The 25 listed insurance linked securities were made up of: four securitization programs, 13 notes issued pursuant to these programs, six notes issued as stand-alone securities and two specialist exchange trade fund classes.

“All of this activity has happened in the space of about two years,” said Mr. Wojciechowski. “The momentum is driven largely by the BMA’s revised regulations, which in late 2009 established a new designation for ‘special-purpose insurers’ (SPI) as part of its supervisory scheme. This has been a very positive step for SPI’s setting up in Bermuda wanting to issue ILS such as catastrophe bonds, and we have been able to offer them the option of listing these ILS on the exchange.”

According to the Bermuda Monetary Authority, 19 special-purpose insurers have been formed in Bermuda by December 2011, and the majority of these formations were created for issuing catastrophe bonds. In 2010, 10 were formed during the whole year.

In January 2011, Chartis, the property and casualty insurance unit of American International Group, listed a $450 million catastrophe bond through Lodestone Re on the BSX. Munich Re gained extra capacity through Queen Street IV Re’s issuance of a $100 million BSX-listed catastrophe bond in November. The last ILS to list in 2011 was Lloyd’s insurer Amlin’s first cat bond, $150 million Tramline Re, on December 22.

Mr Wojciechowski added: “Bermuda is the world’s third largest reinsurance market and is already home to 1400 insurance companies with total assets of $442 billion, and is a natural place for setting up ILS. Many of our reinsurance companies have issued cat bonds or set up special purpose vehicles such as side cars – so we have a historical interest and knowledge.

“At the exchange, we are looking to support it from a capital markets perspective any way we can. Institutional investors such as pension and endowment funds are interested particularly in ILS because of the low correlation between ILS and capital markets. ILS are a natural hedge to capital markets, and listing on the exchange gives them that bit more security.

“In Bermuda, we also have a critical mass of insurers and reinsurers, the infrastructure to deal with them, and the rigorous regulation from the Bermuda Monetary Authority and the Bermuda Stock Exchange.”