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ESG & Bermuda’s ILS sector growth

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ESG & Bermuda’s ILS sector growth

We revisit this article with Sherman Taylor, Ocorian’s Head of Capital Markets in Bermuda, published on Artemis on 1 August 2022 below.

With environmental, social and governance principles (ESG) growing in relevance in Bermuda, Sherman Taylor, Ocorian’s Head of Capital Markets in the country, has shared his views on the matter as part of Artemis’ Q2 2022 Catastrophe Bond & ILS Market Report.

“A corporate culture based on environmental, social and governance principles (ESG) is rapidly developing in the global capital markets landscape, with insurance coming into focus as a powerful sector with a strong influence on investment decisions,” Taylor stated.

“There is a proliferation of underwriting exclusions and restrictions in cover in the global (re)insurance market as a direct result of ESG and this has not escaped Bermuda. Many large global (re)insurers have publicly announced that they will either exclude or restrict cover of assets and projects connected to industries such as fossil fuels.

“These companies are under pressure to transition to carbon neutrality, as more stakeholders become motivated by social responsibility over economic benefit.”

Taylor explained that, even though ESG is yet to be codified into Bermuda law, ESG policies geared towards meeting and exceeding international standards already exist.

Additionally, Bermuda itself actively participates in international ESG efforts and in May 2022 Bermuda hosted the inaugural Climate Summit, which attracted global climate-risk thought leaders, Taylor noted.

He said: “Bermuda entities, including Ocorian, are staying in lockstep with the global industry, with many having developed their own corporate ESG policies.

“The Bermuda Monetary Authority (BMA), which supervises insurance and ILS in Bermuda, is working on integrating key considerations – climate change in particular – into its supervision activities.

“The expectation is that the BMA will consider risks, opportunities, and innovation and will eventually provide the insurance sector with comprehensive guidance on the governance of ESG.”

According to Taylor, these aspects will likely include expectation for boards, risk management and self-solvency assessments to consider climate change risks.

Additionally, he highlighted some “proud examples” of ESG initiatives in Bermuda.

They include: “[Bermuda’s] commitment to 85% reduction in fossil fuel use (and replacement with renewable sources) by 2035 and government and several entities have already invested in solar technology.

“Charging stations for electric vehicles are being installed throughout the island and a new fleet of electric buses recently commenced operations. Elsewhere, there is an island wide tree planting strategy aimed at removing invasive species, increasing resilience to climate change, and improving biodiversity.”

He added: “Importantly, Bermuda’s ILS industry stands out for several reasons including speed to market, cost effectiveness, a large insurance talent pool and low friction operations.

Bermuda’s regulators traditionally provide a balanced legislative framework that adequately protects policyholders while maintaining the island’s commercial appeal.

“This explains Bermuda’s emergence as a leader in the global ILS market and as the island looks towards a bright future with ESG regulations on the horizon, there is assurance that those factors that make Bermuda attractive will continue to flourish.”

Regarding insurance solutions Taylor said: “The Ocorian team provides a full suite of administration and fiduciary services to the ILS and captive market from our Bermuda, Cayman and BVI offices, ensuring that all structures remain compliant with applicable regulations in each jurisdiction.

“We add value throughout the life cycle, from incorporation and licensing to unwinding and voluntary liquidations when the structure ends its natural life; precision and technical expertise have been the perennial hallmarks of our service offerings to this important global industry.”

Read the full article and download the entire Artemis Q2 2022 Catastrophe Bond Market report here.

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