BSX Boss Discusses ILS Issuances In Canada
Expect insurance-linked securities [ILS] to be the next evolution of product support and development coming out of the Bermuda reinsurance market, says the CEO of the Bermuda Stock Exchange [BSX].
Greg Wojciechwski spoke to industry journal “Canadian Underwriter” while visiting with Canadian business leaders in Toronto this week in the third annual Bermuda Briefing business opportunities for Canadian individuals and firms on the island.
The event was organised by the BSX in conjunction with Business Bermuda.
In the conversation, he listed ILS issuances for perils that would be of direct relevance to the Canadian context.
“Bonds that we’ve seen list have traditionally written on places where you would see the need [in Canada],” he said. “So, for example, wind storm in regions that are more prone to experiencing that kind of catastrophic peril.”
He also noted ILS instruments for earthquake risk.
“One of our most recent listed issuers is a bond structure called Embarcadero [Re], which has been done by the California Earthquake Authority,” he said. “For the Canadian market, is there maybe an avenue for quake? Are there seismic areas where they might be losses? That could be something where additional capital cover could provide some [additional capacity].”
Mr. Wojciechwski said the capital markets in Bermuda are quite interested in having exposure to [ILS] securities and they are willing to invest, “and that is the perfect initial ingredient to the development of a more robust market.”
He observed the BMX and the Bermuda Monetary Authority have worked on initiatives that would make the ILS market increasingly attractive to investors looking for diversification in their portfolios. Currently a specialized market, ILS issuances amount to between $12 billion and $15 billion.
One such initiative has been the establishment of a more streamlined process to create special purpose insurers, through which risk is transferred into a capital markets.
“Since the Bermuda Monetary Authority introduced those changes,” Mr.Wojciechwski said, “we’ve been marketing this thing strongly from the BMX perspective, and we’ve gone from no bonds to over 22 ILS securities with a market cap right now of $2.3 billion.”
Earlier this week it was announced Canada’s Finance Minister had approved the addition of the Bermuda Stock Exchange to that country’s list of designated exchanges.
In making the announcement Monday [Nov.14], Mr. Wojciechowski said: “The BSX is delighted to have achieved and been granted this very important designation by Canada’s Minister of Finance.
“Following the implementation of a Tax Information Exchange Agreement between Bermuda and Canada this summer, designation of the BSX by the Minister is very welcome news.
“I am confident that these important developments will deepen the longstanding cultural, commercial and capital market ties between our countries.
“We are grateful to Canada’s Department of Finance for the guidance that has been provided to us during the designation process.”
In 2005, the Canadian government removed the foreign content limit on tax-deferred retirement plans prompting an increasing number of Canadian investors to look to foreign securities listed on foreign exchanges to enhance their returns and diversify the investments held in their Canadian Registered Retirement Savings Plans [RRSPs] and Deferred Profit Sharing Plans [DPSPs].
The addition of the BSX to the Designated Stock Exchange list now opens up the opportunity for Canadian investors to include BSX listed securities in the investment portfolios of their RRSPs and DPSPs.
