Garrod: Brexit Could Bring Business To Bermuda

Volatility and uncertainty caused by the Brexit vote is likely to lead to new business and jobs in Bermuda, according to one of the Island’s corporate lawyers.

Chris Garrod, a Director in the Corporate department of Conyers Dill & Pearman, said Bermuda had laid all the right foundations to benefit from the outcome of Brexit.

“My belief is that given the Island’s existing market position as one of the three largest reinsurance markets, its reputation as an easy-to-do business environment from a regulatory perspective and having obtained NAIC qualified jurisdiction status and Solvency II equivalence, Bermuda will become an even greater, accessible rival reinsurance hub than ever before, attractive to capital markets and investors.

“As a result of the volatility caused by the Brexit vote, we are already starting to see some increasing interest from insurers with UK/Lloyd’s operations who are seeking to set up operations here and write business from within the Island, setting up offices and hiring staff,” said Mr Garrod.

He added: “Even prior to the Brexit vote, we had seen Lloyd’s syndicates such as Brit Insurance, Novae Group, Neon Underwriting and Canopius – to name a few – set up operations on the Island.”

Mr Garrod said there had been some important developments which could work in Bermuda’s favour.

The British Insurance Brokers Association, he said, had recently recognised that UK insurance regulators such as the FCA and PRA do not have the mandate or objective to actively support the promotion of their insurance industry along the lines the regulators do in markets such as Bermuda.

“Lloyd’s has just recently put its plans to launch its insurance risk Index Service on hold. The Index Service was to be used in risk transfer transactions such as ILW or derivative transactions and would have made Lloyds much more competitive.”

“It was supposed to have significant implications in ILS for risk transfer purposes, being a dedicated, insurance-based index. According to Lloyd’s, their priority now is to stabilize, given Brexit’s implications.”

“With Lloyd’s putting its Index on hold, I would speculate that any of that new ILS interest will likely be Bermuda based,” added Mr Garrod.

“Lloyd’s speculated recently that four percent of its global gross written premium is likely to be affected by the Brexit vote.

“There is generally expected to be upheaval in the reinsurance market with many raising concerns over increasing regulatory and compliance burdens and, when the UK eventually does exit the EU, there will be queries over London’s future as a global centre for the industry, with re-domestication being one of the avenues many businesses may now investigate.”

Mr Garrod also highlighted a recent Fitch Report which, he said, stated that unless the UK Government was able to negotiate passporting access into the European Economic Area [EEA], there would be a loss of business for Lloyd’s.

Mr Garrod said the report stated that some of that business would move into the EEA itself, but a jurisdiction such as Bermuda could easily benefit from businesses re-domesticating as a result of it having Solvency II equivalency, an accessible reinsurance regulator compared to others in the EEA, and also a large flexible and commercial reinsurance industry already in place.

“Bermuda has a broad market which obviously can attract captive business, being the domicile which created the captive industry in the 1960s, but also one which also hosts ILS funds, segregated accounts business, long-term reinsurance business and, of course, the existing successful commercial reinsurance market, which is hugely significant both in terms of the Island’s economy but also attracting new insurance business to the Island,” said Mr Garrod.

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