Bermuda Seeks Growth in ILS as Trading Falters

The Bermuda Stock Exchange (BSX) seems to be betting on the insurance-linked securities industry just as its more traditional business languishes following the financial crisis.

There were 19 ILS listings on the BSX as of December 31, 2010, representing approximately $1.83 billion in market capitalization, according to the exchange’s year-end report.

That compares to a total of 807 issuers and a total market cap of $319 billion on the BSX.

The report cited recent catastrophe bonds such as Lodestone Re, Montana Re and Merna Reinsruance II as examples of their ILS success which was spurred by changes by the Bermuda Monetary Authority earlier in the year that made it easier to form new structures.
“The BSX entered this market much later than its competitors and the results to date have been impressive further deepening the exchange’s commitment to this space,” said BSX President and Chief Executive Officer Greg Wojciechowski in the report. “The BSX will work hard and closely with the insurance industry to provide additional levels of stock exchange support for these and other instruments so that Bermuda solidifies itself as the logical location for the convergence of the capital and insurance markets”

But just as the trumped the ILS success, the report noted the dismal year the exchange experienced throughout other sectors.

The Royal Gazette/BSX Index — a list of stocks representing the broader market — ended 2010 at 1149.49, down 45 percent from the 2009 close and skidding to its lowest levels since 2007.
“2010 was a challenging period for the domestic capital market. Trading volumes and values hit lows as investors reacted to financial market news and results posted by BSX listed issuers,” Wojciechowski said in a statement.

Despite losses on the BSX, as well as some high-profile defections of insurers to other domiciles, Wojciechowski says the island is prepared to take advantage of the growth in catastrophe bonds he is sure will come in 2011. “Bermuda has an important role to play in supporting this dynamic and growing market which saw over $5 billion in new structure issuances in 2010 alone.” he said.

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