Arthur Wightman, Territory Leader of PwC Bermuda, does not expect a fundamental collapse in pricing through 2026 despite continued reinsurance market softening on the property side, with plenty of discipline in the capital and innovation magnet that is the Bermuda market.
In April, Reinsurance News met with Wightman at PwC’s offices in Hamilton, Bermuda, to discuss the current reinsurance market cycle, Bermuda’s competitive edge, and the surge in asset-intensive, or funded reinsurance transactions globally.
“We definitely have come right off a very hard market. And certainly, through the renewals, we’re seeing significant double digit drops in pricing, particularly on the property side,” said Wightman. “We anticipate seeing continuing softening of the market as a result.”
While pricing dynamics are clearly shifting quickly in some property segments, structural discipline and capital management should limit any risk of a breakdown in pricing discipline.
Despite this, Wightman stressed that through the coming months, PwC does not expect to see “a structural collapse in pricing in Bermuda”, despite some areas experiencing faster-than-expected rate movement as there might have been historically, thanks in part to underwriting discipline and the moderating force of alternative capital.
“There remains a strong degree of underwriting discipline in the Bermuda market, and that capital discipline helps to limit the downside on profitability, return on capital and so on,” continued Wightman. “As always, however, there will be acute focus on whether this holds true for existing and new market entrants which are more reliant on rapid premium growth and fee-based commissions.”
As highlighted by broker renewal reports, the softening is most notable on the property reinsurance side, with divergent trends shaping the casually reinsurance space.
“In casualty, and notably in North America, reinsurers are focused on pricing adequacy. There are a lot of concerns around social inflation, and significant concerns around reserve adequacy. Even in recent years of price firming, signs of adverse loss development have emerged, raising questions about whether pricing is sufficient” he said.
Alongside discipline, Wightman highlighted consistent structural innovations in both the traditional and alternative capital sectors.
“ILS capacity continues to support the overall market, as it typically does, but is acting as a largely moderating force—both on the upside and downside. We see ILS de-peaking the historic rating environment, which is likely a positive development in our base case analyses, we do not anticipate any near-term return to hardening,” said Wightman.
As our readers will be aware, Bermuda is a dominant global hub for reinsurance and alternative risk transfer, and Wightman told Reinsurance News that the island’s market position is “very sustainable.”
“We hear comparisons between jurisdictions— London versus Bermuda, Bermuda versus Cayman, and so on. However. the scale and depth of expertise embedded in Bermuda has been here for a long time, and is here to stay. We have over a third of reinsurance capital based in this market, and that’s unlikely to change. The Bermuda market remains sustainable and strong.
“We have extremely strong regulatory credibility. We have Solvency II equivalence. and NAIC reciprocal status. We have an active, pragmatic and forward-looking regulator in the BMA, which has helped build that credibility and will continue to support the jurisdiction’s long-term standing” said Wightman.
The executive went on to describe Bermuda as a “capital and innovation magnet,” emphasising the jurisdiction’s philosophy of working to make the re/insurance market bigger and better in order to access new risks and help to close the protection gap.
“That’s what Bermuda is all about. There’s no shortage of capital wanting to come into this market. There are competitive pressures here, as there are in any other place in the world. We’ve obviously got the implementation of a global tax system. We’ve had things like that in the past, and we’ll have things like that in the future. The Bermuda market has largely embraced and accepted all of that in a positive way, and that can only strengthen our reputation versus some of the other jurisdictions that may not have gone down that path. So, competitive pressures will always exist, as well as costs of doing business, inflation, things like that. But on the whole, Bermuda is an established and strong jurisdiction, and it will have a long tenure,” he said.
Earlier this year, PwC released a report on the growing asset-intensive reinsurance market, highlighting the sector’s global expansion over the past decade. In light of this, we asked Wightman what is driving the surge in these transactions, and why Bermuda is at the centre of it.
“It’s quite simply growing demand for longer duration life and annuity based products,” he said. “Insurers need to free up trapped capital, that’s what they’ve been doing. Why is Bermuda in the middle of it? Because of our regulatory credibility, capital efficiency and expertise. The core elements that supported the development of the P&C environment are now being applied to the life reinsurance market. While the skill sets may differ in certain areas, the overall combination of capabilities within the jurisdiction is well positioned to be deployed into this space.”
Looking ahead, Wightman said that he 100% expects Bermuda to remain a hub for funded reinsurance transactions, again citing regulatory credibility, the scale of capital in the market, Bermuda’s proven track-record, and also the region’s access to private capital.
“There is also a deep pool of technical expertise here. As mentioned, what was previously more concentrated on the P&C side is now firmly established in the life space. We have a strong advocacy organisation in BILTIR, as well as a broad base of professionals who live and breathe this sector, either based here or closely connected to the market.
“And then there’s something called an ecosystem inertia. It’s difficult to suggest that this market could be dismantled in favour of another when all the ingredients for success—for investors, policyholders and beyond—are already here and fully in play.”
