After the 9/11 attacks, Bermuda’s resilient and resourceful industry came into its own.

Creating a dynamic industry with a successful model that many aim to copy demonstrates the importance of Bermuda’s influence as the world’s risk capital.

Bermuda today holds the world’s foremost captive market and third-largest reinsurance market. More than 1,200 of the world’s insurance and reinsurance companies are based there, which boast a combined $170 billion in assets, in excess of $80 billion in capital and surpluses, and generate more than $90 billion in gross annual premiums. A series of unfortunate events, as it goes with the insurance sector, has led to the emergence of such a successful and dynamic industry on the island that it has inspired copies around the world of what has come to be known as the ‘Bermuda Model’.

One of the Bermuda industry’s greatest strengths stems from the strong financial regulatory system in place on the island. Designed with the intention of striking the right balance between high international standards and the creation of an enabling environment, Bermuda has aimed to create enforceable regulations that attract the right kind of business to the island and keep it there. Chairman and CEO of the Bermuda Monetary Authority Cheryl-Ann Lister says this mindset has been guiding the development of the financial sector since the 1940s. She comments, “We have always been about quality rather than quantity, and we have done everything possible to build up an infrastructure that supports that quality. At the end of the day, we are open to business and we welcome anyone who is willing to meet that quality criteria and ensure our reputation is protected.”

Although Bermuda’s insurance industry dates back to 1784 when the Bermuda Assurance Company issued a marine cargo policy, the first real breakthrough in the island’s sector came in the 1960s when Ohio businessman Fred Reiss invented the concept of the captive, a new type of self-insurance vehicle that would put Bermuda on the world’s insurance map. Captives allow for individual companies or groups of linked companies to retain their own insurance-related profit through the creation of insurance companies to insure or reinsure the risks of its parents and affiliates. Mr. Reiss formed his captive management company IRM (International Risk Management Limited) in Bermuda in 1962, thus creating a new industry which continues to be a mainstay in many state-of-the-art risk management programs and counts more than 4,000 companies among its ranks today.

Bermuda’s insurance sector grew again in the mid-eighties when demand for excess liability from large U.S. corporations resulted in the formation of companies like ACE and XL, today global leaders with combined assets of over $70 billion. ACE was formed by 34 American companies that contributed an initial capital of over $200 million. By 2002, ACE had more than $43 billion in assets and wrote nearly $13 billion in gross premiums. It also had authority to operate in 140 countries. XL was formed in 1986 and by 2002 had assets of $36 billion and was writing $9 billion in premiums.

When Hurricane Andrew hit in 1992 it formed the catalyst for the third wave in Bermuda’s insurance industry’s growth. Over $4 billion in capital flowed into Bermuda during the summer of 1993, and an additional seven property catastrophe reinsurers were formed. Of these, Renaissance Re is the only key player still operating today. From 1995 to 2000 Bermuda’s growing insurance companies expanded and diversified, establishing their global presence and increasing their product portfolios.

After the Twin Towers fell in 2001, the Bermuda insurance industry saw its next and fourth wave of growth. Although Bermudian companies bore nearly $5 billion of the total $40 billion in 9/11 claims, they had managed to raise an additional $8 billion in new capital by the following spring. Even more remarkable was the influx of new insurers and reinsurers to the island – eight new companies were formed by Christmas of 2001. In the end, more than two-thirds of the $25 billion in new capital injected in the global insurance industry following the 9/11attacks went to Bermuda – unequivocally establishing the island as a global capital markets leader. By 2004, the post-September 11th companies, among them Allied World, AXIS, and Endurance Specialty, were already earning a combined annual premium income of $9.5 billion.

Today Bermuda boasts a comprehensive industry that maintains its key position worldwide through the excellence of its companies and products. Along with Bermuda-based giants such as ACE, XL, Max Re, and Renaissance Re, the island is also home to numerous subsidiaries of global companies such as AIG, Swiss Re, and Zurich. Bermuda also boasts all the major brokers - Marsh, Aon, Willis and Benfield all have a presence on the island, as well as a number of smaller local brokers.