Somerset Re chief executive Danish Iqbal said the life reinsurer was in a unique position in the market, being highly regarded among players focused on smaller businesses and having a very strong balance sheet, while also having the expertise, track record and financial strength to focus on larger transactions.
Speaking to Reinsurance News at the headquarters of Somerset Re in Bermuda, Iqbal said the company was not just focusing on large-scale opportunities, saying it pursues deals in the hundreds of millions of dollars but also does larger deals of up to billions of dollars.
He said: “New players looking for reinsurance support will bring smaller deal sizes and they want to work with companies with strong balance sheets and track records. Among the smaller players interested in focusing on smaller transactions, we believe we are in the best position in terms of ratings and strong balance sheets.
“Large players with strong balance sheets are typically focused on bigger opportunities, so they don’t really have time to focus on smaller transactions. We like the niche of smaller blocks, and with our skillset focusing on larger blocks, I think we’re uniquely positioned in the market.”
Iqbal also outlined the key advantages of Somerset Re doing business in Bermuda, noting that the company has a reciprocal reinsurance status with the NAIC so the company can have direct trust in Bermuda and its entities.
“The regulatory regime is a principles-based regime, so our assets and liabilities are based on market value. So it’s a pure, real economic view of assets and liabilities that can move in sync with each other, which enables us to have better ALM so that we can more easily protect our balance sheet and we’re not subject to prescribed rules that would affect us.
“The BMA are very responsive and responsive to the needs of businesses here. If you want to get approval you go and talk to them and they try to get it going quickly. They try to make it easy to work with them.
“There’s a lot of talent here because the market has matured and there are a lot of people now. Also, the service providers are here and they already have quite a bit of knowledge so you can approach them and leverage them, and it’s close to the US and you can even come easily from the UK. So Bermuda is a very ideal location,” Iqbal said.
He also noted that there has been an increase in life reinsurers and insurance companies setting up operations in Bermuda, reflecting the continued validation of the jurisdiction. However, he noted that many new entrants are now aware of the operational complexities involved in operating entities there, and Iqbal expects the market to eventually see consolidation.
“We’ve seen a lot of new entrants come in. The BMA is very focused on protecting the jurisdiction, so they’ve changed and strengthened the regulatory regime, which does mean there’s quite a bit of overhead and governance responsibilities for these new entrants that they may not have anticipated when they set up the entity.
“Setting up a reinsurance business in Bermuda is not easy. We are starting to see some retail businesses setting up reinsurance here start to realize the level of operational overhead involved. This, combined with wider business capacity considerations, may still lead them to seek third party reinsurance. In some cases this will Leading to partnerships with established players such as Somerset Re, we therefore expect there may be some consolidation in this market over time and if we remain disciplined and measured and continue to execute on our strategy, we believe we will be well-positioned to benefit from this dynamic.”
He added: “It’s not just new reinsurers being formed; I would say a lot of them that weren’t focused on asset-intensive reinsurance in the past are now open to it. They see their competitors executing reinsurance deals and creating value on the books and need it to be competitive on new business.”
In terms of the specific regions where Iqbal expects the fastest growth, he said there is still a lot of capital coming from the US and Somerset Re is well-positioned to serve these regions with its breadth of liability expertise, solutions and structural flexibility.
He highlighted that the company is also seeing growing interest from a range of other jurisdictions, including Japan, Hong Kong and Singapore following regulatory changes, although he noted that these markets have higher barriers to entry and a focus on building relationships, so taking more time to enter and scale.
Commenting on the outlook for the next 24 months, Iqbal said Somerset Re’s focus will be on balancing continued growth with discipline, following a period of strong expansion, record years of premium growth and deal numbers.
“I think we will continue to measure on the basis of delivering growth that allows us to continue to execute while maintaining a strong balance sheet and disciplined underwriting capabilities,” Iqbal concluded.
