ABIR’s Huff: Bermuda “will excel” in offering proprietary views of cat models
The Bermuda market will continue to heavily invest in the resources needed to offer unparalleled views of catastrophe risk at a time when discussions are taking place around the flaws and limitations of climate modelling, according to Association of Bermuda Insurers and Reinsurers (ABIR) president and CEO John Huff.
During the Monte Carlo Rendez-Vous, Huff had numerous conversations with industry peers about how the Bermuda market is making strides in modelling catastrophe perils as a result of heavy investment in this area.
“[There are lots of] discussions right now about the flaws, if you will, or the challenges with modelling, but the real focus is the proprietary view of models,” Huff said in conversation with The Insurer TV.
“Bermuda will excel in that area because they’ve committed to the resources, the talent, the expertise in the interpretation of those models, and more importantly in the aggregation of those risks geographically,” he noted.
Huff said that this proprietary view of models would enable the Bermuda market to offer better insights into implementing business plans and deploying underwriting strategies.
He also spoke of the growing interest in certain casualty and specialty lines on the island, which will likely attract more talent.
“What we’re seeing is a great deal of interest in casualty and specialty lines. We remain dominant in natural catastrophe, which we think is a logical extension for climate risk finance. But these specialty lines are getting more and more interesting,” said Huff.
“I call them talent-intensive lines of business,” he said. “You see great opportunities for ABIR members in Bermuda to take what I call the ‘narrow and deep’ – they’re considering certain lines of business and then they’re really committing the right talent and resources around that line,” Huff added.
OECD tax proposal implementation – the right time?
During the interview Huff also spoke of his position on the landmark OECD global minimum tax agreement, explaining the timing for its implementation is not the most appropriate.
This agreement seeks to impose a new global minimum company tax rate of 15 percent for larger companies.
Huff said that while in 2021 the discussion focused on policy considerations, this year discussions have centred around implementation timing.
“As we look around the world and as countries consider implementation, a lot has changed since 2021. So if you think about the Russia-Ukraine situation and inflation and quite a bit of stress in the energy space … how we’re going to heat homes this winter, countries are deciding is this the right time for implementation,” he noted.
He added that headwinds related to inflation had prompted the US to decide against implementing the OECD tax proposals, and also shed some light on the uncertainty around implementation in the UK given the newly formed government’s aversion to taxes.
“It’s really an issue of timing, not going back on their commitments of 2021, but talking about the implementation considerations,” he reflected.
Implementing this tax could have a significant impact on offshore markets such as Bermuda, which is the home of cat reinsurance and largest provider of capital to the Lloyd’s market.
As a member of the OECD, Bermuda has committed to implementing the framework but this hasn’t prevented concerns being voiced on the island.
These include former finance minister Bob Richards, who recently pointed out that if Bermuda levied a 15 percent corporate tax, it might eventually make the public finances dependent on volatile (re)insurance markets rather than the more stable sales and payroll taxes.
Huff also stressed Bermuda’s position as a low-tax jurisdiction – not a zero-tax jurisdiction – with ABIR members supporting local government at $1bn a year.
“There’s quite a bit of payroll tax, excise tax, and the Bermuda system is a consumption tax system. It’s served them well for the last two centuries,” Huff concluded.
Watch John Huff of ABIR’s full interview with The Insurer TV, speaking from the balcony of our pop-up studio suite in the Hôtel de Paris. Click for more about:
- What makes Bermuda an attractive place for the (re)insurance sector
- The OECD tax reforms
- Huff’s takeaways from the Rendez-Vous