Bermuda Ticked All The Boxes
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- Case Study
When Stephen Catlin came out of semi-retirement to set up a new international specialty re/insurer, the decision on domicile location was straightforward. The renowned British entrepreneur wanted to launch Convex Group in 2019 with $1.7 billion of committed capital. He had spotted a rare opportunity in the casualty market and needed to put investors’ money to work as quickly as possible. Bermuda ticked all the boxes.
“It wasn’t a difficult decision,” Mr Catlin says, adding that the process of clearing regulatory hurdles with financial-services regulator the Bermuda Monetary Authority was extremely efficient. “In Bermuda, we were welcomed with open arms and we got everything done in about six weeks.
“The relationship between the industry, the Government and the regulator is so different here. It’s much easier to plan your future with certainty. We knew Bermuda, we knew the runners and riders, we knew it worked: why would we take the risk of going somewhere we didn’t know how it works?”
The speed to market that Bermuda affords is an essential consideration for setting up a new global re/insurance company.
The speed to market that Bermuda affords is an essential consideration for setting up a new global re/insurance company, he says.
“The minute you’ve got the capital, there’s a pressure for you to get earnings on capital,” Mr Catlin says. “If you spend a year getting from A to B, that’s a wasted year of return. It’s a drag on your investors’ investment. So there’s a strong commercial reason to find a jurisdiction like Bermuda, where you know you can get going quickly.”
Mr Catlin’s business relationship with Bermuda goes back to 1999, when he relocated the holding company of Catlin Group to the island from the UK. He had launched the Lloyd’s underwriter 15 years earlier with just £25,000 of initial capital – £15,000 of which he borrowed himself.
The island proved an excellent launchpad for Catlin Group’s global expansion. The firm grew to have six underwriting hubs, 55 offices around the world and the largest Lloyd’s syndicate, before it was acquired by XL Group in 2015 for $4.1 billion.
Mr Catlin grew fond of the island during that time, particularly after longtime mentor Michael Butt, former chairman of Axis Capital and known as the doyen of Bermuda’s re/insurance industry, provocatively suggested that he was regarded as “a visitor to the island”.
“Overnight I changed my stance and started spending more time over here,” Mr Catlin says. “I got more involved and ended up becoming chairman of ABIR [Association of Bermuda Insurers and Reinsurers]. I really became part of the Bermuda infrastructure. Once I did that, not only did it work, but it was very enjoyable.”
Bermuda became “my second home”, Mr Catlin says. He recalls getting unexpectedly emotional about his attachment to the island some time after he retired from XL Catlin when returning to the island for the first time in two years. “As we came into land, I got a bit watery-eyed. It took me off my guard.”
ABIR, whose 29 member companies employ more than 1,500 people in Bermuda and tens of thousands more elsewhere in the world, is a strong trade organisation, Mr Catlin says. “In Bermuda everyone can take their competitive hat off and work together for whatever needs to be done in terms of regulation, for example. Getting people in the UK to do that is hard work.”
It’s a social island and you can socialise outside for a large part of the year – there are not many places in the world you can do that. If culture is important to you, then Bermuda is user-friendly.”
Convex is “big on culture”, says Mr Catlin, and adds that the island’s environment is the perfect place to achieve a healthy balance between work and life. “It’s very easy to develop a culture here. It’s a social island and you can socialise outside for a large part of the year – there are not many places in the world you can do that. If culture is important to you, then Bermuda is user-friendly.”
Establishing a culture at a young, growing company is especially difficult during a pandemic. “We’ve employed 230 people virtually out of 350,” Mr Catlin says. “You think of the percentage of our employees who have never met each other and who have never met senior management face to face. It’s a shocking challenge. When you’re trying to build a culture, it’s incredibly difficult.”
He has apologised to new staff, “but the feedback I have got is, ‘don’t beat yourself up, we came here because we believed it was a good culture and we can already feel it, even though we haven’t met anybody’.”
Mr Catlin, who finds Zoom meetings draining, sees a growing desire for face-to-face interaction. “We have a sense that people have an appetite to socialise, to exchange ideas, to be together. There’s a hunger to get back to work.”
Part of that is business travel, which Mr Catlin believes will bounce back to some extent. “I suspect people will travel less frequently and when they do it, they’ll do it for a longer period,” he says. “If you get on a plane to have a two-hour meeting and then come back, you’ll now have a virtual meeting instead. But business travel won’t stop.”
If your job involves speaking with people regularly, remote working makes life more difficult and less personable, he says. “Normally when you meet somebody, you spend five or ten minutes just chewing the cud. That tends not to happen remotely, so we’re losing that part of social interaction, which is so important in terms of a business relationship.”
Bermuda’s relative success in handling the pandemic adds to appeal for business travellers, Mr Catlin says. “Coming here, being able to meet people, go out for lunch, go out for dinner, which I can’t do in the UK – I can’t tell you what that feels like. I haven’t done that for months.
“I’ve said to David Burt, the Premier, that he’s been world class. I was here for the first part of the shutdown for some 15 weeks on my own. During that period, he spoke to the electorate every Monday at 6pm whether it was good or bad news. The level of communication he’s afforded has been so much clearer than other countries. He’s shown true leadership and together with Curtis Dickinson, the finance minister, they’re a great team. It’s done Bermuda’s reputation no harm at all.”
Mr Catlin set up Convex in anticipation of an upturn in casualty insurance prices after years of inadequate pricing of risk by the market. That opportunity has become greater with the impact of the pandemic. Mr Catlin said he’d be “amazed if Covid losses don’t get to $100 billion”.
While he has seen many insurance cycles play out, Mr Catlin says this one is different. “I’ve been in the industry nearly 50 years and in all that time, I’ve never seen a cycle led by the direct market before. This time it’s being led by the direct market. I think the unwind of casualty and Covid will take at least five years.”
The hardening market sparked a slew of start-ups in Bermuda, most of them led by veterans like Mr Catlin. While more than two-thirds of the employees of ABIR’s member companies are Bermudian, what will it take for a new generation of homegrown leaders to come through?
Mr Catlin, a career innovator who was EY’s UK Entrepreneur of the Year in 2011, says in addition to education, training and hard work, it comes down to aspiration. “We all achieve by aspiring to something. The sooner you start to aspire as a teenager, the greater the possibility that you continue aspiring in later life and do better,” he says. He also believes strongly in training and hiring expertise from whichever location you are in, because “it’s the right thing to do”.
His own internal driving force is “to make a difference”. He says: “If you make a difference in business, you will make money – it’s a bi-product, not a motivator. I’m passionately involved in making a difference in anything I do.”
Mr Catlin has made an impact in the science of climate change, through Catlin Group’s support for substantial surveys of the Arctic and the ocean. The work, which produced data made available to scientists everywhere, was an effort to “open people’s eyes and ears to what was going on” Mr Catlin says.
Now he envisages that the island can set an example of how to mitigate the impact of climate change. “I believe Bermuda can become a leading light in sustainability and I’m prepared to put something into that myself, both personally and corporately,” Mr Catlin says. “I think it would be good for Bermuda and good for the world. We need to get rid of this tax haven rubbish and get people to recognise, particularly in continental Europe, that Bermuda is a force for good.”
Bermuda is a powerful part of the insurance sector. It has a voice that will be listened to. If we don’t use that voice, shame on us.
Bermuda’s re/insurance industry can contribute to sustainability by being selective about risks and clients to insure, he says, adding: “Bermuda is a powerful part of the insurance sector. It has a voice that will be listened to. If we don’t use that voice, shame on us.”
He would like to see the insurance industry doing a better job of portraying its purpose in future. “Probably 95 per cent of what we do in property and casualty has a social consequence that is positive,” Mr Catlin says. “There are not many industries that can say that.”
Social purpose is powerfully evident in Mr Catlin’s work in trying to close the protection gap – the lack of insurance penetration that leads to natural disasters being more economically devastating in developing countries. He was the founding chairman of the Insurance Development Forum, a public-private partnership involving the United Nations, the World Bank and the re/insurance industry, which works to find ways to narrow the gap.
He says: “It’s something that could be cured if governments worked with the insurance industry to find risk transfer options, which saves taxpayers’ money, speeds up economic recovery and decreases human depravation. What’s not to like about that?”