Bermuda to remain a key innovator as ILS broadens beyond cat: MultiStrat CUO

In an interview with Artemis around the Bermuda Risk Summit 2025, Kier James, Chief Underwriting Officer (CUO) of MultiStrat, discussed how the company believes that the island will continue to maintain its dominance of the insurance-linked securities (ILS) market as it broadens beyond catastrophe-focused ILS into casualty and specialty lines of business.

Praising the island as an innovator, James of MultiStrat, the specialist underwriter, reinsurance investment facilitator and casualty insurance-linked securities (ILS) company, expressed confidence that Bermuda will remain a key driver of growth in the ILS sector for the foreseeable future.

A key example of this, that James highlights, is the Incorporated Segregated Accounts Companies Act (ISAC Act) which was enacted in 2020 and supplements the earlier Segregated Accounts Companies Act enacted in 2000.

“This demonstrates that the jurisdiction is willing to listen and engage with the industry to provide solutions. This legislation has provided the ILS market a unique and flexible corporate structure which allows for the segregation of assets and liabilities into distinct incorporated segregated accounts, offering enhanced asset protection and operational efficiency and is being embraced by the ILS industry and investors,” James explained.

At the same time, the CUO notes that the Bermuda Monetary Authority (BMA), the island’s regulatory body for financial services, has demonstrated a rigorous but pragmatic approach to supervision and regulation of the ILS market, which according to James, has helped create a “stable and reliable environment for both ILS practitioners and a jurisdiction in which investors are willing to put their money.”

He continued: “Bermuda has also created a highly efficient ecosystem within which reinsurers, ILS funds, insurance managers and legal service providers can transact business. This is exemplified by the fast-track, seven-day listing process for insurance-linked securities on the Bermuda Stock Exchange, which lists approximately 92% of the global cat bond market.

“MultiStrat believes that the island will maintain its dominance of the ILS market as it broadens beyond cat ILS into casualty and specialty lines of business. That said, no jurisdiction can afford to be complacent; casualty ILS Insurtech Ledger chose the Cayman Islands for two new entities last year.”

Moving beyond Bermuda, James also discussed what he believes are some of the biggest challenges and opportunities for the casualty and broader ILS market as it looks to expand.

“Challenges for the casualty ILS market are often based on misconceptions, partly due to practitioners not explaining the product adequately. A fear of the impact of a zero-interest environment is one concern, but duration matching of assets to liabilities means this isn’t an issue in the current high-interest rate environment and won’t be anytime soon,” James said.

He continued: “At any rate, the typical five-to-10 year duration of non-cat ILS means they will “outlive” any period of zero or negative rates. What’s more, investors aren’t limited to risk-free rate return products. Assets that can be deployed to collateralize non-cat ILS structures can generate significant returns, even in a zero-interest rate environment, and these can be enhanced by the leverage that can be created by appropriate structuring.”

Notably, James states that casualty reserve strengthening in the United States has worried some potential investors.

“However, this isn’t a cross-class, universal phenomenon but often more a reflection of an individual company’s underwriting and reserving strategy,” he added.

On the other hand, social inflation remains a challenge within US casualty, but according to James, the risk can be mitigated by skilled portfolio managers and underwriters through appropriate risk selection, structuring, curation of diversified portfolios, and by effective claims handling and legal strategies.

Moving to cat ILS funds, James explains, “one barrier to growth beyond the prevalent $10 billion or so assets under management “ceiling” is that only certain structures are appropriate for these funds. The need to be fully collateralized to limits, with the only leverage being created by the premium, which in itself may potentially incentivize riskier, high rate-on-line (RoL) transactions. Collateralization to limits makes layers with reinstatements and those with low RoL less appealing, so there’s a lack of single-shot and aggregate layers, whether in the form of cat bonds, parametric covers, ILWs, or retrocession, available at acceptable pricing.”

He added: “Geographical concentration risk – Florida comes to mind – is another challenge, but various strategies are being deployed to alleviate this, including the use of rated reinsurance fronts. Equally, continued growth of the market, including innovation in areas such as parametric cover should also facilitate continued growth.”

In addition, the CUO also highlights how there has also been some well-publicised issues surrounding the validation of collateral, which notably was a setback for the whole ILS market.

He explains that MultiStrat, as well as other companies have responded rigorously by introducing additional controls around collateral, such as secured, encrypted communication for all counterparties.

“The ILS sector is now stronger for it and confidence has returned,” James said.

As for the opportunities within the casualty and ILS market, James notes that increasingly, buyers are seeking whole-account quota share on a multi-year basis and a more diverse array of reinsurance solutions as they become more sophisticated about capital management.

Ultimately, it appears that investors are looking for superior returns and products that possess little or no correlation with wider financial markets.

“ILS will continue to help to close the gaping global protection gap across insurance classes and are applicable to multiple lines. The development of ILS-specific regulation should help the growth of the market in new centres, such as the UK,” James added.

Furthermore, James also discussed what new innovations and structures are currently emerging within the casualty ILS market.

“Casualty modelling arrived on the scene relatively late, but the modelling ecosystem is growing and improving rapidly, giving investors more confidence. Predictive analytics are helping, incorporating real-time data and historic insights, to help anticipate this rapidly changing risk.”

On the other hand, innovations within casualty ILS structuring is also generating interest and demand among investors.

According to James, these include “forward exit options, fixed commutations, and traditional legacy solutions, which can be built into the contract at the outset. These facilitate participation by series funds and those that need a finality solution in order to invest. All in all, the product is getting increasingly sophisticated and appealing to an ever-wider range of investors.”

And lastly, James also addressed whether he sees ILS capital playing a larger role in the broader casualty space in the future.

“Some casualty business will flow away from traditional reinsurers, which are giving siloed coverage for isolated lines of business, into the ILS market but in the main, casualty ILS offer a path for the entire casualty market to grow.

“Many buyers aren’t purchasing the right limits in the first place, new liabilities associated with technological innovation, climate change, or transition risk, are emerging constantly, and with social inflation pushing jury verdicts up, demand for casualty cover will continue to rise. It took cat ILS approximately 15 to 20 years to achieve a penetration rate of 30% to 40%, and we believe the casualty ILS market could get there in about half that time.”

“MultiStrat is looking forward to playing an integral part in this growth story and continued success in collaborating with brokers, cedants and investors on mutually satisfactory reinsurance opportunities in the casualty space,” James concludes.

Read all of our interviews with ILS market and reinsurance sector professionals here.