Bermuda: The World’s Risk Capital

Launched in 1971 as a purely domestic exchange, by 1993 the BSX transitioned to an electronic platform opened to international listings and is now the world’s preeminent, fully electronic offshore securities exchange.

The BSX is a full member of and sits on the Board of the World Federation of Exchanges and is an affiliate member of the International Organization of Securities Commissions. The BSX is also a Designated Offshore Securities Market by the US Securities and Exchange Commission and a Designated Investment Exchange by the UK Financial Conduct Authority, among others.

As of Q2 2020, the BSX had over 1000 listed securities, including investment funds, debt and insurance related securities, as well as small to medium enterprise companies. BSX’s recent growth is due, in large part, to its innovative and commercial approach which includes offering listed issuers speed to market, often in as little as two weeks.

The BSX is also responsible for the Mezzanine Listing Facility which provides development stage companies a unique opportunity to list, and subsequently raise, capital on an internationally recognised exchange at an earlier stage than a traditional IPO. The majority of issuers are Bermuda-based, but the BSX also has issuers from North America, the UK, Europe and Asia. The BSX has also seen an increase in interest from the global capital markets for an alternative internationally recognised exchange platform for the listing of international debt instruments, especially from Latin and South America.

With our exchange platform being fully electronic, and our securities being dematerialised and held in electronic book entry form, resiliency was more or less built into our platform from the beginning. As a result, we were prepared to address business interruption from events such as COVID-19 with minimal impact on our robust operating systems which have proven efficient during this unusual period of market operation. We continue to list new securities, support daily trading, settlement, and operation of our securities depository.

While the BSX has focused on organic growth and developing the foundation of the Exchange, we have also concentrated on our electronic exchange environment, helping our domestic capital market develop and gain international recognitions so that we are appropriately regulated and recognised to support future development.

In July 2009, the Bermuda Monetary Authority introduced the Special Purpose Insurance (SPI) class which enabled the collateralisation of insurance products – what would come to be known as catastrophe bonds and Insurance Linked Securities (ILS). The BSX is now the world’s leading Exchange for ILS with 470 listings with combined nominal value of US$38.1 billion or 85 per cent of global issuance at the end of Q2 2020.

With the recent market volatility, ILS has proven once again to be a non-correlated asset class which continues to grow in scope and geographic diversity. ILS has also been deemed a sustainable investment in accordance with the United Nations’ Sustainable Development Goals (SDGs) due to its role in helping private and public organisations to build resistance to natural disasters and climate change. Pension funds from several jurisdictions have highlighted the Environmental, Social and Governance (ESG) aspects of ILS investments and catastrophe bonds which provide essential financing and liquidity when natural disasters strike. Such investments not only have the potential to protect communities and infrastructure in times of emergency but also help reduce what is known as the ‘protection gap’ (uninsured or underinsured risks) and increase resilience to such risks generally, even in times of prosperity.

At year end 2019, Miami International Holdings, Inc. (MIH), an owner and operator of three fully electronic US securities exchanges, obtained a controlling interest in the BSX. Since its founding in 2012, MIH and its Exchange Group has been a generator of technological innovation and their fully electronic exchanges have challenged legacy trading platforms. This partnership will provide additional support to the evolving global (re)insurance risk market through innovative products on a global scale with a view toward the futures market.

Bermuda’s innovative approach, as seen in the reinsurance industry, has also been reflected in the development of regulatory strategies to provide the market with certainty in the digital asset area, illustrated by the implementation of the Digital Asset Business Act (DABA) and Initial Coin Offering (ICO) legislation.  The BSX is in the process of leveraging this important legislation to support market participants in this developing area.

It has been said that imitation is the sincerest form of flattery, and in the past few years other jurisdictions such as London, Hong Kong, and Singapore have been launching their own competing platforms in the risk marketplace. It is clear, however, that Bermuda is far out in front in terms of volume and expertise, in large part thanks to our many competitive advantages such as speed to market, our expertise in property-catastrophe risk and catastrophe modelling, actuarial and underwriting resources and our first-class regulatory regime including Solvency II equivalence and National Association of Insurance Commissioners (NAIC) recognition.

Bermuda’s pragmatic commercial approach has created an operational, technical, and regulatory infrastructure focused on clients’ needs which is the result of a collaborative effort between the private and public sectors on the island. This model ensures jurisdictional policies remain in line with or ahead of market developments and keeps Bermuda’s regulatory oversight at prudent levels, whilst also maintaining support and appreciation for the entrepreneurial spirit that drives innovation.

The future is bright for the BSX – and for the foreseeable future Bermuda will be at the epicentre of the ILS market. To learn more about the BSX visit www.bsx.com.

Gregory A. Wojciechowski
Greg Wojciechowski is President and Chief Executive Officer of the Bermuda Stock Exchange (BSX). He is also, the Chairman of the Financial Intelligence Agency in Bermuda, past-Chairman of ILS Bermuda Ltd. and sits on the Board of Directors of the World Federation of Exchanges (WFE) and the Bermuda Business Development Agency (BDA). Prior to assuming the role of President and CEO in January 2002, Greg Wojciechowski was the Exchange’s Chief Operating Officer. In this capacity, he was responsible for the development of the Exchange’s regulatory and operational infrastructure as well as the day to day running of the Exchange. Prior to joining the Bermuda Stock Exchange in 1993, Mr. Wojciechowski, over a period of several years, held management positions at three large U.S. brokerage firms. During this time his attention was focused on brokerage administration and operations in the global equity and fixed income capital markets. Mr. Wojciechowski was educated in the U.S. and received a Bachelor of Arts degree from the University of North Carolina at Charlotte. He has studied International Business at The University of Copenhagen under Denmark’s International Studies Program and has studied French and International Relations at the Universite D’Aix-Marseille (Institut Pour Etudiants Etrangers) in Aix-en-Provence France. In 1998 Mr. Wojciechowski attended and completed the Young Managers Programme at INSEAD in Fontainebleau, France.