With chairman stepping down, Hiscox will keep evolving

FRIDAY, MARCH 2: It’s been a big week for Bermuda-incorporated insurance company Hiscox.

Robert Hiscox, chairman of Hiscox, announced this week he would be stepping down in 2013.

The company also announced 2011 profits of £17.3m, down from £211.4m in 2010.

Charles Dupplin, CEO of Hiscox Bermuda, spoke to the Bermuda Sun about the leadership change, profits, the year of catastrophes and the bickering between Cayman and Bermuda over the insurance business.

How do you feel about the results released this week?

We have a volatile business that takes large bets on things like catastrophes and we have non-volatile retail businesses. The retail businesses still churn out the profits and the net results are we haven’t lost our shareholders money.

It shows what a strong business it is.

Other businesses on the island have also turned in some reasonable results, but some people have been regrettably badly smacked by all this catastrophe activity, but the Bermuda market remains a very, very strong market with some very, very strong players in it.

It’s the only real reinsurance market apart from London.

With Mr Hiscox stepping down, how will that affect the company?

We’re 100 years old and we’ve been through leadership change before so I think all strong businesses keep evolving.

There’s an old saying ‘If you don’t carry on evolving your business faster than the world outside, then eventually you’ll be extinct’.

Our business will evolve. Robert is not going to go away. He will still continue on as honorary president and there’s no man who knows more about the business than him.”

How do you see all the catastrophes in 2011 shaping the industry going forward?

Without the existence of reinsurance, which can take the surge tank of catastrophe activity local insurance markets would have been very badly damaged.

Take the Chilean market, which was a 2010 loss. It couldn’t have possibly withstood a big earthquake like that on its own resources so it needs to buy reinsurance.

Even a mighty economy like Japan, and they have huge companies there, couldn’t have taken it without reinsurance protection.

The number and intensity of last year’s catastrophes serves as a reminder as to why reinsurance is necessary. In order for it to be necessary you need to have sufficient markets.

There are two highly sufficient markets in the world — London and Bermuda.  This has reminded everyone as to what those markets do. Certainly a lot of companies around the world have been reminded of the importance of their own reinsurance protection and how they are adequate and placed with decent companies that work.

Every single Bermudian claim has been paid and that should be a source of pride. It shows what a good strong market it is.

Bermuda has proved itself to be a very good product in a very nasty year in the investment world, the banking world and we found there weren’t people there to pay their way.

The Catastrophe insurance world has acquitted itself in a very good way.

There’s been a lot of talk about Cayman’s Premier McKeeva Bush saying they are going after Bermuda’s market. What’s your take on that?

It’s all fine and dandy enacting legislation to say you can have your captive insurer here, but in the end you actually need people to operate the people.

People not only means underwriters with great skill but it also means office staff, accountants. You need people skilled in insurance.

Bermuda begins any debate there with a vast number, in the thousands, who are highly skilled, at a very specialized area in international insurance and reinsurance.

So the war of words between Bermuda and Cayman is naturally of interest, but in the end the reason Bermuda should win is it has got the people with the skills.

In legislative terms, it is very friendly. The BMA, as a regulator, when choosing a jurisdiction, can hold its head very high because it is very well regarded internationally.

The International Association of Supervisors, which is sort of the regulators club, they have quite a lot of BMA staff chairing committees and you’re not going to have them doing that if people think you’re muppets. That is a great strong point.

If you have the people, a really good regulator, and helpful legislation, that’s a pretty good winning combination. In the end, when people come to select jurisdictions, and they think of those three things, Bermuda scores so highly.

I think it will simmer down and I think Bermuda will still be the go to place for insurance related stuff.

No matter how much Cayman would love to have people, it’s not going to rapidly grow a vast pool of people who know about insurance.