This year will mark the 40th anniversary of the incorporation of insurer ACE – a pivotal moment in Bermuda’s economic history. From its humble beginnings — writing its first policy out of a Bermuda hotel room — the company known today as Chubb Limited has gone on to become one of the world’s largest property and casualty insurers, with a stock market capitalisation exceeding $110 billion at the time of writing.
This remarkable corporate success story helped to establish Bermuda as the go-to domicile for solutions to crises in the global re/insurance market. It is a blueprint that has been followed multiple times over the decades, including the waves of new companies and risk capital coming to the island after devastating hurricane seasons, terrorist attacks and the Covid-19 pandemic.
PROVIDING COVER
ACE was born out of the liability insurance crisis in the mid-1980s, when claims and premiums spiked amid a surge of litigation against companies, while some types of insurance became unavailable. Bob Clements, an insurance broker with Marsh & McLennan at the time, saw opportunity.
With the support of 34 founding sponsors, including some of America’s largest corporations, Mr Clements raised the capital to launch ACE, or American Casualty Excess, in August 1985. The sponsors were also the customers. ACE’s mission was to provide high-level protection and stability of cost for general liability, directors and officers liability and fiduciary liability insurance, cover that was difficult to find.
Remarkably, for a company widely regarded as having started Bermuda’s evolution as a global re/insurance hub, ACE was incorporated not in Bermuda, but in the Cayman Islands. Mr Clements made the domicile choice to avoid Bermuda’s comparatively onerous stamp duty, levied as a percentage of starting capital. Five years later, the Bermuda Government relieved exempted companies from stamp duty under the Stamp Duty Relief Act 1990.
BOOMING BUSINESS
However, Bermuda was ACE’s centre of insurance operations. According to Catherine Duffy’s book, Held Captive: A History of International Insurance in Bermuda, Mr Clements said the decision to run ACE from Bermuda was based on the ability to get the new company up and running quickly to meet the urgent need, rather than go through the lengthy approval process that would have been required in a US state.
Employee number one was John Cox, also the founding chairman, who recalled in an interview with The Bermudian magazine that the company’s first temporary office was Room 348 at the Hamilton Princess, from where he wrote the first policy. Business was soon booming, given the urgent need for the coverage ACE was supplying.
In 1986, when another Bermuda start-up, XL Capital, was formed under a similar model in Bermuda, corporations were keen to invest, having seen the success of ACE.
Some of ACE’s historical highlights in Bermuda include:
• In 1987, ACE Bermuda assumed management of Corporate Officers & Directors Assurance Ltd (CODA), a specialist D&O underwriter which it went on to acquire in 1993.
• In 1994, ACE Bermuda opened a London representative office and then a Dublin operation in 1997, writing the same high level excess capacity for international clients.
• ACE diversified into reinsurance through the acquisition of Tempest Re in 1996 and CAT Limited in 1998. The company then created ACE Tempest Re Bermuda, a leading Bermuda-based catastrophe reinsurance company.
RAPID EXPANSION
Under the leadership of Brian Duperreault, who took over as CEO on October 1, 1994, ACE’s growth continued. In the late 1990s, the Bermuda Government gave ACE and XL permission to own and build their own office buildings, side by side, on land previously occupied by the Bermudiana Hotel.
The construction site symbolised a shift in Bermuda with the fast-growing insurance industry overtaking previously dominant tourism as the main driver of the economy. ACE and XL each opened their new buildings in 2001.
In 2004, Mr Duperreault retired as CEO after a decade of success, handing over the reins to Evan Greenberg, who has now led the company for nearly 21 years. In 2008, ACE moved its corporate domicile from Cayman to Switzerland.
In 2016, Mr Greenberg oversaw ACE’s $29.5 billion acquisition of the venerable US insurer Chubb. The deal created the world’s largest publicly traded property and casualty insurer. The combined company chose to brand as Chubb.
The company continues to make its mark on Bermuda, as underwriter of a wide range of insurance and reinsurance products and as a major employer with a strong track record of developing Bermudian talent, including current Chubb Bermuda division president, Judy Gonsalves and one of her predecessors in the role, Rees Fletcher. It is also a philanthropic force — the Chubb Charitable Foundation has donated more than $35 million to local charitable causes.
LASTING LEGACY
The ACE brand may have been consigned to history, but it will for ever remain a powerful name in the annals of Bermuda business. When Robert Clements envisioned ACE as an innovative solution in Bermuda to an international insurance problem, he set a precedent.
ACE’s success inspired others to follow that precedent. Like the cluster of the catastrophe reinsurers which incorporated on the island in the wake of Hurricane Andrew. Like the cluster of diversified insurers who entered the market after 9/11 in 2001, and like the sidecar and catastrophe-bond innovators who introduced an influx of third-party capital to bolster reinsurance capacity after the devastating hurricane season of 2005.
Today, Bermuda is a vibrant and diversified global re/insurance market, covering risks of every conceivable type, from storms and earthquakes to cyber risk, from climate risk and professional liability to the mortgages of millions of American homeowners. It has an unrivalled reputation as the laboratory of the insurance world, where world-leading talent creates new ways to cover the world’s most complex emerging risks.
If you happen to pass Room 348 at the Hamilton Princess hotel, you will see a plaque on the wall commemorating the place where ACE wrote its first policy — immortalising a moment that arguably heralded the start of Bermuda’s transformation into the thriving market it is today.
