Former Premier Ewart Brown once said that the insurance industry was as important to Bermuda as air is to life. So when the dynamics of the industry are undergoing significant change, all residents should sit up and take notice.While the phrase “insurance-linked securities” (ILS) might make the eyes of the average non-international business person glaze over, the phenomenon that it represents is of great relevance to our economy. It is with good reason that ILS has featured prominently in the Business section over the past three years.The numerous high-quality jobs that have come to these shores as a result of the influx of insurance companies that arrived in the wake of major global catastrophes — such as Hurricane Andrew in 1992, the 9/11 terrorist attacks in 2001 and Hurricane Katrina in 2005 — provided a great boost to Bermuda’s economy. The local spending of the industry and its well-paid employees has sent beneficial ripple effects through the whole community, from landlords and landscapers to retailers and restaurateurs.While no one would wish a devastating earthquake or hurricane on anyone, Bermuda could really do with a ‘Class of 2013’ wave of new insurance companies to pep up the flagging economy. However, the consensus view in the industry is that it’s unlikely to happen that way again.Put simply, the reason is that new money coming into the industry is being put to work in different ways. Instead of going through all the hassles necessary to create a new company, investors are using ILS. These structures allow them to tie up their money for a defined period and gain an attractive rate of interest, while shouldering the risk of seeing some or all of their money wiped out if a specified event occurs on a defined scale. ILS provides extra capacity for existing companies.The good news for Bermuda is that the Island has some very smart people who saw this change coming and have positioned Bermuda to take advantage of it. People like Greg Wojciechowski, CEO of the Bermuda Stock Exchange, who saw much of this business going to Cayman four years ago and successfully spread the message that Bermuda, as the ‘risk capital of the world’, was the best place for it. Today the BSX boasts more than $5.8 billion in listed ILS. And then there are the regulators at the Bermuda Monetary Authority, who created a regulatory framework that has allowed ILS to flourish here.Some complain that ILS does not bring new jobs. But it supports existing jobs in reinsurance and law firms and reinforces Bermuda’s credibility and reputation as a reinsurance centre of global importance.The initiative to launch a new annual ILS conference in Bermuda in November, organised on the lines of the Monte Carlo Rendezvous reinsurance event, will set the stage for deals to get done and suggests the Island is now asserting itself as the lead player in this growing industry.It may seem like an obscure corner of business to many, but it is one in which Bermuda is establishing itself as a world leader.Thank goodness for our insurance innovators.