Bermuda's re/insurance industry derives much of its success from being clustered together in one place, according to a leading US business school report.

The report, which was published by Professor J. David Cummins, a Harry J. Loman Professor Emeritus of Insurance and Risk Management, highlighted the Island's insurance market for its value to other global markets.

It report, based on Bermuda and the economies of agglomeration, was completed by Dr. Cummins and his research staff at The Wharton School, University of Pennsylvania, and, The Fox School, Temple University.

Dr. Cummins – whose standard research areas have focused on insurance economics; financial risk management, productivity and efficiency; and, securitisation – noted in the report that the Island benefits from economies of agglomeration.

The report stated: "This term is used in urban economics to describe the benefits that firms obtain when locating near each other. It is related to the ideas of economies of scale and network effects in that the more related firms are clustered together, the lower the cost of production becomes because firms have competing multiple suppliers and can achieve greater specialisation and division of labour.

"When multiple firms in the same sector (competitors) cluster, there are advantages because the cluster attracts more suppliers and customers than a single firm could alone.

"The concentration of captive insurance companies in Bermuda provides a natural market for Bermuda's reinsurers, and the presence of the reinsurers and intellectual capital and infrastructure makes Bermuda a one-stop shopping environment for captives.

"The presence of multiple reinsurers in the market facilitates retrocessions and other forms of risk-sharing. Thus, Bermuda presents advantages as an insurance center that is comparable to the advantages of New York as a financial centre."

Dr. Cummins said economies of agglomeration as one example of advantages that Bermuda has as an attractive domicile for re/insurers.

He cited other advantages that the Island offers to the market, including political stability, a low government debt burden, a high sovereign financial rating and a stable monetary system.