Two forces are changing the world we live in, causing significant realignments in many major institutions. The results could prove extremely beneficial to Bermuda’s already strong insurance industry.The first force is the graying of the world’s population. The US is in the forefront of this age wave, now that the 78 million members of its Baby Boom generation have started turning 65 at the rate of about 10,000 a day. By 2025, more than 72 million Americans will be classified as senior citizens, about one-fifth of the nation’s population.Wherever they live, the members of the world’s graying population need retirement plans that give them stability and security and allow them to have the lifestyles to which they are accustomed. The trend is toward fixed income accounts that avoid the volatility of stock markets and other such investments, and the insurance industry has responded to this challenge by providing appropriate solutions, such as annuities.The second force affecting society is the withdrawal of banks from providing these same kinds of instruments. Basically, bankers are shrinking their balance sheets because they don’t want to take on much in the way of long-term risk. This shift is driven by tougher regulatory standards and the continued need to “clean-up” troubled loans from the Great Recession. For example, there was a time not so long ago when Wall Street routinely carried some $250 billion of risk capital for Corporate bonds. Now the figure is more like $50 billion.The result is an evolutionary process that Charles Darwin would no doubt recognise the convergence of the solutions that the insurance industry is providing to the graying population and those that asset management companies offer.It’s a logical development because asset management firms are, as the name suggests, in the business of managing assets for long-term, stability-seeking investors like, say, pension funds. As the insurance companies move more strongly into fixed income solutions, companies like mine with our expertise in risk management and return maximization increasingly become their obvious partners.Certain localities are in a position both to encourage this trend and benefit from it. And Bermuda is a leading candidate for this role.First, Bermuda already has a strong record of innovation in the insurance market, especially its emergence as a world re-insurance center. In particular, it has been a leading locale for the evolving relationship between re-insurers and hedge funds.Second, Bermuda is well-known for a regulatory system that strikes the right balance between being friendly to business interests while insisting on strict rules of conduct.The fact that Bermuda has successfully avoided financial scandals in a world that is regularly rocked by them is proof of how well its system works. That is just the kind of environment that will foster the convergence of insurance companies and asset management firms. The result should be a steady stream of innovative offerings that suit the needs of the world’s graying population.Policymakers are constantly confronted with the challenge of identifying emerging trends and adapting successfully to them. At first glance it may not be easy to see the connection between the age wave that is sweeping over the globe, the tendency of bankers to deleverage their balance sheets and possibilities these simultaneous developments create for insurance companies and asset managers.But this convergence of interests is now under way, and Bermuda is ideally situated to capitalize on it.Cliff Corso is the chief executive officer, president and chief investment officer of Cutwater Asset Management Corp, which has approximately $37 billion of assets under management