flexible and efficient solutions stretching from bespoke risk coverage
to run-off portfolio management. This expertise is also enabling
structures to evolve, which includes adapting to the changes in tax
arrangements for reinsuring onshore affiliates.
Wide client base
These attractions are reflected in the broad spread of reinsurance
entrants and business coming into Bermuda, geographically and
in terms of risk focus. Registrations over the last few years reveal
companies focusing on Asia, Europe and North America. There have
been major deals carried out across longevity risk and the variable
annuity market, and insurers worldwide are exploring ways to
consolidate and manage their risk through a Bermuda vehicle.
Sustaining the momentum
How then can market participants sustain this growth? Capital
inflows and associated capacity continue to increase in step with
demand. Sources of investment include private equity and sovereign
wealth funds, but capacity is only one part of the equation.
As reinsurers set up in Bermuda and seek to expand their
operations, they need to win cedant confidence. That requires clarity
over business models and product offering. It also requires a track
record—so there is the chicken and egg challenge of securing the
initial deal that will help to attract other clients.
Efficiency rather than innovation is likely to be the key to getting
over this all-important first hurdle. Cautious cedants are reluctant to
be the guinea pigs for new models and untried solutions, and their
risk aversion is heightened by the reputational sensitivities surrounding
life and pensions business. Any slip-ups could not only bring down
regulatory sanctions but also affect their ability to attract new business.
That is not to say there is no place for innovation—this is very
much part of Bermuda’s future success in this sector—but it can come
into play only once companies have demonstrated their capabilities.
This is a very exciting time to be working with life reinsurers
here in Bermuda. The coming together of capability, capacity,
and global demand means we’re likely to see a continuing
acceleration in growth. The companies that will reap the
dividends know they need to build up a foundation of trust
before they can realise the full potential.
Damian Cooper is a partner at PwC Bermuda. He can be
contacted at: firstname.lastname@example.org
As capital flows in and registrations soar, Bermuda has
emerged as a leading global centre for life reinsurance.
With assets of $300 billion, the life sector is now the
largest insurance sector by assets in Bermuda, according
to Bermuda International Long Term Insurers and Reinsurers (BILTIR).
While this $300 billion owes much to the large asset holdings that are
part and parcel of life business, the pace of new registrations—15 new life
licences issued by the Bermuda Monetary Authority (BMA) in 2018—
marked the greatest year-on-year growth across all insurance sectors.
Why the upsurge in growth? Bermuda has found itself in the
right place, with the right people, at the right time.
Globally, the direct life and pensions market is growing rapidly
on the back of an ageing population and the scaling back of state
welfare. Life insurers are looking to reinsurers to help them transfer
risks including longevity and income guarantees so they focus capital
on these new business opportunities.
The pincer of regulation and low investment yields has heightened
life reinsurance demand by increasing the capital requirements for
life and pension risks and making it harder to fund the guarantees.
Direct writers are especially keen to seek reinsurance solutions
that enable them to offload and aggregate the guarantees built into
policies before these new rules came into force and where portfolios
have been closed to new business as a result.
Bermuda’s big draws include a pragmatic regulatory environment
and National Association of Insurance Commissioners (NAIC) and
Solvency II equivalence. BILTIR should also be commended for its
ability to collect feedback from market participants and enable them to
engage with the BMA with one voice as far as possible. This dialogue
has helped to build solid foundations for registration and regulation.
Growing talent pool
Bermuda benefits from a strong and growing talent pool within the
life insurance and reinsurance market. There are now more than
500 Bermuda-based staff working in the sector, according
to BILTIR, with 40 percent of these employees being
Bermudian or the partners of Bermudians, which highlights
the firm roots the sector is putting down. We also have a
strong bedrock of legal, advisory and outsourcing support.
This combination of in-house and third-party expertise
is enabling Bermudian life companies to develop innovative,
“There is the chicken and egg challenge of securing the
initial deal that will help to attract other clients.”