A growing hub for the life sector

Standing on the cusp of what is likely to be a fraught 2022 renewals season, the re/insurance world’s focus is squarely centred on the direction of the property/casualty markets and property-catastrophe business in particular.

The sector has grabbed all the headlines in a year where the market suffered from myriad natural catastrophe losses and the fallout from the COVID-19 pandemic, closely followed by the impact on insurance-linked securities (ILS).

As ever, Bermuda will be at the centre of things. Its established incumbent players and the many startups that have launched in the market in the past two years will all negotiate and determine what capacity they are willing to offer—at what price—all amid growing concerns over climate change and how the ILS market will rally from another loss-impacted year.

Behind the Headlines

The P&C sector always gets the headlines. Behind them, however, Bermuda has another growing base of companies far removed from the P&C rabble, which are rapidly growing, bringing jobs and economic prosperity to Bermuda—in a quieter and more measured way.

Bermuda has a growing base of long-term re/insurers: companies that generally specialise in life insurance or reinsurance. They have not come from nowhere. Their association, Bermuda International Long Term Insurers and Reinsurers (BILTIR), celebrated its 10th anniversary this year and now boasts some 70 members. They offer Bermuda’s economy a new and very stable pillar.

As the pandemic caused a rupture in other segments of the re/insurance world, the life reinsurance market on the Island has shown signs of expansion, with more companies opting to make Bermuda their home.

Brad Adderley, partner at law firm Appleby, says that the pace of new entrants to the space has increased markedly over the past year—and that the change is a boon for the Bermudian re/insurance market as a whole. He stresses that these companies are big—managing a lot of assets. They bring a lot to the Island.

“If you go back five or seven years in Bermuda, how many class E carriers were there in Bermuda? I’m guessing not many,” he says.

“Now, I have six on the go—right now. So, from our perspective, the life insurance market in Bermuda is booming.”

He says this is great for the Island because it makes it a well-rounded marketplace. “It’s always had the P&C carriers, then came the ILS market, then collateralised reinsurance and now the life insurance space is growing in size. It is good for the Island.”

What is more, he says, the growth shows no signs of slowing. Because of its global nature and links to the capital markets, there is little danger of the space becoming saturated. Bermuda is now attracting life books of business from beyond the traditional feeder market of the US. Companies from Europe, Asia and elsewhere are now viewing the Island as an attractive destination.

“This marketplace is growing exponentially. Most of the time when you see things growing, it starts flat, and it gets steeper—but we are on a very steep curve now. And there is more and more interest coming in,” Adderley says.

Praise for the regulator

Adderley points to the important role the Bermuda Monetary Authority (BMA) has played as a regulator in helping to facilitate the growth of the market. Given that life re transactions can run into the billions of dollars, it is important that overseas regulators are comfortable with the Bermuda regime, Adderley says, if the market is to continue to grow.

“The BMA should be commended on the supervision and licensing of these companies, to get overseas regulators comfortable with what we’re doing, because they’ve only increased our reputation on the Island,” he says.

“They have made sure that cedants are comfortable. A life reinsurance transaction can be a couple of billion dollars. So the fact that Bermuda is attracting so many companies with assets on this scale, making sure the onshore regulators are comfortable, is a big compliment to the BMA. For me, the market is going from strength to strength.”

He notes that Bermuda has taken a clear lead over other competitor jurisdictions, such as the Cayman Islands, in its bid to become the global hub for the life re industry.

Adderley says the Island’s competitors are rarely in the frame over where to domicile such books of business, with the regulatory regime implemented by the BMA streets ahead of other offshore finance hubs.

“I don’t see other hubs being involved. The vast majority of all the new life reinsurers we see are being formed in Bermuda. Some are being formed in Cayman, but you don’t hear about any other jurisdictions,” he adds.

He reiterates the size of the deals involved. “In P&C you might do a $50 million contract; in life you get a $2 to $8 billion contract, so the reputation of the jurisdiction is very important. Except for a small number, they are all being done in Bermuda.

“I have never had a client do what I would call a ‘beauty parade’, where they’re considering the benefits of another jurisdiction. Everyone else is here, and that marketplace is now growing.”