Bermuda’s long-term insurance sector strengthened its resilience to liquidity shocks in 2024, according to a new report by the Bermuda Monetary Authority.

The survey found reinsurers holding larger liquidity buffers and facing reduced exposure to stress in the event of a surge of policyholder withdrawals.

The report, Liquidity Risk in the Bermuda Long-term Insurance Market, concluded that the market remains “well positioned to withstand liquidity challenges” amid concerns that a period of higher interest rates will tempt more policyholders to cash in their policies.

The data comes amid growing scrutiny of Bermuda’s life reinsurance industry from regulators concerned by liquidity and transparency of their investments, particularly private credit investments.

In the past week, Japan’s Financial Services Authority and Britain’s Prudential Regulation Authority have both separately proposed regulatory changes that would clamp down on life insurers transferring blocks of annuity liabilities to Bermuda reinsurers, who shoulder the liabilities and invest the assets tied to them.

Regulators in Europe and the US have also expressed concerns about the growing involvement of private equity firms in the industry and the potential conflict between the interests of policyholders and investors. Apollo, Brookfield and Blackstone are among the firms who either own Bermudian reinsurers, or mange their investments.

Rapid growth culminated in Bermudian long-term insurers managing assets of more than $1.5 trillion as of September 2025, according to BMA data.

In its report, the BMA said differences in sophistication across firms highlighted the need for continued improvement. Areas identified for enhancement included more advanced stress testing, diversified funding channels and stronger cashflow-forecasting capabilities.

The BMA said liquidity risk management would remain a supervisory priority in 2026, with increased focus on governance, validation processes and contingency planning as global financial conditions continue to evolve.

The regulator found that a key measure of resilience — the liquidity coverage ratio — improved significantly during the year. Under the BMA’s severe “one-in-200-year” stress scenario, the median LCR rose to 471 per cent from 418 per cent in 2023, while the weighted average climbed to 762 per cent from 527 per cent.

The report added that even under the stricter International Association of Insurance Supervisors methodology, insurers maintained a median LCR of 350 per cent.

The BMA attributed the sector’s performance to prudent investment allocation, stronger surrender disincentives in insurance products and increasingly sophisticated liquidity risk management frameworks.

According to the report, approximately 57 per cent of insurers’ investments were concentrated in cash, sovereign bonds and corporate bonds at year-end 2024, reflecting a preference for liquid, investment-grade assets. Corporate bonds alone accounted for nearly half of portfolios.

At the same time, insurers reduced their vulnerability to sudden policyholder withdrawals. The share of best estimate liabilities exposed to lapse risk declined to 72 per cent from 78 per cent a year earlier.

Products carrying medium economic penalties for early surrender rose to 65 per cent of surrender values, up from 52 per cent in 2023, giving policyholders stronger incentives to maintain their contracts.

The BMA’s review of 76 Commercial Insurer’s Solvency Self-Assessment submissions also found widespread adoption of formal liquidity governance practices.

Nearly 90 per cent of insurers used quantitative liquidity risk appetite statements, while more than 80 per cent maintained contingency liquidity plans and asset-liability matching programmes.

• See the full report under Related Media

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BMA Liquidity Risk Report