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Conference to examine new approaches for annuity sector

The increased demand for reinsurance and the tough environment for traditional ways of providing it is to feature at a major conference on the island next week.

But delegates will hear that — while low yields, mounting capital demands and price competition are affecting the business — the industry can help annuity writers improve efficiency and open up access to broader investment strategies.

Colm Homan, managing director of accountancy firm PwC, which is organising the conference with ratings agency Standard & Poors, said: “Bermuda is ideally placed to provide the cost-, capital- and tax-efficient solutions that would enable annuity writers to compete more effectively.”

PwC believes that Bermuda's role in supporting the US annuity sector as comparable to earlier developments in catastrophe reinsurance.

It has already been reported that more than 40 per cent of US life and annuity liabilities have been transferred to subsidiaries in Bermuda and other capital-efficient jurisdictions like Vermont and South Carolina.

Mr Homan said: “One of the island's key advantages includes the speed of licencing.

“Bermuda also offers a mature regulatory system which reflects the fact that the arrangements are being made between knowledgeable parties rather than directly with retail policy holders.”

He was speaking in the run up to the eighth annual Bermuda (Re) insurance Conference, to be held at the Hamilton Princess next Tuesday and Wednesday under the banner of ‘Securing a foothold in shifting sands'.

Mr Homan added: “Ceding risks to special purpose insurers and other reinsurance structures domiciled in Bermuda has become a growing trend over the last four years.

“Use of reinsurance is enabling annuity writers to reduce their capital demands. They're therefore in a much better position to compete on price while still achieving a reasonable margin.”

And he said: Bermuda offers the additional advantage of more flexible asset rules and a tax neutral environment which can help companies to deliver higher investment returns to their policyholders.

“Alongside the capital advantages, this flexibility could help to promote the development of innovative new products in what is an increasingly dynamic marketplace.”

He added that proposed changes in the regulations governing the New York market — which may reduce reserves of cash rather than increase them.

Mr Homan said: “If the regulator gets its way and reserving levels are increased, New York could become economically unviable for many life insurers.

“They will be faced with a tough choice to either withdraw and lose access to a major market or deal with lower returns associated with holding the higher capital levels.”

For more information on the conference, visit www.bermudareinsurance2013.com.

Colm Homan, managing director of accountancy firm PwC -

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Published November 08, 2013 at 8:00 am (Updated November 08, 2013 at 8:20 am)

Conference to examine new approaches for annuity sector

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