Life insurance sector comes into its own
Bermuda is a renowned insurance and reinsurance domicile and has enjoyed a long and distinguished history in the area of long-term insurance and reinsurance. While its prime focus has been on general insurance business, in recent years the long-term re/insurance market in Bermuda has grown substantially.
In 2018, the life sector grew exponentially as the number of new company formations more than doubled from the previous year with 15 new life licences issued by the Bermuda Monetary Authority compared to just six in 2017.
With an aging global population, the demand for life products, including pensions and retirement products, is high. Direct writers are seemingly running out of exposure capacity and look to reinsurance to spread the risk.
Large amounts of capital are being invested in this sector as investors consider life insurance and annuities to be a stable source of earnings.
In 2015, the life sector was comparable by assets to the captive sector with approximately $196 billion in assets but second to the property & casualty (including special purpose insurers) sector, which had approximately $241 billion in assets.
In 2016, the life sector overtook both the captive and P&C sectors and grew to $288 billion in assets while the P&C sector had $260 billion and captives had $217 billion.
Since then, the life sector has maintained its lead position in the insurance sector. Indeed, the life market is now the largest sector in Bermuda with more than $300 billion in assets, and that amount looks set to increase still further.
One of the key attractions of Bermuda as a reinsurance domicile is its strong yet appropriately flexible regulatory framework. This is certainly true of the life sector and is a key driver in both growing and sustaining the island's booming long-term insurance market.
While maintaining unswerving dedication to the paramount need to promote and foster core regulatory principles including policyholder protection, proportionality and transparency at every level, Bermuda continues to be a beacon of innovation in accommodating an array of exciting and leading-edge structures.
Recent examples of these developments include an emerging trend whereby a number of existing general insurers have succeeded in adding long-term licences to reflect new programme coverages, thus enhancing the optimisation and utility of existing structures while yielding significant cost savings and other advantages.
Bermuda enjoys both Solvency II equivalence and National Association of Insurance Commissioners qualification which means that the island's insurance and reinsurance market operates in a legal and regulatory environment that is on par with that of Europe and the United States. This has put Bermuda ahead of many of its competitor jurisdictions and reaffirmed its position as a dynamic insurance market with robust, pragmatic and highly credible regulation.
The Bermuda International Long-Term Insurers and Reinsurers organisation was established in 2011 with five founding members. Today, Biltir advocates for its approximately 55 member companies in the life and annuity industry including in relation to regulatory requirements. Indeed, armed with extensive industry knowledge and contacts supported by sterling regulatory relations in both Bermuda and abroad, Biltir focuses on the most critical issues facing the global insurance industry.
The growth of Bermuda's life insurance sector is set to continue, allowing existing companies to raise large quantities of capital and start-ups to benefit from a straightforward and streamlined licencing process geared entirely toward facilitating innovation and speed to market.
• Attorney Laura Burns is a member of the corporate team at Appleby. A copy of this column is available on the firm's web site at www.applebyglobal.com.
This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.