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Bermuda shines in alternative capital stakes

Bermuda is leading the way in the insurance sector's growing alternative capital market.

The large insurance losses sustained as a result of hurricanes in 2017 resulted in more alternative capital being placed in the Bermuda insurance market.

Commenting on that trend, Craig Swan, the BMA's managing director, supervision (insurance), said: “The steady growth of alternative capital within the Bermuda insurance market, particularly following the 2017 losses from Hurricanes Harvey, Irma and Maria, indicates that Bermuda continues to be a trusted centre for insurance risk securitisation.”

“The aggregate exposure of non-life (re)insurers backed by alternative capital was approximately $51.9 billion at year-end 2017, while gross written premiums was $3.9 billion. Bermuda's share of total capacity was approximately 58 per cent of the global alternative capital market.”

To put the island's share in to context, the global market in 2017 was $89 billion.

Catastrophe bonds and collateralised reinsurance are the two dominant forms of alternative capital in the Bermuda market. At the end of last year, cat bonds accounted for $19 billion of the island's alternative capital total, while collateralised reinsurance valued at $28.5 billion accounted for more than half of the total capacity.

Other forms of alternative capital structures include sidecars, longevity and mortality bond/swaps and hybrid securities such as preference shares.

Geographically, the assumed risks for Bermuda's alternative capital vehicles was 40 per cent in the US.

Although the risks were split across nine lines of business, property catastrophe, including property retrocession, accounted for 94 per cent of the gross written premiums to the end of 2017.

Gross written premiums in 2017 totalled $3.9 billion.

The information for the BMA alternative Capital Report 2018 was gathered from the alternative capital schedules and statutory financial returns submitted to the authority by June 30.

The BMA has also released its annual captive report, offering year-on-year comparisons to the captive/special purpose insurers report of 2017.

Mr Swan said: “Although not yet significant in premium size, the greatest year-on-year percentage increase was experienced by the cyber-risk line of business which saw an increase in premium of $26.3 million (rising to $42 million) a nearly twofold increase in premiums written.”

He added: “These reports provide further insight and transparency about how Bermuda's innovative (re)insurance market continues to evolve and develop.”

The reports can be accessed at https://tinyurl.com/y93zmrku

Lion's share: Bermuda's alternative capital business in 2017 totalled $51.9 billion, accounting for 58 per cent of the global total of $89 billion (Graph by Scott Neil/data from Bermuda Monetary Authority)

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Published December 27, 2018 at 8:00 am (Updated December 26, 2018 at 11:55 pm)

Bermuda shines in alternative capital stakes

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