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Bermuda’s captive leadership narrows

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Bermuda’s dominance as the world’s leading captive domicile may be under threat, like never before.

This, as the government flies the flag in support of a contingent of Bermuda insurance industry executives, at the Risk & Insurance Management Society’s annual conference and exhibition, an event which colloquially was known as the Rims Conference, but is now rebranded as simply Riskworld.

The conference is educational in nature. Members learn what is new in the commercial insurance industry and what is new to them.

The event begins today at the Moscone Center in San Francisco, California – an event attended by Bermuda executives for about a half a century, and by an official government delegation since at least 1986.

The total number of Bermuda official and unofficial delegates in some years have been estimated to approach 100. Many arrive in town just for pre-arranged business meetings and therefore are not registered for the conference.

The convention, first staged in 1963, celebrates its 60th anniversary next year.

Rims, the risk management society®️ began in 1950 in the US, but is today a global not-for-profit, advancing the practice of risk management throughout the world.

It provides opportunities in networking, professional development, certification, and education for its membership of 10,000 mostly risk management professionals in 60 countries.

The members are from more than 3,500 industrial, service, non-profit, charitable, and government entities throughout the world.

Risk managers manage risk for their organisations.

They identify potential risks the company could face, including causes of accidents or loss, and then determine preventive measures and devise plans to minimise costs and damage, should a loss occur, including the purchase of commercial insurance and captive insurance products.

As captives are formed, they seek reinsurance, legal, banking, accounting and other services.

Representatives from all such organisations from across the US and around the world converge at RISKWORLD to learn what’s new and help educate on industry developments.

This self-insurance solution was first introduced to Bermuda as a fledgeling concept in the 1960s, and it is usually employed for a company’s difficult to ensure risks.

Bermuda has been the dominant domicile in captive insurance for more than 50 years – more captives incorporated here than in any other captive jurisdiction.

In the United States, insurance is state-controlled, and there are at least 30 individual states battling each other, and outside jurisdictions, for captive business.

But at least by one measure – the total number of captives – a leading insurance magazine suddenly has Bermuda barely ahead of a Caribbean rival.

The number of captive insurance companies worldwide dropped significantly in the last seven years with Business Insurance, an industry authority, last month determining the latest figure at 5,985 in 2021.

That is a drastic drop from 2015 when there were nearly 900 more.

The popular industry magazine places the number of captives at 6,739 in 2014 and 6,851 in 2015, with a steady decline in the number by 2020, when the number was put at 5,879.

The 2021 number was cited at 5,985, with 106 more captives registered, as the captive count shows a clear correlation with the global insurance composite pricing change.

With the hardening of the commercial insurance market, companies seek alternative ways to transfer risks, such as by expanding their use of captives. In 2020, there were increased captive formations and an expansion of existing captives.

Business Insurance has Bermuda retaining its perennial top spot as the world’s largest captive domicile, by registered captives.

But the statistical comparison at the top is closer than it has ever been.

The annual count published in a March edition lists Bermuda with 670 and the Cayman Islands with 661 and Vermont with 620.

The 670 for Bermuda is slightly down from the previous year, but down by 186 since 2012, when total captives were listed at 856.

When asked about this narrowing of the lead, the Bermuda Captive Network stated: “The Bermuda captive community are very pleased with the growth and new formations experienced in 2021.

“There was 17 pure captive (2020 -12) formations and outside of this, a further 47 insurance licenses awarded in the commercial space.

“Bermuda is the only jurisdiction that reports separately on limited purpose Insurance entities and commercial licensed insurers.

“Whilst new formations in 2021 was up, the real growth was experienced in the expansion of existing licensed entities with a lot of insurance managers and other captive service providers reporting strong growth in existing single parent captives, with increased deductibles/retentions in captives and a large increase in cells being formed in existing cell structures.

“This growth is experienced not just as a result of the hard market but also as a result of Bermuda’s high class reputation, especially evidenced, over the last two years of lock down, to global requirements both on a regulatory and a risk base.”

Meanwhile, the latest data from the Bermuda Monetary Authority released in November comes from the 2020 Captive Report, highlighting the market results from the 2019 year-end statutory financial returns by general business captive insurers.

The Authority said at the time, that Bermuda remained the leading captive domicile in terms of both premiums written and capital.

Business Insurance reported that Marsh Captive Solutions managed the most captives in 2021 with 1,501, followed by Aon Captive & Insurance Management with 990 captives and Artex Risk Solutions with 822 captives.

All three companies have offices in Bermuda and other major captive domiciles.

The Moscone Center in San Francisco, California, the site of RISKWORLD, the branded Rims 2022 event (Photograph by Louis Raphael)

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Published April 11, 2022 at 7:56 am (Updated April 12, 2022 at 7:55 am)

Bermuda’s captive leadership narrows

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