Bermuda has tackled international concerns over asset management in its life reinsurance sector head-on, and is poised for further growth as a result, according to the head of an industry body.

Suzanne Williams-Charles, chief executive officer of the Bermuda International Long-Term Insurers and Reinsurers, said scrutiny over investment strategies of life reinsurers was “perfectly normal”.

And she added that actions taken by the Bermuda Monetary Authority to enhance regulatory oversight had served to reinforce the jurisdiction’s credibility and its attractiveness as a life reinsurance hub.

Bermuda’s life reinsurers have more than $1.5 trillion of assets under management and Ms Williams-Charles sees further prospects for growth, particularly from Asia and the high-net-worth sector.

The increasing involvement of private-equity firms in the life reinsurance sector, especially in Bermuda, has drawn the attention of regulators in the US, the European Union, Britain and Japan, as well as the International Monetary Fund.

Deals in “asset-intensive reinsurance” generally involve the transfer of blocks of pensions, annuities or life insurance products from an insurer to a reinsurer. The reinsurer takes on both the liability and associated asset risks.

Benefits for ceding insurers include the offloading of capital-intensive products and long-term liabilities, freeing them to focus more on new business. The practice helps to address the global pension protection gap, estimated at $1 trillion in a 2023 report by the Global Federation of Insurance Associations, and set to grow as populations age.

Alternative investment managers who own, wholly or partially, Bermudian reinsurers include Apollo (Athene and Athora), Sixth Street (Talcott Life Re), KKR (Global Atlantic), Carlyle Group (Fortitude Re), Brookfield (Brookfield Wealth Solutions), and Ares (Aspida).

Such firms’ investment strategies differ from what had been traditional in the life sector, with greater allocations to assets such as private credit and mortgage-backed securities. These investments generally generate higher returns than shorter-duration or publicly traded securities, enabling retirement funds to last longer, an essential need for the industry, given increases in life expectancy.

Liquidity issues, from an investment perspective, have come into sharp focus this year, as private-credit funds have seen a growing trend of investors seeking to pull out their money. The funds are typically structured to allow only 5 per cent of funds to be withdrawn per quarter, though in several well-documented cases, redemption requests have been higher.

With more than $1.5 trillion in assets under management, the sheer scale of Bermuda’s life reinsurance sector has caused concerns over the potential for systemic risk. In 2023, the IMF flagged up the risk of “contagion” from “offshore reinsurance” spreading to other parts of the financial system.

The National Association of Insurance Commissioners, the US standard-setting body, has made scrutiny of how life reinsurers manage their investment portfolios a strategic priority in 2026.

“It’s normal and appropriate for regulators to ask questions and to want to gain more clarity as a sector evolves,” Ms Williams-Charles told The Royal Gazette. “Jurisdictions of ceding companies will ask questions to understand the risks, because ultimately, the protection of policyholders in their jurisdiction is their responsibility.”

Illiquidity concerns centre on the need for the money to be available for payouts to policyholders. Ms Williams-Charles said the liquidity question should take into account the nature of what is being insured.

“What’s most important is asset-liability matching — so an asset only needs to be as liquid as the liability that it’s matched against,” Ms Williams-Charles said. “It needs to be there when that particular commitment comes due.

“The Bermuda regulatory regime has been designed, on the long-term side, to allow a good alignment of long-duration assets and liabilities.”

Ms Williams-Charles said Biltir and its members had worked over the past two years to explain how their internal controls address the liquidity and transparency concerns and any potential conflict-of-interest issues for private-equity backed reinsurers.

She added that, at the same time, the BMA has evolved its framework, introducing a “prudent person” principle and an enhanced public disclosure regime that requires reinsurers to provide details of their assets and liabilities, a regime aligned with what is in effect in the US.

The BMA also performed a stress test on the island’s long-term reinsurers last year, modelling a financial crisis scenario like that of 2008. The results highlighted the sector’s resilience, as the BMA concluded: “The stress test revealed that the majority of insurers maintain capital levels well above regulatory requirements, even under severe stress conditions.”

Ms Williams-Charles, a former deputy director of insurance supervision at the BMA, said: “I’m proud the BMA has gone in this direction. They’ve been very good about responding to even perceived gaps in regulation, because as we all know, perception is reality.

“Biltir has also supported increased transparency from the very start, because we thought this was the appropriate thing to do to address the concerns that have become global.”

The BMA’s moves have served to boost the island’s credibility as a jurisdiction that meets international standards of oversight, building on its Solvency II equivalence from the EU, and qualified and reciprocal jurisdiction status from the US.

“This increased transparency puts Bermuda in a good position to respond to questions around liquidity and asset quality, because interested parties can look at the composition of the investment portfolios, and make their own assessment,” Ms Williams-Charles said.

Further growth would be driven by demand, Ms Williams-Charles said. With an ageing population in most developed economies, and people living longer, the pension protection gap will drives the need for solutions.

“Helping to close that gap will require innovation,” she added. “I’m aware from conversations with our members that some are looking at new strategies to enhance capital efficiency while maintaining strong policyholder protection.”

In February, Ms Williams-Charles travelled to Las Vegas to attend the Refocus Conference, an annual event for life insurance and reinsurance professionals. “The most talked-about thing from the conversations I had was the growth of the Asian market and how that will be a key driver for growth in Bermuda,” she said.

Biltir representatives will travel to Japan later this year to promote the industry, and also sees growing opportunities in Hong Kong and Singapore, and in the high-net-worth space.

Japanese life and annuity insurers have struck several risk-transfer deals with Bermuda life reinsurers and demand continues. Last month, for example, Japan Post Insurance sold two blocks of annuities, one to Aflac Re Bermuda and another to Talcott Re, expanding a previous agreement.

“Japan has an ageing population, and therefore a growing need for coverage in this area,” Ms Williams-Charles said.

“They have to figure out: how do we continue to deliver? By offloading some of their risks to reinsurers, that frees them up to continue to deliver.

“They want to do that with the absolute aim of protecting their policyholders. And so where do they look to do that? In a reputable jurisdiction — and that’s why their business is coming to Bermuda.”