Project Description

Bermuda has long been known as a centre of excellence in the world of re/insurance.

Despite challenging global market conditions, including mergers & acquisitions, in 2017 Bermuda again held its #1 position as top captive insurance domicile.

Not be overlooked, however, is the burgeoning life re/insurance and annuity space on the Island. Life re/insurance today represents a significant portion of Bermuda’s re/insurance market.

The concept of buying life insurance and annuity products to protect one’s life and assets is not new. But it has evolved, resulting in innovative insurance techniques and structures that act as a key tool in achieving planning goals for international clients, whether they are individuals looking to provide for their family’s future, or companies looking to provide pensions or employee benefits.

There has been an upswing in interest in these offshore products issued by Bermuda reinsurers, which has translated into a high level of activity by large institutional players – mainly US reinsurers and investment houses – seeking to establish new long-term re/insurance facilities on the Island.

The Bermuda Monetary Authority (BMA) has a risk-based classification system for the supervision of re/insurers. The BMA classifies long-term insurers into five classes ranging from A to E: Class A reinsurers are single-parent companies, which underwrite the life business risks of their owner or owner’s affiliates. And, at the other end of the scale, are Class E reinsurers with total assets of over $500 million and which write life business for multiple entities.

Bermuda saw impressive growth in this sector in 2017 with 6 long-term insurance companies, one Class C and 5 Class E companies, newly licensed by the BMA. These included Monument Re, Athora Life Re, Allianz Re Bermuda Life, Langhorne Re, and Private Bankers Life & Annuity Co.

Bermuda is perhaps unique among offshore jurisdictions in that it can accommodate all forms of re/insurance. From creating the first captives in the 1960s, to becoming a home to global reinsurers in the 1980s and a hub for alternative risk transfer products in the 2010s, it has righly gained a reputation for being the world’s re/insurance laboratory.

Reinsurers on the Island have developed a strategic focus on niche products, including universal life and other investment-linked products, variable annuities and group long-term disability coverage.

Frank Gillis, one of the Bermuda International Long-Term Insurers and Reinsurers’ (BILTIR) founding directors and president, says that Bermuda is highly attractive to life reinsurers as a result of the BMA’s commitment to achieving compatibility with the EU and the US.

BILTIR was created to serve as a formal association representing the long-term insurer and reinsurer group in Bermuda. Its primary focus is to be an advocate for the life industry on the Island for matters with respect to regulatory requirements and other aspects with the BMA, tax matters with various jurisdictions and in general to provide a consistent and coherent voice for any concerns of the life industry in Bermuda.

‘Life reinsurers are continuing to establish themselves on-Island, in part to benefit from a comprehensive capital and solvency framework’, Gillis says. ‘A number of companies specialise in reinsuring US fixed annuities. There is interest in Bermuda from Europe-based companies [after being granted] Solvency II equivalence.’

There are now 50+ life and annuity reinsurers incorporated on the Island that are members of BILTIR. An example is Athene Life Re, launched by investment firm Apollo Global Management, which focuses on the growing need for new capital to support the annuity insurance market. Today, the long-term and life reinsurance industry represents around a third of the Bermuda market in terms of total assets, and that amount looks set to increase still further.

‘Life reinsurance continues to expand as part of the Bermuda international business sector,’ said Sylvia Oliveira, also of BILTIR. ‘Long-term re/insurers provide significant diversification for the Bermuda economy since we are affected by a different set of drivers than property and casualty re/insurers. Our markets keep expanding as aging populations seek to protect assets during retirement and for their heirs. We are confident the BMA’s sophisticated regulatory environment continues to attract life reinsurers to domicile in Bermuda.’

There are many reasons to incorporate on the Island. These include the most frequently cited ones, such as Bermuda’s superb infrastructure and professional expertise, cutting-edge telecommunications and speed of response time.

And with new products being continuously developed, many industry observers believe that the global marketplace has now recognised Bermuda as the natural domicile for the conduct of international life and annuity business.

Learn more: Accounting for Corporate Life Insurance [external link]

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