
A sector on the rise
Bermuda’s life reinsurance sector has enjoyed dramatic growth in the last decade.
The life reinsurance sector in Bermuda has seen significant growth, solidifying its position as a global hub for long-term re/insurance activities.
Bermuda is home to more than 40 life and annuity reinsurers, many of which are members of Bermuda International Long Term Insurers and Reinsurers (BILTIR).
These entities are central players in the global reinsurance market, managing substantial portfolios that contribute to Bermuda’s prominence in this sector, and Bermuda’s life reinsurance sector has evolved considerably over the past few decades.
Initially overshadowed by the Island’s property and casualty insurance industry, the life reinsurance market began gaining momentum in the early 2000s.
The sector’s expansion was partly driven by the global financial crisis of 2008, which highlighted the need for greater capital efficiency among insurers.
This need was particularly acute in the life insurance market, where long-term liabilities and low-interest rates put pressure on balance sheets.
Between 2006 and 2012, Bermuda’s life reinsurance assets grew at an average rate of 18 percent per year.
This growth was fuelled by a combination of new market entrants and existing players scaling up their operations.
Then in 2013, the Bermuda Monetary Authority (BMA) introduced comprehensive regulations for the long-term sector that resulted in Bermuda being awarded equivalence under the European Solvency II regulatory regime.
As of 2022, Bermuda’s long-term commercial life insurance and reinsurance companies reported assets nearing $1.07 trillion, evidence of the sector’s expansion and the increasing demand for life reinsurance solutions. Figure 1 shows the proportions of assets held by the sector.
BILTIR and other key players
BILTIR has played a pivotal role in supporting the growth and development of the life reinsurance sector on the Island, representing the interests of long-term insurers and reinsurers, advocating for regulatory frameworks that promote the sector’s stability and growth while ensuring compliance with international standards.
Notable companies within BILTIR include Athene Life Re, a significant player launched by Apollo Global Management, and Wilton Re, which focuses on acquiring legacy blocks of life insurance business.
These firms, among others, have been instrumental in establishing Bermuda as a leading jurisdiction for life reinsurance, providing innovative solutions that meet the evolving needs of global insurers.
Regulatory landscape
Bermuda’s regulatory environment has been a crucial factor in the sector’s success.
The BMA has developed a robust regulatory framework that aligns with international standards while offering the flexibility needed to attract global reinsurers.
Bermuda’s status as Solvency II-equivalent has been particularly advantageous, allowing reinsurers based on the Island to operate on a level playing field with their European counterparts.
This equivalence has made Bermuda an attractive destination for reinsurers seeking to benefit from capital efficiency and a favourable regulatory environment.
Recent regulatory developments include updates to the Economic Capital framework, effective from March 2024.
These changes require life insurers to adjust their reserve valuations and capital management strategies, ensuring that Bermuda remains at the forefront of regulatory innovation.
The BMA’s approach to regulation, characterised by its pragmatism and collaboration with industry stakeholders, has been central in maintaining the sector’s competitive edge. The BMA works closely with other regulators to ensure that transfers of portfolios are carried out with prior agreement.
New entrants and capital influx
The past two years have brought several significant new entrants into Bermuda’s life reinsurance market, reflecting the sector’s ongoing appeal.
Notable among these is the establishment of Monument Re, which has rapidly expanded its presence on the island.
Monument Re focuses on managing portfolios that are capital intensive under the Solvency II regime, providing solutions that enable insurers to optimise their capital and exit non-core business lines.
Other new players include various private equity-backed reinsurers that have identified Bermuda as a strategic base for their operations.
These entities are drawn to the Island not only by its regulatory environment but also by the opportunity to tap into the growing demand for reinsurance solutions, particularly in the annuity and retirement services markets.
Mergers and acquisitions activity
The life reinsurance sector in Bermuda has undergone significant mergers and acquisitions activity over the past two years.
This trend is driven by the need for scale and diversification, as well as the pursuit of synergies in an increasingly competitive market.
A key example is the acquisition of blocks of life insurance by companies such as Wilton Re, which has been actively acquiring legacy portfolios to enhance its value proposition.
Other recent activities include Brookfield Re’s purchases of American Equity Life in the first half of 2024 and American National Life in 2022, which gave the company $100 billion in assets. Fortitude Re closed a $28 billion reinsurance agreement with the Lincoln National Life Insurance Company in November 2023.
In September, 2023, life insurance giant Prudential and investment bank Warburg Pincus joined forces to launch $1 billion long-term reinsurer Prismic Life Reinsurance. A month later, global life and annuity insurer Aegon redomiciled to Bermuda from the Netherlands after the sale of its Dutch business.
The BMA’s supportive regulatory framework has facilitated these transactions, allowing companies to execute complex deals efficiently and with the necessary regulatory approvals.
Regulatory standards
The industry has faced some criticism as it has grown. Overseas regulators and competitors have raised concerns about capital adequacy and supervision, and have questioned the role of private equity businesses as owners.
In response to the rapid growth of the sector, the BMA updated its regulations in 2023 and required the companies meet its risk-based regulatory framework and capital adequacy requirements.
In one example, the BMA must approve all blocks of life business as they come in, based on a broad set of information.
The Island’s ability to attract and retain leading global reinsurers speaks to its status as a premier jurisdiction for life reinsurance, offering a compelling combination of regulatory stability, capital efficiency, and market access.
As the sector evolves, Bermuda will remain a key player in the global life reinsurance landscape, driving innovation and providing essential risk management solutions to re/insurers worldwide.
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