Bermuda’s burgeoning life reinsurance sector bears testament to the BMA’s efforts to secure a supportive regulatory environment that is compatible with the US and the EU. Bermuda:Re+ILS investigates.
The long-term life insurance sector makes up a significant portion of Bermuda’s re/insurance sector and comprises 123 firms with premiums of $19.9 billion, total assets of $151.5 billion and capital and surplus of $32.5 billion at the latest count.
The Bermuda Monetary Authority (BMA) has a risk-based classification system for the supervision of re/insurers. In 2011 the authority reclassified 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. 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 (see Table 1.)
According to David Theaker, chief actuary at the BMA, Bermuda’s long-term sector is currently undergoing rejuvenation. “Major, international players in the life sector are establishing new subsidiaries here,” he says.
“The authority has already registered five new Class C insurers and one new Class E firm in 2014. Two more Class Es are approved and await registration. Since the reclassification in 2011, the authority has not seen three Class Es register in the same year,” he says.
“The new Class Es have told the BMA that Bermuda remains attractive because Bermuda has a first-class reputation; the BMA is accessible and responsive; and the jurisdiction is willing to innovate.”
“The regulatory regime and recognition in Europe and North America support the ability to access and compete in these markets in a credible manner.” Manfred Maske
Bermuda is unique among insurance domiciles 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, Bermuda has gained a reputation for being the world’s re/insurance laboratory.
“Over the decades Bermuda has developed a sophisticated, wholesale market where no two structures are exactly alike,” says Theaker.
In December 2013, Bermuda won conditional qualified jurisdiction status from the National Association of Insurance Commissioners (NAIC), the US standard-setting and regulatory support organisation. The move means that reinsurers licensed and based in Bermuda will be eligible to be certified for reduced reinsurance collateral requirements. The BMA, along with similar bodies in the UK, Germany and Switzerland, has been granted conditional status pending a full review in 2014.
“The authority’s commitment to the regulatory equivalence processes in relation to the NAIC qualified jurisdiction status and the European Insurance and Occupational Pensions Authority’s (EIOPA) Solvency II directive casts Bermuda’s regime in a favourable light,” says Theaker.
Despite concerns regarding delays in the implementation of the Solvency II requirements, the BMA continues its efforts to meet an EU equivalency standard, making Bermuda one of several nations seeking to meet equivalence for commercial entities under Solvency II.
As a result of its equivalence assessment in 2011, EIOPA found that Bermuda meets the criteria for third-country equivalence, but with certain caveats which the BMA has undertaken to address with a more enhanced regulatory regime for commercial insurers.
The BMA’s commitment to achieving Solvency II equivalence was a deciding factor behind Legal and General’s entry into the Bermudan life reinsurance market. The company obtained its licence as a long-term life reinsurer in June 2014 and is currently looking to complete its first major tranche of business in the short term as well as continuing to develop its presence in key selected markets.
“We selected Bermuda as our domicile because of the recognised and robust regulatory environment as well as the direction the BMA was going in terms of being a qualified jurisdiction in the US and seeking Solvency II equivalence in the EU,” says Manfred Maske, CEO of Legal & General Reinsurance Company.
“Bermuda is developing as an international centre for life reinsurance and I believe this will continue as other entrants consider setting up operations here. The regulatory regime and recognition in Europe and North America support the ability to access and compete in these markets in a credible manner.”
Frank (Chip) Gillis, one of the Bermuda International Long-Term Insurers and Reinsurers’ (BILTIR) founding directors and president, agrees 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.
“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 helped by the possibility of Bermuda’s being granted Solvency II equivalence.”
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.
There are now 40-plus 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 is focused 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. Between 2006 and 2012 assets grew by on-average 18 percent per year,” says Gillis.
From a regulatory standpoint, the BMA’s current challenge is to continue to meet developing international standards while at the same time keeping regulations appropriate for the firms which operate on-Island.
“Life reinsurers are continuing to establish themselves on-Island, in part to benefit from a comprehensive capital and solvency framework.” Frank (Chip) Gillis
“To minimise business disruption and provide maximum opportunity for feedback, we ensure that any changes are phased in in a measured, pragmatic way and carried out in full consultation with industry groups like BILTIR with whom we maintain open and effective channels of communication,” says Theaker.
“In terms of the life sector specifically, challenges include a sustained low interest rate environment, particularly where they have to honour guarantees. The BMA is addressing such challenges by continuously monitoring licence-holders—particularly from a macroprudential level—and supervising accordingly.
“Obviously I don’t have a crystal ball, but I remain optimistic about the future. If this year’s registrations are any indication, the outlook looks bright. These are global companies seeking to benefit from Bermuda’s reputation and sophisticated reinsurance market. Their presence here is proof of the authority’s regulatory quality.”
BILTIR Members (full members only)
Ability Reinsurance (Bermuda)
Incorporated in 2005 and based in Bermuda, Ability Reinsurance Holdings Ltd is a holding company that provides reinsurance, administrative, and risk management solutions to health and life insurers and reinsurers seeking to exit non-strategic markets in the US, through its subsidiary Ability Resources.
ACE Tempest Life Re
ACE’s businesses in Bermuda offer a wide range of insurance and reinsurance products and services for businesses. ACE Tempest Re Bermuda is a global leader in the catastrophe reinsurance market and offers property catastrophe, casualty and specialty reinsurance products worldwide.
AIA International Limited
AIA Group Limited and its subsidiaries comprise the largest independent publicly listed pan-Asian life insurance group. It has operations in 17 markets in Asia-Pacific—wholly-owned branches and subsidiaries in Hong Kong, Thailand, Singapore, Malaysia, China, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau, Brunei, a 97 per cent subsidiary in Sri Lanka, a 26 per cent joint venture in India and a representative office in Myanmar.
Arch Reinsurance Ltd
Arch Reinsurance Ltd was formed in 2001 to provide an infusion of highly rated capacity to the specialty property and casualty reinsurance marketplace. With an experienced management team, industry-leading underwriting talent and substantial capacity, Arch provides a sound, flexible market for ‘large lines’ on selected property, casualty, specialty and multi-line reinsurance contracts.
Athene Life Re
Bermuda-based reinsurance company focused on the growing retirement services market. Athene Life Re’s core business is fixed annuity reinsurance, partnering with primary life and annuity insurance companies to find solutions to their corporate needs, enhancing their presence in the retirement market and improving their financial results.
Aurigen Capital Limited is an insurance holding company that was formed in 2007 with a capital facility in excess of $500 million. Aurigen provides risk and capital management solutions tailored to specific customer needs, with its core business being the reinsurance of life insurance policies of North American residents.
Beechwood Bermuda International Ltd
BBIL was formed in 2012 to provide offshore innovative insurance products and reinsurance capacity to life, accident and health insurance companies seeking improved capital efficiency through reallocations of surplus. Beechwood life reinsurance company is fully licensed by the BMA and is capitalised with more than $75 billion in capital, with access and intent to fund up to $500 billion additional capital over the coming years.
Brookfield Life Assurance Company Limited
A subsidiary of Genworth Financial Inc.
Commonwealth Re / Ariel Re Bda
Part of Global Atlantic Financial Group Limited, a multi-line insurance and reinsurance company, it was founded at Goldman Sachs in 2004 and separated as an independent company in April 2013. In less than a decade, Global Atlantic has established itself as an innovative insurance and reinsurance provider. The company entered the life & annuity market in 2005 by acquiring Allmerica Life, renamed Commonwealth Annuity and Life Insurance Company.
Credit Suisse Life (Bermuda)
A subsidiary of Credit Suisse AG.
Front Street Re
Front Street Re seeks to provide long-term reinsurance solutions to life and annuity insurers allowing clients to increase capital bases, reduce leverage ratios and focus on core strategies. It aims to develop meaningful relationships with clients by treating each uniquely, being open and transparent and investing time to develop long-term plans that are focused on each client’s goals.
Hannover Life Reassurance Bermuda Ltd
Hannover Life Reassurance Bermuda received its authorisation to transact long-term reassurance business from Bermuda in October 2007 and will primarily seek to reinsure life, health, annuity and accident reinsurance as well as blocks of in-force life insurance business. Its team works closely with Hannover Life Re offices across the globe, providing great diversity.
Hannover Life Reassurance Company of America (Bermuda)
Hannover Life Reassurance Company of America (HLR America) is the North American life and health reinsurance subsidiary of the Hannover Re Group. Hannover Re is one of the largest and most financially sound professional reinsurance groups in the world.
Legal & General Group
Legal & General Group Plc, commonly known as Legal & General, is a British multinational financial services company headquartered in London, UK. Its products include life insurance, general insurance, pensions and investments
Liberty Re (Bermuda)
Manulife Reinsurance (Bermuda)
A leading Canada-based financial services company with principal operations in Asia, Canada and the US. Since welcoming its first customers in 1887, Manulife Financial has built a significant global presence. Its international network of more than 84,000 employees and agents offers clients a broad range of financial protection and wealth management products and services.
Northstar Financial Services
Northstar Financial Services (Bermuda) Ltd offers innovative investment products that are designed to help non-US citizens achieve their financial goals. Northstar is regulated by the BMA and holds a Class D insurance licence.
Old Mutual (Bermuda)
Old Mutual serves the world’s private wealth clients with global investment solutions delivered through the security and flexibility of a Bermuda Trust structure. Its solutions are offered through relationships with leading global financial institutions and advisors.
Over two decades, PartnerRe has increased its global presence and expanded its product lines, built upon its capital strength. Its strategy for assuming and managing risk includes diversification across products and insurance markets; an appetite for risk that delivers superior risk-adjusted returns; and enhanced returns through invested assets within an appropriate risk framework
RGA Global Reinsurance Company
Reinsurance Group of America, Inc is a leader in the global life reinsurance industry with approximately $2.9 trillion of life reinsurance in force and assets of $39.7 billion. It is one of the largest life reinsurance companies in the world and the only global reinsurance company to focus primarily on life and health-related reinsurance solutions.
Safe Harbor Re
Safe Harbor Re is a Bermuda-based long-term insurer established by Safe Harbor Holdings, Ltd to serve and provide reinsurance to the specialty insurance sectors of fixed, deferred and payout annuities. SHR engages in long-term reinsurance transactions, either through retrocession or novation treaties with primary life and annuity companies, existing reinsurers and pension schemes.
Sun Life Assurance Company of Canada
Sun Life traces its history back to 1865 and has a long history of providing a diverse range of protection and wealth accumulation products and services to individuals and corporations. Through its Bermuda International Operations, Sun Life Financial provides offshore financial solutions specifically designed to meet the objectives and concerns of high-net-worth individuals residing outside of the US, Canada or Bermuda.
The Standard Life Assurance Company of Canada
The Standard Life Assurance Company of Canada, ultimately a wholly owned subsidiary of Standard Life plc, provides long-term savings, investment and insurance solutions to more than 1.4 million people throughout Canada. The Standard Life Assurance Company of Canada is subject to regulation and supervision by the Office of the Superintendent of Financial Institutions (Canada) and is also registered with the BMA as a long-term reinsurer.
Transamerica Group of Companies
Transamerica Life (Bermuda) Ltd, incorporated in Hamilton, Bermuda, is a wholly-owned subsidiary of Transamerica Life Insurance Company, a company with a long and storied lineage as a leading provider of insurance and investment products for individuals and companies for more than 100 years.
Union Hamilton Reinsurance, Ltd
Wilton Re Bermuda Limited
Wilton Re is a US life re/insurance company specialising in the acquisition of in-force life insurance and annuities as well as with assisting life insurance clients with product development, underwriting and new business strategies designed to serve the middle market.
Hamilton-based XL Life had its a-(Excellent) financial strength rating affirmed by AM Best in March and the firm’s capitalisation and its profitability in recent years, following past volatility, confirmed.
Life reinsurance, Bermuda, BMA, NAIC, Solvency II