Burt defends life reinsurance regulation

Bermuda's premier has defended the island's life reinsurance sector and regulatory regime following a crisis at 777 Re. 

David Burt told the Finance Times that “you can never prevent all problems from occurring” but said the Bermuda Monetary Authority had moved quickly to deal with problems. 

777 Re, owned by Miami investment firm 777 Partners, was taken under administrative control by the Bermuda Monetary Authority and has ceased writing insurance business. The life reinsurer's financial condition came under scrutiny after its parent company invested in a range of investments from football clubs, including a failed takeover of English Premier League football club Everton, to budget airlines.    

The FT said global regulators have increasingly warned about the potential implications of the ceding of a vast amount of long-term liabilities to Bermudian reinsurers owned or linked to private equity groups, many of them operating from Bermuda. 

“You can never prevent all problems from occurring, and I think that everyone accepts that,” Burt told the FT. “What matters is how you deal with [them].”

Burt, who also serves as finance minister, highlighted work by the Bermuda Monetary Authority, the financial regulator, to crack down on connected-party investments in the wake of problems at 777 Re. 

“It is accepted that we have a very strong and robust regulatory system,” Burt said, “where we have made sure to tighten the rules ... to make sure that our international regulators, who may have expressed these particular concerns, know that we are taking these matters seriously.” 

The bigger risk, he added, came from jurisdictions “who may have similar types of companies [but] do not have the level of insurance regulatory supervision that we have in Bermuda”. The self-governing territory’s financial sector is deemed as having equivalent or reciprocal status with European and US solvency rules.

The BMA had “been at the forefront of addressing concerns about PE-owned insurers”, and has had significant engagement with other international regulators, he added.

The premier — on a trip to visit policymakers in the UK and EU — also addressed the growing concerns around the insurability of natural disasters.

Bermuda’s insurance market “will be there to stay and will be able to properly assess those risks”, Burt said, adding that he was optimistic that cyclical effects will ease pressures on consumers. “Markets will adjust.”

The FT said that in recent years, Bermuda has dominated other insurance hubs including London in newer areas of insurance such as insurance-linked securities, which allow investors to put their capital against insurance risks through structures like catastrophe bonds.

Burt said rival insurance hubs in Europe, the US and Asia “want to take our lunch and we are just trying to make sure that we not only maintain what it is that we have but also make sure that Bermuda [continues to be] known for innovation”.

Bermuda, which Burt said had a “long history of being a co-operative and transparent jurisdiction”, will be adopting the global minimum tax rate on multinationals of 15 per cent from January. Industry insiders and analysts expect that Cayman Islands, which is outside of Solvency II, might begin to lure more life reinsurance business its way.

“We are not worried what other jurisdictions do, because we know we are a blue-chip jurisdiction and [that] means you are going to be aligned to the global norms,” he said. “There is a reason why in Bermuda there are more people than there are companies — because we focus on substance.”

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