6 July 2020ILS

Bermuda accounted for nearly 75% of alternative capital capacity in 2018: BMA

Bermuda’s share of total alternative capital capacity was $71 billion at the end of 2018,  or approximately 73 percent of the global alternative capital market, according to the Bermuda Monetary Authority’s (BMA) 2019 Alternative Capital Report.

That represented a healthy increase on the $51.5 billion of alternative capacity in Bermuda in 2017. The BMA attributed this increase to the reloading of capital, newly registered alternative capital vehicles and improved self-reporting by the alternative capital sector.

In 2018, Bermuda’s alternative capital insurers reported approximately $19 billion of increased capacity via existing insurance linked securities structures and $12 billion of new capacity to the market.

Total assets held by alternative capital insurers were $94 billion at year-end 2018, compared to $74 billion in 2017.

The aggregate net loss and net loss expenses incurred by Bermuda’s alternative capital insurers were $7.8 billion and $6 billion at 2018 and 2017 year-end, respectively. Underwriting losses were $3 billion in 2018, up from $2.7 billion in 2017.

Collateralised reinsurance structures represented the largest segment of alternative capital providers within the Bermuda market, reaching $41 billion, or 58 percent of outstanding issuances at year-end 2018, compared to $28.5 billion in 2017.

The average exposure limit of Bermuda’s collateralized insurance structures was approximately $650 million in 2018, while ten collateralised insurer structures had capital exceeding $1 billion.

Cat bonds were the second most common structure used by Bermuda insurers to deploy alternative capital. Such structures had a total aggregate exposure of $26 billion, or 37 percent of the total market aggregate, at the end of 2018, up from $19 billion in 2017.

The average aggregate outstanding exposure limit of each cat bond was $414 million.

Gross written premiums (GWP) for alternative capital structures were $7.4 billion in 2018, compared to $4.8 billion for 2017.

According to industry estimates, as at December 31, 2018, outstanding alternative capital for non-life business was approximately $97 billion, representing 9 percent growth from the prior year.

Alternative risk transfer maintained a similar stake in total available reinsurance capacity in 2018, representing approximately 17 percent of global reinsurance capital, compared to 15 percent in 2017.

In all, Bermuda’s alternative capital insurers assumed risks across nine lines of business, the BMA said. The largest of these was property catastrophe, including property retrocession, which represented approximately 90 percent of GWP.

Bermuda provided coverage to four major geographical regions, the largest of which was the US, representing 48 percent of aggregate limits covered.

The BMA’s report gathered data from alternative capital schedules and statutory financial returns contained in 2018 annual filings submitted to the BMA by September 30, 2019.