Bermuda: down but not out as a reinsurance hub

23 August 2018

Are Bermuda’s days as a reinsurance hub for US primary carriers numbered?

Guy Hengesbaugh, Partner, JLT Bermuda

You could be forgiven for thinking that Bermuda is on the ropes, reading recent press headlines.

The reinsurance hub has been the focus of attention to do with M&A since AIG snapped up Validus and then AXA moved on XL, putting question marks over the future of several other players based on the island.

Meanwhile, big changes to the corporate tax regime in the US have prompted speculation that Bermuda’s days as a reinsurance hub for US primary carriers could be numbered.

The most obvious impact is the loss of the pricing advantage embedded in tax rates that had been lower than those of domestic carriers.

Yet, Bermuda has actually experienced an uptick in insurance and reinsurance registrations recently.

Figures from the Bermuda Monetary Authority (BMA) reveal that registrations for the first two months of 2018 comprised 11 (re)insurers – including three Class E long-term (life) commercial (re)insurers and one general business Class 4 general business commercial (re)insurer – as well as one intermediary.

This compares with five new (re)insurers (and no intermediaries) recorded for the same period last year. Class 4 and Class E (re)insurers are the largest entities by size on the Bermuda register.

Catastrophe bonds

Bermuda is the leading jurisdiction for the issuance of catastrophe bonds. Insurance-linked securities (ILS) issued from Bermuda represents 76.1 per cent (US$22.5 billion of US$29.5 billion) of total outstanding capacity at the end of Q2 2017. Bermuda is also host to foreign ILS listings on the Bermuda Stock Exchange.

Meanwhile, Bermuda is still a big captive domicile with a total of 739 active captive insurance licences on its books: 17 new captives were registered in 2017 compared with 13 in 2016.

Clearly, it’s way too early to count Bermuda out. Bermuda will always be attractive to capital looking for a responsive regulatory environment; its market is simply too nimble and too smart to become irrelevant.


Please contact Guy Hengesbaugh on +1 441 294 4549 or email guy.hengesbaugh@jltre.com

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