30 May 2013Analysis

2013: A great start for new insurers

Following on from a successful RIMS conference in Los Angeles in April, Bermuda’s reputation as a first-class insurance and reinsurance domicile has been reaffirmed in 2013.

Bermuda’s new insurer registrations are trending upwards and the licensing and authorisations department of the Bermuda Monetary Authority (BMA) is looking forward to a busy year.

Thirteen new insurers registered in Bermuda during Q1 2013—a marked increase from the seven new insurers registered in Q1 2012. Included in that total were five new captive insurers.

Eight of the Q1 2013 new insurer registrations were special purpose insurers (SPIs) with total premiums of more than $93 million. This included three SPIs that underwrote more than $1 billion of catastrophe bonds and insurance-linked securities (ILS). Bermuda has already doubled the number of SPIs registering in the first quarter, year on year. The new SPIs covered a diverse range of business activities, from excess of loss coverage and property catastrophe reinsurance to proportional reinsurance. The market continues to find various ways to utilise these vehicles to complement traditional reinsurance.

The increase of Q1 registrations confirmed Bermuda’s continued ability to attract quality business. This is in no small part due to Bermuda’s unique ability to service the full spectrum of insurance: from traditional commercial insurers and reinsurers, to captives and special purpose vehicles using alternative capacity structures.

In addition, as the jurisdiction’s key financial services regulator, the BMA remains keenly aware that having a practical regulatory environment is a key component of Bermuda’s continued attractiveness overseas.

Therefore, with an ever-increasing number of jurisdictions offering insurance products, in particular captives, the BMA’s focus remains unchanged—to develop and maintain proportionate regulations thatremain workable for both the regulator and the regulated. Our continued ability to meet this goal has never been more important for the jurisdiction.

Another example in that regard was UK insurance group Randall and Quilter (R&Q) stating that a major reason for its decision to redomesticate to Bermuda was the regulatory access, open dialogue and regulatory certainty they found at the BMA.

As the world’s first captive domicile, Bermuda’s core attributes are rooted in decades of experience, which include quality service providers on the ground; a practical regulatory environment; an efficient licensing process; and proximity to both the North American and European markets.

Despite our leadership position, the jurisdiction is not resting on its laurels. There is also a collective recognition that Bermuda’s captive business remains a core market. For us, from a regulatory perspective, this means we’re focused on ensuring the BMA’s captive regime stays practical and proportionate.

"The total volume of new ILS issued globally in 2012 was $6.4 billion with $2.5 billion, or 40 percent, of this being sponsored by Bermuda-sponsored registered SPIS."

With this in mind—and based on the proven effectiveness of Bermuda’s regulatory regime for captives—the BMA will not apply a Solvency II-like regime to captives. Doing so would be inappropriate, given the limited risk profile of such insurers. As stated in our 2013 Business Plan, we will introduce a risk return as part of a consolidated annual filing for captives that they will submit electronically, which will create efficiencies in the process for both the market and the BMA. That is the extent of our captive regime refinements.

Bermuda is still attracting business from traditional markets, and there is also a collective effort from the jurisdiction to innovate and find new business opportunities elsewhere. The outreach to emerging markets such as Latin America is one such example.

There is already strong interest and growing business from this region and this year for the first time, there will be dedicated Spanish-speakingsessions at the Bermuda Captive Conference on June 10 to 12. The BMA looks forward to assisting with markets outreach efforts to emerging markets throughout the remainder of 2013.

Also in this regard, Bermuda is now widely recognised as a global centre for the creation, listing and servicing of ILS that are sponsored by SPIs—new registrations were driven by SPIs in 2012 (27 out of a total of 53 registrations). The total volume of new ILS issued globally in 2012 was $6.4 billion with $2.5 billion, or 40 percent, of this being sponsored by Bermuda-registered SPIs.

Overall, SPIs provide another alternative risk transfer option that builds upon Bermuda’s longstanding expertise in this area. The jurisdiction is committed to servicing this growing segment of the market and the BMA looks forward to participating in Bermuda’s first global ILS conference in November, Convergence 2013, which aims to become the marquee event for the ILS industry.

Having put in place the regulatory framework for SPIs in 2009, the BMA is pleased to be seeing initial interest translating into active business.