6 December 2017Analysis

Bermuda captives remain profitable, BMA report shows

The Bermuda captive market was profitable for the 2016 financial year-end, with a median loss ratio of 49 percent and combined ratio of 75 percent for Bermuda general business captives.

This is highlighted in the Bermuda Monetary Authority Captive/SPI Report for 2017, which provides insight into Bermuda's captive insurance and special purpose insurers market.

The majority of risk assumed by Bermuda captives in 2016 originated in North America (62 percent) and Europe (25 percent).

Nearly half of the European risk is from Ireland, while a quarter is from the UK.

Bermuda covers a broad range of industrial sectors in its captives, although is lead by financial institutions (18 percent), shipping, transport and storage (14 percent), and automotive, manufacturing and retail (11 percent).

Other industries include energy, power and utilities (9 percent), healthcare (8 percent), professional services (8 percent), wholesale and retail (7 percent), administrative and support services (6 percent), construction (4 percent), chemical and pharmaceutical (4 percent), technology and telecoms (3 percent), media and gaming (1 percent), and more.

The premium share of the Bermuda captive market is however dominated by captives focused on financial institutions (54 percent) and shipping, transport and storage (11 percent).

Bermuda’s captive market is mostly composed of pure captives (61 percent) that only underwrite the risk of its parent or affiliates.

7 percent of captives were 'rent-a-captives', 6 percent group captives, 4 percent association captives, 1 percent agency captives, <1 percent risk retention groups, an 21 percent came under 'other', companies carrying insurance business that do not fit into the above categories.

The provision of property coverage represented 55 percent of all business written by Bermuda captives. Of the total property premium, 38 percent came from property and casualty catastrophe, warranty and residiula value followed after at 21 percent, marine accounted for 16 percent and property damage and business interruption account for 12 percent.

Bermuda captives wrote about 45 percent of all business in casualty lines in 2016.

“This report will provide further insight on how the Bermuda market continues to evolve and succeed," said Craig Swan, managing director, supervision (Insurance) at BMA. "Considering the Island’s leadership position in the global captive and SPI space, and its overall importance, there is naturally a level of interest generated from industry participants and peers. We’re pleased to release this information for and about the Bermuda captive and SPI market.”