Bermuda captives are still innovating
Bermuda is known as the World’s Risk Capital thanks in large part to the industry’s adaptability and innovation. Captive insurers were developed in Bermuda in the 1960s and over the past few decades the market has evolved and expanded to cover a wide variety of risks through several classes of insurance companies.
A panel to discuss the emerging and creative ways businesses are utilising captives as an alternative to traditional insurance, including innovative captive strategies as versatile tools for risk management and operational efficiency in a rapidly changing global landscape was moderated by Justin Doherty, President & CEO, IML, Kirk Barnett, AVP, Account Executive, WTW Captive Management, Sarah Hopkins, Insurtech/Fintech Regulatory Associate, Fenwick & West, Hanno Tolhurst, Partner, ASW Law and James Wencil, Consulting Actuary, Pinnacle Actuarial Resources.
The insurance market today is very different from when the first captives were formed and the panel discussed new and emerging risks including climate change, cyber, AI and cryptocurrencies. Some of the important advantages that allow for innovation in Bermuda include the regulator, stable political environment and robust legal environment with access to the UK Privy Council.
Captives are inherently innovative in that they self-insure a company’s risk and unlike some other jurisdictions, Bermuda has bespoke legislation and regulation for captives and less stringent capital and governance requirements while maintaining prudent management.
A recent example of flexible regulatory requirements relates to Bermuda’s early adoption of the regulation of digital asset business and the utilisation of cryptocurrencies and digital assets within a captive insurance structure. The framework exists for captive insurers wanting to utilise digital assets to test innovative ideas in the insurance regulatory sandbox before being approved by the regulator and implemented.
Other types of insurance including microinsurance were identified as suitable for captives, where currently across emerging economies of the world approximately 11% of the people are covered with microinsurance which leaves a significant gap of 85% uninsured or underinsured. This gap has been identified as a significant area of growth with an expected compound annual growth rate of around 67% between 2022 and 2030.
Such innovative opportunities are especially attractive to technology companies who typically find roadblocks in other jurisdictions in the US and UK.
Bermuda’s long history in various risk markets allows for more flexibility, especially when clients are aware that their risks are novel, their captives are fully funded, and service providers are knowledgeable and helpful which all maintains Bermuda’s relevance and continues to attract business to the island.
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