Bermuda captives grow despite increased competition

Bermuda’s captive insurance sector produced steady growth in 2024 and the island continues to be one of the world’s leading domiciles, despite increasing competition, according to the Bermuda Monetary Authority’s latest report. 

Seventeen captives were licensed in Bermuda in 2024, up from 16 in 2023. Figures for the total number of captives registered in Bermuda in 2023 were not available at the time of publication, but it is likely to be higher than the 633 in 2022 and the 632 in 2021. 

Nonetheless, the sector faces stiff competition from onshore and offshore domiciles, with new captive regimes sprouting up in several US states and in Europe. There are now an estimated 82 captive domiciles around the world, with 40 established in US states and 42 others. 

To remain a market leader, Bermuda will need to continue to innovate and offer high levels of service to its customers while raising its profile. 

The Bermuda Monetary Authority, which regulates the sector, believes this is possible. Its Captive Report 2023 said: “Innovation has always been at the forefront and captives are widely recognised as invaluable risk management tools by parent companies and organisations. This has continued to drive the market forward.

“Over the years, there have been many shifts in strategy for the market's participants; however the captive market has shown a long-term commitment to operating in Bermuda due to the many associated benefits. 

“In fact, many captives have been registered in the Bermuda market for decades and continue to thrive.”

It added: “The BMA continues to see significant interest in companies wanting to establish new captives and/or increase their usage of existing captives. 

“Indeed, the future looks bright with many dynamic changes in the strategies used by Bermuda captives. The prevailing approach is to address evolving risks using a proportional method. Major themes that have emerged are sustainability, enhancing efficiencies and minimising loss experiences.”

The report noted that while rates had levelled out for some captives in 2023, others were experiencing challenges.

“One especially active area in this respect has been in property programmes, which have had continued capacity concerns that have translated into greater retention,” the report said. “Exclusions in the parent companies' traditional insurance policies have also required adjustments to their captives' policies to fill the gaps.” 

It added that the BMA had noted the market’s sophisticated strategies and use of tools “to achieve tangible results and enhance the captive’s risk management approach”. 

“These include tools that provide advanced warning and tracking systems, digitised processes, enhanced research and secure ground-breaking safety equipment. 

“Captives increasingly gain greater access to more sophisticated analysis and better underwriting and reporting tools through enhanced broker and reinsurer support systems. This fosters stronger risk management solutions, decision-making and analysis of bespoke solutions relevant to the captive market.”

The Bermuda Captive Network, formed in 2023 as an umbrella organisation for the captive sector, held its annual conference last September where it was urged to raise the island’s profile – one of the principal reasons for which it was formed. 

Heidi Lawson, equity partner, Fenwick & West, told the conference that Bermuda’s credible and flexible regulation were reasons it was a leading captive domicile, but added: “The other jurisdictions are out there marketing. 

“One thing we’ve really noticed at the World Captive Forum and other conferences is, Bermuda is not there. I think that’s really been missing the last couple of years.” 

She added: “The flexibility is so important to companies but there’s no voice. When we’re going around to the different captive conferences in the United States, we’ll see other international jurisdictions, but we don’t see Bermuda.”

The conference also heard that some captives will be affected by the corporate income tax, but it was not clear how many. The CIT, which taxes multinationals with revenues of more than €750 million, was introduced in January. It was not thought the tax would lead to an exodus of captives to other jurisdictions since it can be collected from companies regardless of jurisdiction. 

The conference also received assurances from Timae Flood, BMA deputy director, insurance supervision, that Bermuda captives would continue to be treated differently under the European Union’s Solvency II, with which Bermuda has equivalence. 

Tragically, the captive industry lost one of its leading lights shortly after the conference. One of the people responsible for forming the BCN, Leslie Robinson was a government senator and senior vice president, head of underwriting and claims in WTW’s Bermuda office, when she died. 

The BCN said in a statement: “Bermuda’s captive industry has been shaken by this tremendous loss. 

“Leslie’s absence will be felt in a deep and visceral way throughout Bermuda, alongside the Bermuda Captive Network’s membership and beyond. She was more than a colleague – she was an ally, a friend and an inspiring leader.” 

The BMA report contained a wealth of detail on the state of the Bermuda market. It said 70% of risk insured by Bermuda-domiciled captives originated in North America and Bermuda. Europe was the second largest source of risk with 13%. The rest of Asia and Japan originated five and four per cent respectively. 

Financial institutions were the single largest owner of captives at 15% while the automotive, manufacturing and retail sector was second with 12%, transport was third, and energy and power fourth. 

Of the 18 companies formed in 2022, energy and power was the leading area for new captives with four or 22%, while healthcare companies formed three captives or 17% of the total. 

Captives owned by financial institutions underwrote 27% of total premium while energy and power and shipping and transport had 13% each. 

Pure or single-parent captives continued to make up 65% of all captives, while insurer/reinsurers accounted for 17%, rent-a-captives were eight percent of the total and group captives six percent. 

Short-tail coverages represented 66% of all premiums written by Bermuda captives in 2022, down from 66% in 2021. 

Of that amount, property and casualty catastrophe had the largest share of premium with 45%, while the other largest segments were warranty and residual value (18%), property damage and business interruption (15%) and marine (13%). 

Long-tail underwriters’ share of premium increased to 34% from 32% with general liability being the highest segment with 30% while workers’ compensation edged up to 23% from 22%. 

Other large segments were professional liability (18%), accident and health (13%) and motor (10%). Of those segments, workers’ compensation’s share has fallen three percent since 2020, as did professional liability. 

The number of long-term captive re/insurers was not given but longevity made up 66% of total premium while group life was 14% and group disability 13%. 

Captive insurers’ combined ratio in 2022 was 75%, down from 79% in 2021. Single-parent captives had a 67% combined ratio, group captives 79% and Class 3 insurers 80%. 

In 2022, captives had $31.31 billion of gross premium and total assets of $142 billion. Capital and surplus for the sector was $73.8 billion. 

Within the sector, captives writing third-party business wrote the majority of gross premium with $16.4 billion.  

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