COVID-19 will drive the development of new and innovative risk management responses, according to the Bermuda Monetary Authority (BMA), with captives playing a key role in helping their owners mitigate these risks.
In its 2019 Captive Report, the BMA predicted that captives will continue to play an important role in helping businesses manage their pandemic risk. “Captives will continue to be used as a key risk management tool for such new and emerging risks, while companies assess risks and coverage availability in traditional markets,” the BMA said.
In the early months of the pandemic, “Bermuda’s captive insurers implemented business continuity strategies for their operations, with most services being offered remotely,” the BMA said. “Most captive insurers are in the midst of reviewing portfolios to determine exposures to COVID-19, and holding discussions on the management and mitigation of such exposures.”
The BMA’s 2019 report highlighted market results from 2018 year-end statutory financial returns, submitted by captives to the BMA by December 31, 2019.
The report found that the composition of the Bermuda captive market has been relatively steady. In 2018, 62 percent of the risks assumed by Bermuda captives originated in the US or Bermuda - the same figure as 2016, but down on the 67 percent recorded in 2017. The second largest exposure came from Europe, at 24 percent in 2018, up from 21 percent in 2017 - but slightly down on the 25 percent seen in 2016.
Owners of Bermuda captives also tended to originate from the same industries as in previous years. Financial institutions, auto manufacturing and retail, and shipping transport and storage represented the top three industries for Bermuda captive owners, as they have for every year since 2016. Financial institutions were top on 15 percent, down from 16 percent in 2017, while auto was at 12 percent, up from 11 percent the previous year. Shipping fell into third at 11 percent, having been second, on 12 percent, in 2017.
Financial institutions also represented comfortably the largest share of premiums for Bermuda captives at 33 percent in 2018, though it was down on the 46 percent seen in 2017. Shipping was the only other industry above 10 percent - at 11 percent in 2018, down from 12 percent in 2017.
Nearly two thirds (64 percent) of Bermuda’s captives were pure captives in 2018, down from 65 percent in 2017.Insurers and reinsurers represented 19 percent - the same as the previous year - while rent a captives and group captives represented 7 percent and 6 percent, respectively, in both 2018 and 2017.
Bermuda Monetary Authority, BMA, 2019 Captive Report