23 November 2022Bermuda analysis

BMA: captives ‘vital’ to insurance market

The Bermuda Monetary Authority (BMA) continues to view the Bermuda captive market as a vital part of the overall insurance market, contributing significantly to the quality and depth of the Bermuda insurance market, according to the latest BMA report on the sector.

The report looks at the overall performance of the Bermuda captive sector over the course of 2021.

It pointed out that the market has been resilient in the face of unprecedented events, market cycles and the evolution of risk, evidenced by the celebration of the 60th anniversary of the first captive to be established in Bermuda.

It said that: “Since the formation of the first captive, the regulation and supervision of captives has significantly evolved over the years to the risk-based model utilised today. As a result, we continue to see increased interest and healthy formation of new captives (having seen an average of 17 new captive registrations annually since 2018) along with enhanced use of established captives.

“Participants in the Bermuda captive market recognise the opportunities to further address their organisation’s exposures. As a result, they have increased the utilisation of solutions available in the captive market, driving innovation and evolving the use of the traditional captive business model.”

It added that while there are a number of emerging risks, the two key risks of note are cyber (specifically ransomware) and climate. According to the BMA Bermuda captives and their parent companies continue to pay close attention to cyber risk as well as the significant increase in the cost cyber insurance in the commercial market. In this regard, the BMA has noted a significant growth increase in the number of organisations using their captives for cyber insurance as part of the overall management of the risk.

The BMA said that this is once again an example of captives coming to the forefront of risk management discussions and being used more broadly to secure the necessary coverage and effectively manage the cost of organisational risks.