Bermuda's Life Marketplace Supports Growing Demands Stemming From Aging Populations

• Published date: 07 October 2022
• Subject Matter: Corporate/Commercial Law, Insurance, Corporate and Company Law, Insurance Laws and Products, Reinsurance
• Law Firm: Appleby
• Author: Mr Brad Adderley

Bermuda Finance 2022/2023, Life and Long-Term Re/Insurance Roundtable, in association with BILTIR.

Bermuda's robust long-term re/insurance sector is well-positioned to support demands for life and annuity products, which form a fundamental part of policyholders' retirement and financial planning. This discussion hosted by BILTIR at the offices of Hannover Re (Bermuda) examines the current landscape of Bermuda's life marketplace.

Q1: HOW WOULD YOU CHARACTERISE THE CURRENT HEALTH OF BERMUDA'S LIFE AND ANNUITY SECTOR?

Martin Laframboise: The Bermuda Monetary Authority (BMA) annual report has recently come out. It revealed that last year alone, there were 13 new licences granted in this sector, including eight new class E (assets greater than $500 million). So, Bermuda now has 148 licences as of 2021.

As an association which serves as a clear and consistent voice in advocating for the interests of Bermuda's life and annuity sector, Bermuda International Long Term Insurers and Reinsurers (BILTIR) now has 68 members which have businesses in many jurisdictions.

Patience Maina: It is a positive story. Assets under management are more than $800 billion now, so close to a trillion. That growth is being driven by a number of things.

First, macroeconomic factors including low interest rates. Companies have been chasing yield and traditional companies, struggling to meet guarantees, are reinsuring their books.

Second, a lot of pension risk transfer business has come in. Asset managers or private equity firms have been doing acquisitions in this space and that is driving a need for increased investment management expertise

Finally, there is the demographics side. There is a growing middle class, especially in Asia. We are seeing a fair bit of Asia business coming in because there is demand for life products and saving products in that region. Meanwhile, in the west, there is an ageing population seeking retirement solutions.

The BMA is very open to talking to new players. We are very accessible; we are able to engage, look at draft business plans and provide feedback quickly. Being accessible and responsive has played a key role there.

Helen Souza: Life is now definitely a very important pillar for Bermuda. We have partnered with BILTIR on a new focus group for the sector to make sure we complement each other. The other big reason people are choosing Bermuda is because of the expertise here, the access to capital and talent.

The Bermuda Business Development Agency (BDA) arranged an executive forum in New York back in May and there were many conversations and a lot of interest around life as well as climate, finance and asset management.

Brad Adderley: The life sector is a fascinating story. We talk about pillars of the economy; for me, this is a key pillar now. We always seem to lump insurance into one pillar but I like to break it down'life is a separate pillar. We had a number of new entrants last year, all with a hiring plan and all creating substance here.

Those jobs will be going from two to maybe five to maybe 50 positions eventually. That is in addition to the established companies hiring. That is interesting. How many large P&C businesses were formed last year? Not many big ones.

The life space is increasingly important to Bermuda. It has helped fill the gap. And what is really exciting is all the different companies are doing something different. They don't all have the same business model. That means they have to talk to the BMA early about what they're doing and how does it work within the BMA regulation. Is it a closed block, flow business, annuities, pension risk transfer? Which regions are they dealing with? The dialogue with the BMA is fundamentally important.

James Claxton: I agree our reputation is growing as a jurisdiction; we have the skills to be able to deal with many different business models. The BMA is key to the market. If you don't have a responsive regulator, it's difficult to make business decisions and move as a business. You need a responsive regulator to be able to make decisions quickly. Whether it's positive or negative, you need that feedback in real time or you cannot make decisions.

That's why people are coming to Bermuda rather than other locations. We have a melting pot of specialties and responsiveness. It's truly a global place to do business.

Ahwaz Chagani: I agree with what has been said. There were strategic considerations we gave a lot of thought to, and that's why we established here in 2018. There are a few other considerations.

We have an affiliate company in the US that writes direct business. There are a lot of competitive pressures in the direct business. There are too many writers effectively selling similar products. You need a way to differentiate. One way you do that is to offer better returns to the policyholder'essentially through reinsurance. That has created an ecosystem of US-focused life insurers backed by an entity in Bermuda.

The other reason is that on the asset side everyone has their speciality, their niche. For third-party reinsurance, our company targets small to mid-sized blocks of business. Plus, we have the direct arm. But other firms might be targeting larger deals. Everybody's offering something unique.

We have found that many direct writers seeking reinsurance are also seeking unique asset management capabilities to improve their competitive advantage. Capital has been cheap, particularly with the decline in interest rates since the Global Financial Crisis, which created an environment where it was easier to set up a shop in Bermuda. That is changing now but there has been a lot of product...