Bermuda's Long-Term Re/Insurance Landscape

• Published date: 10 June 2022
• Subject Matter: Insurance, Government, Public Sector, Insurance Laws and Products, Terrorism, Homeland Security & Defence, Money Laundering
• Law Firm: Appleby
• Author: Ms Ojeda Smith

Bermuda's long-term re/insurance market has grown considerably in recent years. The island now has 144 registered long-term re/insurers and the sector's assets have increased by 200 per cent over the last five years according to the Bermuda Monetary Authority's 2020 annual report.

Today's column will provide some context about this type of re/insurance and why Bermuda is a key jurisdiction for long-term risk.

Under the Insurance Act 1978, as amended, long-term business means insurance business of any of the following kinds:

• effecting and carrying out contracts of insurance on human life or contracts to pay annuities on human life;
• effecting and carrying out contracts of insurance risks of the persons insured sustaining injury as the result of an accident or of an accident of a specified class or dying as the result of an accident or of an accident of a specified class or becoming incapacitated or dying in consequence of disease or disease of a specific class; and
• effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or endowment certificates or otherwise, whereby in return for one or more premiums paid to the insurer a sum or a series of sums is to be payable to the persons insured in the future.

So, long term re/insurance includes, but is not limited to, life insurance and annuity products, pensions and a vast array of other products, many of which have at their root, estate management, retirement planning, tax savings, wealth creation or financial security aims.

Any person seeking to carry out long-term re/insurance business from Bermuda is required to be registered under the Insurance Act, which stratifies such business into several classes - A, B, C, D, E, and ILT.

Classes A and B are known as "captives", which means that the risks are related in nature. Class A insurers are wholly owned by one person and intend to carry on long-term business consisting only of insuring the risks of that person.

Class B insurers are wholly owned by two or more unrelated persons and intend to carry on long-term business where not less than 80 per cent of the premiums and other considerations written will be written for the purpose of insuring the risks of any of those persons.

Classes C, D and E are known as "commercial insurers" and are differentiated by total assets.

Class C insurers have total assets of less than $250 million. Class D insurers have total assets of $250 million to $500 million. Class E insurers have...