Bermuda seeing increase in Special Purpose Insurer (SPI) registrations

by Artemis on August 23, 2011

The Bermuda Monetary Authority has announced that it has seen an increase in the number of registrations of insurance companies on the island. Overall insurer registrations are 30% higher so far this year than were seen for during all of 2010. In particular the BMA are pleased with the increase in registrations of Special Purpose Insurers (SPI’s) which are the entities used for transactions such as catastrophe bond issuance.

During 2010, Bermuda saw 8 SPI registrations over the course of the year. This year they have already registered 12 SPI’s. Bermuda put a new legal framework in place back in 2009 to try to attract a greater number of SPI’s to the island and have since been on a significant marketing push to attract new business to the island.

Not all of the SPI’s are involved in catastrophe bond or insurance-linked securities transactions, some are probably sidecar reinsurers or collateralized reinsurance vehicles. Shelby Weldon, the BMA’s Director in charge of insurer licensing and registrations said that most of the SPI’s have been formed as a response to the record catastrophe losses experienced around the world earlier in 2011.

Jeremy Cox, CEO of the BMA, used the recent California Earthquake Authority catastrophe bond which used a Bermuda domiciled SPI Embarcadero Re Ltd. to issue the $150m cat bond. He said that it was exciting to see the CEA use a Bermudian SPI for this transaction. “The choice of a Bermudian reinsurer for this latest CEA cat bond issue was a departure from previous normal practice for them, and a positive indication that markets seeking quality supervision remain confident in Bermuda”, he commented.

Still, the bulk of outstanding catastrophe bonds in the market have their special purpose vehicles/insurers domiciled in the Cayman Islands at this time, but Bermuda is making concerted efforts to attract more of this lucrative business back to the island.

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