Special purpose insurer registrations slowed in Bermuda in 2014

by Artemis on February 3, 2015

After a bumper year of new Special Purpose Insurers (SPI) in 2013 saw 51 of the, largely ILS or collateralized reinsurance focused, vehicles registered, the 2014 annual total came in some way below with 28 new SPI’s.

The reason for the slower growth is that these vehicles tend to be re-used for multiple issuance’s either as a five-year program vehicle for 144a catastrophe bond and ILS issuance’s or using a segregated accounts structure, allowing multiple private ILS or collateralized reinsurance transactions to be completed within a single vehicle.

It’s a clear sign of the rapid growth experienced in 2013 in insurance-linked securities (ILS) and collateralized reinsurance markets, which saw ILS managers and reinsurers establishing many vehicles to take advantage of the rapid inflows of new capital and appetite from both cedents and investors.

That appetite has not gone away, as evidenced by the 28 new SPI’s registered in Bermuda last year, but the rush to establish vehicles has subsided somewhat, as the market has reached a point of maturity where it has many re-usable Bermuda-domiciled SPI’s at its disposal.

In 2014 the Bermuda Monetary Authority (BMA) reports robust growth in registrations across the different classes of insurers and reinsurers it licenses. In total in 2014 the BMA registered 89 new insurance entities, 65 new insurers and 24 new intermediaries.

Shelby Weldon, Director, Licensing & Authorisations at the BMA, commented; “The most significant area of growth in 2014 was in our Long-Term (life) sector, with four new Class E insurers, five Class C insurers, and one Class A insurer establishing in Bermuda during the year. This compares to six Long-Term registrants in 2013 – three Class C insurers, two Class B insurers and one Class A insurer.”

It’s a positive sign that the larger Class E licenses saw action in 2014, as their holders are the biggest of Bermuda’s Long-Term insurers, with each required to have total assets of more than $500 million. The new Class E insurers commenced business with over $2 billion of assets in 2014.

“An influencing factor in the growth of our Long-Term sector was the National Association of Insurance Commissioners’ (NAIC) granting conditional Qualified Jurisdiction (QJ) status to Bermuda in December 2013.” Mr. Weldon said. “QJ status allows reinsurers from a particular domicile to reinsure US risk on a non-discriminatory basis and benefit from reduced collateral requirements.”

In addition to the ten Long-Term insurers, the BMA registered 16 new captives, 11 new commercial insurers writing general business and 28 Special Purpose Insurers (SPIs)during 2014.

“The significant level of activity experienced in the SPI licensing class was not surprising in light of the increasing role of this segment in the global reinsurance sector. Many of the previously registered SPIs have chosen to enter into new transactions once the initial transaction has gone off risk or are using a segregated accounts structure to enter into multiple deals,” Mr. Weldon continued.

Weldon also reported that the BMA’s Assessment & Licensing Committee granted approval to an additional 22 captive and commercial insurers which it anticipates will formally register in the first quarter of 2015, which would be a strong start to the new year.

The beneficial owners of the new insurance vehicles remain diverse, although the U.S. continues to be the most significant jurisdiction, with Bermuda and Europe second and third respectively. Two of the new insurers hail from Latin America and two captives were from Canada amongst the 2014 registrations.

Weldon said; “The Authority is pleased to see the recent initiatives championed by the Bermuda Business Development Agency (BDA) in these two geographical regions translate into new registrations. The Authority remains supportive of the BDA and will continue to assist with their efforts to attract new business to the jurisdiction.”

In the asset management space, the BMA registered 80 new funds in 2014, including 25 new funds which have availed themselves of recently introduced Class A and Class B Exempt Fund Classes.

“That the 2014 registration activity continues to demonstrate Bermuda’s global position as a leading alternative risk transfer marketplace. We remain the global leader in both captives and Insurance Linked Securities and our international reinsurance sector remains one of the world’s top reinsurance markets. Recent efforts have also seen renewed interest in Bermuda from funds and asset management entities and we hope to build on that momentum throughout 2015,” Weldon concluded.

Also read:

Bermuda seeks to capitalise on leading ILS domicile position.

Bermuda Stock Exchange nears $16B of ILS & cat bond listings.

Bermuda grows re/insurance registrations in H1, but SPI’s down slightly.

Bermuda registers 51 SPI’s in 2013, up 89% year-on-year.

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