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Xactanalysis Insights and PCS

Bermuda SPI & ILS registrations remain strong in 2021

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The number of new special purpose insurer (SPI) vehicles registered in Bermuda fell slightly in 2021 after a record previous year, but overall new licenses for insurance-linked securities (ILS) related vehicles remained very strong on the island.

bermuda-satelliteWith record catastrophe bond issuance in 2021 it is no surprise Bermuda saw a majority of the new issuance vehicles required licenced there.

In total, 27 new special purpose insurers (SPI’s) were registered in Bermuda in 2021, 26 of which were restricted and just one unrestricted, in terms of the business they can undertake.

Among these are new catastrophe bond issuance vehicles, mortgage insurance-linked securities (ILS) issuance vehicles and newly licensed structures for use as collateralised reinsurance entities or sidecars.

Interestingly, mortgage ILS overtook catastrophe bonds this year.

Mortgage insurers have tended to register a fresh SPI for every issuance of mortgage insurance-linked notes, which is more costly but given the number of tranches of notes issued and the way these ILS arrangements are structured it does make sense.

Out of the 26 restricted SPI’s registered in Bermuda, 14 were for mortgage ILS deals, the rest a mix of catastrophe bonds, quota share sidecar vehicles and other collateralised reinsurance use-cases.

The annual record for new SPI registrations was set in 2020, when 30 vehicles were licensed in Bermuda during the year.

Prior to that, the record was held by 2014, a very busy catastrophe bond year and 2018, at 28 SPI’s in a single year.

As catastrophe bond SPI’s tend to be re-used for repeat issuances under a program, most sponsors do not registered new cat bond SPI’s any more frequently than every five years nowadays.

When SPI’s are registered and used for segregated account purposes, such as a sidecar platform, they can live a lot longer and therefore it’s natural registrations do not get repeated that regularly.

So, for Bermuda to still have registered so many SPI’s remains testament to the ease of doing business there and the speed to market of its insurance-linked securities (ILS) regulations and regulatory oversight.

Important to this was the recent step to provide much faster licensing and registration of new catastrophe bond vehicles, with the process to approve an SPI now streamlined to take just three working days by the regulator.

Outside of SPI’s, one notable ILS related registration in 2021 was the Leadenhall Capital Partners backed Class 3A reinsurer Nectaris Re Ltd.

Bermuda continues to dominate global ILS market activity and with new initiatives constantly underway to ease access to the marketplace and make it simpler for investors to connect with risk, Bermuda is expected to remain a significant force in ILS for the foreseeable future.

You can read about and view details of many of the Bermuda registered SPI’s and other ILS structures in our catastrophe bond Deal Directory, our mortgage ILS directory and our reinsurance sidecar listings.

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