Report gives insight into Bermuda’s captives

  • Market snapshot: the BMA has released a report that looks at the island’s captives and SPIs

The profitability and diversity of Bermuda’s captive insurance market and special purpose insurers has been highlighted in a new report.

It shows that in 2016, Bermuda captives assumed 62 per cent of their risk in North America, and 25 per cent in Europe, with Japan accounting for 5 per cent.

And the island’s captives cover a diverse range of industries and are “home to a broad range of industries utilising captives as a key risk management tool”.

Some 11 per cent of the parent companies of Bermuda captives are financial institutions. Other large groups represented are shipping, transport and storage at 14 per cent, and automotive, manufacturing and retail at 11 per cent.

Those three sectors also account for the largest portion of premium share, with financial institutions taking a 54 per cent share, followed by shipping, transport and storage on 11 per cent, and wholesale and retail at 6 per cent.

Presented by the Bermuda Monetary Authority, the BMA Captive/SPI Market Report shows where business was written by geographical region and lines of business. It also looks at the utilisation of captives and SPIs by different industries, together with balance sheet assets and liabilities, and investment allocation.

The details are based on year-end returns as of the December 31, 2016.

“This report will provide further insight on how the Bermuda market continues to evolve and succeed,” said Craig Swan, managing director - supervision (Insurance), at the BMA.

“Considering the island’s leadership position in the global captive and SPI space, and its overall importance, there is naturally a level of interest generated from industry participants and peers.”

In terms of profitability, the median loss ratio and combined ratio for Bermuda general business captives was 49 per cent and 75 per cent, respectively.

The report reveals that 61 per cent of Bermuda captives are “pure captives” that only write the risk of their parent, affiliates or both.

In terms of business lines, property coverage represented 55 per cent of all business written by Bermuda captives, while terrorism and cyber-risk accounted for less than 1 per cent of coverage last year.

Bermuda captives wrote about 45 per cent of all business in casualty lines during 2016.

Quoted investments accounted for 31 per cent of the balance sheet of the island’s captive market, with bonds by far the most favoured representing 79 per cent of investments, followed by equities at 12 per cent.

Meanwhile, Bermuda’s SPIs wrote coverage in 17 regions in 2016, led by North America at 69 per cent, and Europe at 25 per cent. The SPI reinsurance covers consisted primarily of catastrophe bonds at 44 per cent, followed by collateralised reinsurance at 36 per cent and sidecars at 18 per cent.

For Bermuda’s SPIs, the most significant lines of business were property and casualty, which accounted for 77 per cent, followed by terrorism at 15 per cent.

A copy of the report is available at under ‘Publications’.