Growth Trends: Life (Re)Insurance Companies

Over the past several years, there has been a significant increase in companies looking for innovative solutions for risks associated with their life insurance, pension, or long-term disability portfolios.  Higher life expectancies, growing fear of pandemics, and financial concerns require global life reinsurance and insurance markets to identify new ways to turn risk into opportunity.  One solution is for companies to set up a licensed offshore insurance company, commonly referred to as a long-term insurer, to mitigate these risks — particularly in the Bermuda and Cayman markets. 

These long-term insurers are being set up to help with the following:

• Capital Efficiency:  Statutory reserve requirements in the US, Asia, and Europe can be onerous. Reinsuring part of these reserves offshore can free up capital at the parent company level.
• Interest Rate Risk:  The current low interest rate environment is equating to lower investment returns, which in turn puts pressure on companies globally.  Reinsuring the business offshore provides greater investment flexibility to generate higher returns, which can benefit both companies and policyholders.
• Longevity, Mortality, and Morbidity Risks:  Changing global demographics and pandemic concerns have heightened risks for not only primary life insurers, but pension plans and long-term disability/critical illness carriers as well.  Offshore reinsurance can assist with capital support and risk mitigation strategies for these organizations.

In terms of domicile choice, Bermuda and Cayman both offer compelling advantages. Cayman has a more pragmatic regulatory policy, which appeals to those companies needing more elasticity in their capital approach.  Both domiciles offer greater flexibility in the treatment of investment assets than can be found onshore.     

Bermuda saw the greatest year over year growth in 2018 in new long-term insurer formations. The industry now comprises a variety of companies and accounts for over US$300 billion in assets. Bermuda boasts a robust regulatory regime that makes it attractive to companies needing a strong capital framework. The domicile recently achieved Solvency II equivalency with the European Union — in addition to NAIC equivalency. This opened a new market with European insurers.

In this dynamic and ever changing life (re)insurance environment, it is important for organizations to review all options to find the right solution for their business needs. With experienced and knowledgeable teams in Bermuda and Cayman, as well as specialists located around the world, Marsh Captive Solutions is well placed to assist clients in this area.