The Bermuda International Long Term Insurers and Reinsurers (BILTIR) has released a report assessing systemic risk in Bermuda’s long-term insurance and reinsurance sector.
Commissioned by BILTIR and produced by consulting firm Oliver Wyman, the report concludes that the jurisdiction's long-term re/insurance activities do not significantly contribute to global systemic financial risk.
Suzanne Williams-Charles (pictured above), CEO of BILTIR, said the report was initiated in response to questions raised about systemic vulnerabilities in Bermuda’s insurance framework.
Get the latest reinsurance news direct to your inbox twice a week. Sign up here
“Bermuda’s system is in place to manage risk and protect policyholders, and this report verifies that Bermuda’s diligent regulatory framework is effectively limiting any potential for systemic risk,” she said.
Oliver Wyman examined three scenarios that are commonly cited in systemic risk discussions by regulatory bodies: a credit event leading to mass reinsurance capture, a confidence shock triggering widespread lapses and asset sales, and a reduction in insurer demand for private credit. Each scenario was evaluated to understand its potential for creating broader market disruption.
The report concludes that Bermuda’s regulatory environment, combined with prevailing market practices, imposes constraints that limit the transmission of systemic risk. It also notes that the long-duration nature of life insurance liabilities helps dampen the possibility of short-term market contagion.
Additional recommendations were outlined to support risk monitoring efforts in the jurisdiction. These include enhanced transparency regarding transaction structures, continuous regulatory engagement, and improved stakeholder understanding of insurer asset and liability profiles using a risk-based approach.
Bermuda plays a central role in the global reinsurance industry, holding an estimated 35% of worldwide reinsurance capital. This concentration of capital makes the jurisdiction a critical node in international insurance markets and a key conduit for capital deployment into long-term risk.
In response to ongoing scrutiny, the Bermuda Monetary Authority (BMA) has taken steps to improve transparency. New regulatory rules will require life insurers to disclose more granular details about their investment portfolios, particularly around complex asset structures.
The rapid expansion of offshore reinsurance by US life insurers has been growing. By the end of 2024, more than US$1 trillion in liabilities had been transferred to offshore reinsurers, with Bermuda serving as a dominant recipient of this activity.
While these transfers offer insurers access to capital and balance sheet relief, regulators have raised questions about the sustainability and oversight of such deals, particularly under stress conditions.
The BMA has responded to the increased use of asset-intensive reinsurance (AIR) by examining targeted supervisory tools. Among these are proposals to impose dividend restrictions or elevated solvency thresholds on companies engaging in AIR transactions.
These steps are aimed at ensuring long-term stability and the availability of resources to meet policyholder obligations, especially where cross-border flows of capital and liabilities are involved.
What are your thoughts on this story? Please feel free to share your comments below.
Get the latest reinsurance news direct to your inbox twice a week. Sign up here
