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BMA Releases Two Reports on Alternative Capital and Captives

Bermuda flag with ragged edges
December 21, 2018

The Bermuda Monetary Authority (BMA) has released two new reports. These include the BMA's first annual BMA Alternative Capital Report 2018 and its second annual BMA Captive Report 2018.

The alternative capital report was compiled with information obtained from alternative capital schedules and statutory financial returns submitted to the BMA as of June 30, 2018.

The captive report looked at year-over-year comparisons to the BMA captive/SPI report from 2017.

Craig Swan, managing director, supervision, (insurance) said, "The steady growth of alternative capital within the Bermuda insurance market, particularly following the 2017 losses from Hurricanes Harvey, Irma and Maria, indicates that Bermuda continues to be a trusted centre for insurance risk securitisation."

"The aggregate exposure of non-life (re)insurers backed by alternative capital was approximately $51.9 billion at year-end 2017 while gross written premiums was $3.9 billion," Mr. Swan said. "Bermuda's share of total capacity was approximately 58% of the global alternative capital market."

In speaking of the captive report, Mr. Swan said, "Although not yet significant in premium size, the greatest year-on-year percentage increase was experienced by the cyber risk line of business which saw an increase in premium of $26.3 million (2017 - $42.0 million; 2016 - $15.7 million) a nearly two-fold increase in premiums written."

Data in the captive report showed that 16 percent of insurers are in runoff, 17 percent have segregated accounts, 65 percent have a pure captive structure, and 67 percent originate from North America (a 5 percent increase over 2017).

The report also found that the combined loss ratio for Bermuda captives was 77 percent in 2017, compared to 75 percent in 2016 (from last year's report). The report said that the increased loss ratio is "primarily related to natural catastrophes in 2017 [and] overall, the combined ratio is relatively unchanged as insurers restructured in a bid to increase operational efficiency."

Mr. Swan added, "These Reports provide further insight and transparency about how Bermuda's innovative (re)insurance market continues to evolve and develop."

View both reports on the Bermuda Monetary Authority website's publications section under "BMA Surveys."

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