Bermuda’s commercial long-term insurance sector continued to grow in 2024, with gross written premiums (GWP) increasing 17.8% year-on-year to reach US$200.1 billion, with total assets increasing by 19.1%, according to the latest figures from the Bermuda Monetary Authority (BMA).
The ‘Bermuda Long-term Insurance Market Analysis and Stress Testing Report’ attributes this growth to heightening demand from direct insurers and institutions seeking reinsurance for risk management, capital efficiency, and to mitigate balance-sheet volatility.
This global demand is fuelled by a complex mix of a challenging economic environment and an ageing population.
The report provides a detailed look at how the sector is deploying its growing capital, revealing that the largest asset allocation for the sector was in corporate bonds, which represented 51% of total investments at year-end 2024.
Fixed-income securities with an investment-grade rating comprised 74.7% of the asset allocation and more than 75% of total investments for the four years prior to 2024. Securities with sub-investment grade ratings were less than 3.0% of total investments, and less than 1.0% of total investments were unrated, reveals the data.
Investments in equities, equity-like assets, preferred stock, and mortgage loans rose to 21.4% of the investment allocations, with the allocations to equities and mortgage loans driving the increase.
Bermuda’s role as a global reinsurance hub is reflected in its reserve allocations, the report highlights. The United States accounted for more than 70% of Bermuda’s long-term insurers’ reserves, followed by Asia. European business, including the United Kingdom, continues to represent less than 5% of the allocated reserves.
Regarding the type of business protected, two-thirds of the long-term sector reserves are allocated to longevity and financial business, with the remaining reserves tied to mortality and critical illness coverages.
Additionally, the BMA conducted a Global Financial Crisis (GFC) stress test for long-term commercial insurers in Bermuda, which demonstrated the Bermuda long-term reinsurance sector’s strong ability to withstand severe economic challenges.
According to the report, the sector has a robust solvency position with a median solvency ratio of 286% at year-end 2024. On an individual basis, firms were well-positioned capital-wise to absorb the impacts of the prescribed adverse financial market stress scenarios.
Overall, the Authority noted, “the sector continues to demonstrate resilience to the stress tests.”
The test leveraged relevant work from the International Association of Insurance Supervisors (IAIS). The specifications were calibrated using the IAIS Aggregation Method (AM) Data Collection, featuring scenario analyses that simulated severe economic conditions, like the 2008 financial crisis.
The stress test revealed that most insurers maintain capital levels well above regulatory requirements, even under severe stress conditions.
Bermuda’s long-term insurers maintain strong liquidity, with 56% of assets in highly liquid instruments (cash and bonds). The median Liquidity Coverage Ratio (LCR) is a robust 471% under stress, significantly exceeding the 105% regulatory minimum.
Liability profiles are improving, with lower lapse exposure and increased surrender penalties mitigating liquidity risk.
Insurers undergo mandatory stress tests, the BMA noted, and it continued to target reviews of firms showing vulnerabilities. LCR changes from 2023 to 2024 are attributed to reporting, asset allocation, and data quality improvements.
