Global reinsurance giant Munich Re has set up an entity in Bermuda which is going to act as a reinsurance vehicle for certain of the group’s life reinsurance risks.
Munich Re of Bermuda, Ltd. has been established to take on life risks from across the Munich Re group, acting as an internal consolidator of life risks and retrocessionaire to other entities within the group.
Previously, Munich Re of Bermuda, Ltd. had been named Princeton Eagle West Insurance Company Limited and was authorised to underwrite run-off property and casualty re/insurance risks, but Munich Re has renamed the company in March 2018 and repurposed the vehicle as a tool to help its own efficiency.
Rating agency A.M. Best has assigned a Financial Strength Rating of A+ (Superior) and a Long-Term Issuer Credit Rating of “aa” to Munich Re of Bermuda, Ltd. (Munich Re Bermuda), citing the strategic importance of the new Bermuda life reinsurance venture.
Munich Re Bermuda will act as a vehicle for placing Munich Re’s U.S. life reinsurance business, meaning its ratings are aligned with Munich Re itself and reflect its strong balance sheet strength, operating performance, favorable business profile and strong enterprise risk management, A.M. Best said.
Munich Re Bermuda was approved as a Class C Insurer by the Bermuda Monetary Authority, so that it can act as an authorised reinsurer of the Munich Re group for certain life risks.
Munich Re will also provide support back to the newly repurposed reinsurance vehicle, providing an excess of retention and excess of loss reinsurance treaty to protect its portfolio, as well as explicit support thanks to a capital contribution of $330 million.
So it appears that Munich Re Bermuda will act as a self-reinsurance vehicle for U.S. life reinsurance risks underwritten across the Munich Re group.
In this way the vehicle can help Munich Re to extract more of the risk premium from the life business it underwrites, reducing its need to purchase private market retrocession for life exposures as well.
As such, Munich Re Bermuda can likely add more efficiency to Munich Re’s life underwriting capacity, while ensuring it extracts as much profit from the underwritten business as possible.