The Bermuda insurance industry is projected to grow at a steady pace as a result of new regulations and consistent growth in external business, such as offshore and captive, according to a new report published by London-based business intelligence company Timetric.
Timetric’s Insurance Intelligence Center forecasts the Bermudian insurance industry will rise to US$167.1 billion in 2019, from $102.3 billion in 2014, which amounts to a compound annual growth rate (CAGR) of 10.3 percent.
The Bermudian industry’s gross written premium rose from $64.9 billion in 2010 to $102.3 billion in 2014 at a CAGR of 12 percent, the report said, noting that this increase was also the result of growth in offshore and captive insurance.
During the same time period, reinsurance premiums grew from $42.7 billion to $68.0 billion, at a CAGR of 12.3 percent, said Timetric’s report titled “The Insurance Industry in Bermuda, Key Trends and Opportunities to 2019.”
The report noted that North America – mainly the U.S. and Canada – accounted for the largest share of Bermuda’s gross written premium, followed by Europe, and Australia and New Zealand.
Solvency II Equivalence
The conditions for future growth in Bermuda were enhanced last year when it achieved Solvency II equivalence, the report indicated.
Equivalence is a stamp of approval for the Bermuda Monetary Authority’s (BMA) competence as a regulator and recognition of Bermuda as a major financial hub, Timetric explained.
Timetric quoted Jeremy Cox, CEO of the BMA, who said in a recent speech that achieving Solvency II equivalence “had helped to legitimize Bermuda as an international financial services center.”
“Other advantages will include less onerous regulation of cross-border business with companies based in Europe. Many European jurisdictions had restrictive regulatory provisions that Bermuda based re/insurers will no longer have to comply with,” Timetric said.
“Solvency II equivalence is expected to simplify group supervision for Bermudian insurers with operations in Europe. This is because they are able to have a more efficient group supervisory structure regulated only by the BMA, recognized by European insurers as a group supervisor,” commented Jay Patel, analyst at Timetric.
Timetric also expects increased investment in Bermuda from U.S. and Canadian re/insurers “as it will be a destination from which they can conduct their European reinsurance operations,” the report said.
Because Europe recognizes the BMA as a group supervisor, a re/insurer with European operations will enable a more efficient group supervisory structure, Timetric affirmed.
As of 2015, healthcare accounted for 10 percent of Bermuda’s captive business, the report continued, noting that this business has been an area of focus “for Bermuda’s trade development agencies and industry associations.”
“Key areas involving the formation of healthcare captives include medical malpractice, laboratories and research facilities,” the report said.
Timetric noted, however, that the ramifications of the Affordable Care Act – also known as Obamacare – on the Bermuda captive healthcare sector are currently unknown.
Enacted in March 2010, Obamacare made it compulsory for all individuals to obtain health insurance and also required organizations with 50 or more employees to provide their workers with health insurance, the report explained.
“It is changing the structure of hospitals and how they approach patient care, and many healthcare firms and hospitals are merging to operate more efficiently and effectively.”
Firms may also choose to also merge their captives, which could have either negative or positive implications for the captive healthcare sector, the report added.
This article was based on the executive summary of Timetric’s industry forecast report about Bermuda. The full report is only available to Timetric clients.
Source: Timetric’s Insurance Intelligence Center