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Bermuda’s premier has defended the robustness of the island’s life reinsurance sector, saying “you can never prevent all problems from occurring”, following a crisis at a Hamilton-based reinsurer linked to private equity firm 777 Partners.
The British overseas territory is a global hub for reinsurance, particularly policies covering buildings against natural catastrophes. In recent years it has grown in importance as a venue for life insurers to offload their longevity and investment risks.
Global regulators have increasingly warned about the potential implications of the ceding of a vast amount of long-term liabilities to Bermudian reinsurers owned or linked to private equity groups.
Bermuda-based 777 Re was plunged into crisis after taking on significant exposure to assets connected to Josh Wander’s Miami-based investment firm, ranging from football clubs to budget airlines.
“You can never prevent all problems from occurring, and I think that everyone accepts that,” Bermuda premier David Burt told the Financial Times, in an interview at its office in London. “What matters is how you deal with [them].”
Burt, who also serves as finance minister, highlighted work by the Bermuda Monetary Authority, the financial regulator, to crack down on connected-party investments in the wake of problems at 777 Re.
“It is accepted that we have a very strong and robust regulatory system,” Burt said, “where we have made sure to tighten the rules . . . to make sure that our international regulators, who may have expressed these particular concerns, know that we are taking these matters seriously.”
The bigger risk, he added, came from jurisdictions “who may have similar types of companies [but] do not have the level of insurance regulatory supervision that we have in Bermuda”. The self-governing territory’s financial sector is deemed as having equivalent or reciprocal status with European and US solvency rules.
The BMA had “been at the forefront of addressing concerns about PE-owned insurers”, and has had significant engagement with other international regulators, he added.
Burt highlighted a 2023 paper from the BMA on managing the specific risks with private-equity ownership and how it has tightened its rules, including on investments.
The premier — on a trip to visit policymakers in the UK and EU — also addressed the growing concerns around the insurability of natural disasters.
Bermuda’s insurance market “will be there to stay and will be able to properly assess those risks”, Burt said, adding that he was optimistic that cyclical effects will ease pressures on consumers. “Markets will adjust.”
The island was “leaning heavily” into climate risk finance tools that can improve the resilience of areas that are vulnerable to natural catastrophes, he said.
In recent years, Bermuda has dominated other insurance hubs including London in newer areas of insurance such as insurance-linked securities, which allow investors to put their capital against insurance risks through structures like catastrophe bonds.
Burt said rival insurance hubs in Europe, the US and Asia “want to take our lunch and we are just trying to make sure that we not only maintain what it is that we have but also make sure that Bermuda [continues to be] known for innovation”.
Bermuda, which Burt said had a “long history of being a co-operative and transparent jurisdiction”, will be adopting the global minimum tax rate on multinationals of 15 per cent from January. Industry insiders and analysts expect that Cayman Islands, which is outside of Solvency II, might begin to lure more life reinsurance business its way.
“We are not worried what other jurisdictions do, because we know we are a blue-chip jurisdiction and [that] means you are going to be aligned to the global norms,” he said. “There is a reason why in Bermuda there are more people than there are companies — because we focus on substance.”
