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Bermuda’s financial regulator is planning to force life insurers based in the territory to make public more details on their investments, amid growing scrutiny of the risks being stored up in offshore reinsurance deals.
The island territory is a reinsurance centre known as a major provider of hurricane cover, but its life sector has also become a significant global financial hub, building up more than $1tn in assets backing annuities and other long-term savings products.
Bermuda’s more generous capital rules for investing in less liquid assets have helped attract a wave of offshore reinsurance deals. Private capital groups such as Apollo and KKR have built up large Bermudian insurers.
Global policymakers and regulators are increasingly bearing down on the liquidity, counterparty and other risks being built up through offshore deals.
In a statement to the Financial Times, the Bermuda Monetary Authority said it had published a series of reports since the end of last year on areas such as liquidity risk and private equity-linked insurers to “help the public understand the evolution of the business models and further encourage market discipline”.
It added that it was planning to “augment this work by requiring commercial life and annuity insurers to publish more details regarding their investment portfolios on an annual basis to further deepen understanding”.
The consultation would start in the “near future”, the regulator said.
Currently, Bermudian insurers publish documents such as financial statements, some of which are available through the BMA website.
The proposals would provide more granular detail on the investments, likely including those affiliated to insurers’ owners or linked parties, according to a person familiar with the matter.
The crisis surrounding one Bermudian reinsurer owned by a private equity firm, 777 Re, has underscored the concerns of regulators about the risks embedded in offshore reinsurers’ investment strategies.
777 Re was as plunged into crisis after taking on significant exposure to assets connected to Josh Wander’s Miami-based investment firm, from football clubs to budget airlines. US insurers that had ceded billions of dollars in assets to the group were caught up in the fallout.
The regulator has since stepped up its scrutiny of affiliated and related-party assets through data collection, and on-site examinations.
Suzanne Williams-Charles, the chief executive of BILTIR, which represents Bermuda’s long-term insurers and reinsurers, said it was “supportive of proposals for increased public transparency”, adding that some of that which could be made public was already reported to the regulator.
Bermudian insurers are “committed to serving the needs of their customers which includes ensuring that policyholders and other stakeholders are both informed and able to make appropriate choices”, she added.
Bermuda’s premier David Burt said in September that the territory had “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”.
