Life reinsurance is flourishing in Bermuda, says PwC

Two key themes in the Bermuda market at present are a burgeoning life reinsurance market and an expected upward trajectory for insurance-linked securities (ILS), Arthur Wightman, PwC’s territory leader for PwC Bermuda, told Monte Carlo Today.

“In Bermuda the life reinsurance market has really taken off over the last two to three years,” he said. “There’s a lot of capital being deployed into that area—we are seeing a number of incorporations and a number of large deals being done.

“Over the last five or six years those deals have tended to be done by newer companies but we are seeing some global insurance and reinsurance companies participating in that space as well.

“It’s an interesting development for a market that has traditionally been seen as a property cat centre.”

Wightman added that the ILS market worldwide and in Bermuda has flattened a little over the last year or so—but he expects this to change.

“We are seeing a lot of capital in the wings ready to deploy and also structurally seeing some changes in the market with some degree of consolidation,” he said.

“It’s fair to say that some of the more established longer-standing players such as RenaissanceRe, Nephila and AlphaCat are tending to get better shares of the marketplace than some of the newer, less established players.”

Another theme he noted was a continued deterioration in Bermuda and worldwide on some of the larger, more complex cat losses—referred to as loss creep.

“It’s an interesting aspect of the market. We are keeping an eye on whether existing modelling techniques are satisfactory in light of this, or whether there are some other issues at play that are resulting in companies not being able to work out their losses quickly, and then for that loss to be stable over time,” he said.

On a more macro level, Wightman said, disintermediation is continuing, as brokers and reinsurers start to take on some of each other’s roles.

“We are seeing more brokers positioning themselves in the reinsurance space, and the reinsurers offering analytics and solutions that might traditionally have been in the broker space,” he said.

“That has been precipitated by a period of lower returns and companies looking to find ways to grow their businesses, without a lot of aggregate overall market capacity growth.”