BMA report: Bermuda captives wrote over $25bn in gross written premiums in 2019

The Bermuda Monetary Authority (BMA) has released its 2020 BMA Captive Report, which shows that the Bermuda captive market reported more than $25bn in gross written premiums in 2019. The report reveals that 64% of the market has a ‘pure captive’ company structure, 62% of the risk assumed by the market originates from North America, and 17% of insurers have segregated accounts. In 2019, 14 new captives were formed, with the leading industries of the parent company being 30% from administrative and support services and 21% from financial institutions. Of the new formations, 50% are classified as pure captives writing only the risks of their parent and/or affiliates, and 36% are classified as group captives. By comparison, 19 new captives were formed in 2018. The report highlights the market results from the 2019 year-end statutory financial returns by general business captive insurers (Class 1, Class 2 and Class 3 insurers). As in prior years, the majority of risk assumed by Bermuda captives originated in North America and Bermuda (62%); followed by Europe (23%); Japan (5%); Central and South America, Caribbean (3%); rest of Asia (3%); Africa and Middle East (3%); and Australia and New Zealand (1%). According to the report, financial institutions continue to lead captive ownership (14%); followed by automotive, manufacturing and retail (12%); shipping, transport and storage (12%); healthcare (10%); and energy, power and utilities (9%). The gross written premium of the Bermuda captive market continues to be dominated by captives focused on the financial institution industry (29%); followed by shipping, transport and storage (13%); administrative and support services (12%); professional services (11%); and energy, power and utilities (8%) In terms of growth from 2018, professional services saw an increase of 24% over 2018 premiums in their market share of the overall premiums written. Also, shipping, transport and storage increased by 16% in their market share of the overall premiums written. The provision of short-tail coverages represented 58% of all business written by Bermuda captives in 2019, comprising property and casualty catastrophe (50%); warranty and residual value (19%); marine – protection and indemnity, cargo, hull and liability, and war (13%); and property damage and business interruption (10%). Of all business in 2019, 42% were in longer-tail lines, comprising workers compensation and employers’ liability (23%); general liability – public, products, umbrella and product recall (21%); professional liability – professional indemnity, D&O, bankers blanket, and errors and omissions (18%); and motor –automobile physical damage and liability (18%). In the report, the BMA notes an increase in companies enhancing the use of captives in the healthcare sector, as well as 18% increase in premiums written for cyber risk. “This has been the trend since 2016, when data collection began coinciding with the first year underwriting cyber exposure as a standalone line. The BMA expects to see this trend continue as captives continue to be used as a risk management solution for new and emerging risks,” the report states. Premium written by segregated account companies (SACs) and incorporated segregated account companies accounts for approximately 37% of the total captive gross written premium. The largest lines of business written within the SACs include property catastrophe at 30%, warranty residual value at 23%, and property damage and business interruption at 17%. According to the report, the median combined ratio for Bermuda captives has fluctuated during the past three years (2019: 65%; 2018: 83%; 2017: 77%), driven by fluctuation in the loss ratios. The median loss ratio for Bermuda captives has fluctuated during the same period (2019: 53%; 2018: 65%; 2017: 54%). Craig Swan, BMA chief executive officer, commented: “The island’s captive market is time-tested. Across decades, it has withstood various threats and continues to take advantage of emerging opportunities. This, alongside the captive expertise that resides in Bermuda, contributes to its position as the leading captive domicile in terms of both premiums written and capital to support the business underwritten.”

BMA report: Bermuda captives wrote over $25bn in gross written premiums in 2019

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