The Bermuda Monetary Authority (BMA) has found that most companies in the Bermuda long-term reinsurance sector are maintaining capital levels well above regulatory requirements, according to results from its latest sector examinations.
The BMA’s 2025 Global Financial Crisis (GFC) Stress Test concluded that the long-term reinsurance sector is positioned to withstand severe financial stress.
The final assessment stated, “The combination of strong initial capitalization, effective risk management practices and credible management actions provides confidence in the sector's ability to fulfil its obligations to cedants and policyholders even under extreme conditions.”
The report also noted that the current level of exposures and capitalization does not pose a threat to the financial stability of either the Bermuda long-term market or the global life insurance market.
While the stress test identified certain vulnerabilities and areas for improvement, the BMA said these are manageable within the sector’s overall strength. The authority indicated it will continue to work with industry participants to address these areas, while maintaining a regulatory framework that aims to balance financial stability with market development.
Recent data from the BMA shows that Bermuda’s re/insurance sector is on pace to exceed last year’s registration totals, with 38 new insurer registrations approved by the end of July. This growth is being driven in part by special-purpose vehicles, which continue to play a significant role in market expansion.
Bermuda now represents approximately 35% of the world’s reinsurance capacity, managing over US$1 trillion in assets tied to annuities and other long-term savings products. The island’s role in absorbing global risk remains significant, with Bermuda-based reinsurers providing critical support during periods of elevated catastrophe losses and helping to stabilize global insurance markets.
For 2023, Bermuda-based reinsurers achieved a combined ratio of approximately 85%–86%, an improvement from 92.7% in 2022. This indicates stronger underwriting profitability and reflects ongoing efforts by the sector to manage risk and maintain financial health.
Looking ahead, the BMA highlighted several areas for continued supervisory attention. One concern is the relatively high concentration of BBB-rated assets in some portfolios, which could create vulnerabilities if there is significant credit deterioration. The effectiveness of management actions may also be reduced if multiple entities are affected at the same time, potentially limiting access to capital markets or increasing competition for parental support.
The BMA said that it will continue to monitor entities with ratios of enhanced capital requirement coverage that fall below 100% under stress, verify the feasibility of management actions – especially those without contractual certainty – and assess recapture risk concentrations, particularly for entities with significant exposure to unaffiliated cedants.
The authority will also review recovery plans alongside stress-test results to ensure comprehensive contingency planning and evaluate the volatility dampening elements of the regulatory framework.
The GFC stress test is part of the BMA’s ongoing commitment to financial stability in the long-term commercial insurance sector. The latest initiative built on work from the International Association of Insurance Supervisors, with specifications calibrated using aggregation data collection methods.
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