Professional Documents
Culture Documents
CONTENTS
2 Summary
8 Captive Structure
11 Assets | Composition
14 Profitability Ratios
15 Annex 1
16 Annex 2
17 Annex 3
SUMMARY
This report highlights the results from statutory financial returns submitted
through the Bermuda Monetary Authority’s Electronic Statutory Financial
Return (E-SFR) system as of 31 October 2018. The E-SFR system was
officially launched in April 2016 for financial year-end returns for 31
December 2016 onwards.
• Business written by geographical region, lines of business and industry of parent company
• Industry utilisation of Bermuda captives, their premium shares and the industry profile of the market
• Balance sheet composition by asset, liabilities and investment allocation
• Profitability indicators
This report predominately covers general business captives – i.e. Class 1, Class 2 and Class 3 insurers – as they
comprise 25%, 33% and 26%, respectively, of submitted filings. Class A and Class B insurers combined account for
less than 2% of submitted filings. References to Bermuda’s captive market throughout this report excludes SPIs.
Commentary on the Bermuda SPI market for the 2017 financial year-end will be covered in a separate report pub-
lished on www.bma.bm.
1
Refer to page 8 for the definitions of “pure captive” insurer
2 2018
GEOGRAPHY OF
RISK ASSUMPTION
2
North America includes US and Canada
Industry 2017
Financial Institution 16%
Shipping, Transport & Storage 12%
Automotive, Manufacturing and Retail 11%
Healthcare 10%
Energy, Power and Utilities 9%
Professional Services 9%
Wholesale and Retail 6%
Administrative and Support Services 6%
Construction 4%
Chemical and Pharmaceutical 4%
Agriculture, Mining, Forestry and Fishing 4%
Technology and Telecoms 3%
Hospitality 1%
Charities & Non-profit Organisations 1%
Media and Gaming 1%
Education 1%
Science and Research 1%
Leisure 1%
Government or Public Sector <1%
Total 100%
4 2018
CHART 1 - NEW FORMATIONS BY INDUSTRY OF PARENT COMPANY %
25%
50% Automotive,
Manufacturing and Retail
25% Financial Institution
13% Education
50% 12% Energy, Power and
Utilities
13%
12%
6 2018
CAPTIVE STRUCTURE
• Pure Captive: An insurer writing only the risks of its parent and/or affiliates.
• Rent-a-Captive: An insurer where the policyholder is insured by the captive without owning, or
at least, without voting control of the captive. The captive facility “rents” its capital, surplus, and
license to the policyholder and usually provides administrative services, reinsurance, and/or is an
admitted fronting company. Usually a Rent-a-Captive will be structured as a segregated cell or
separate account company which provides legal segregation for each insurance programme from
the liabilities of every other programme and those of the Rent-a-Captive itself.
• Agency Captive: An insurer that is organised by brokers or agencies that retain partial or
predominant ownership of the captive and offer it as a facility for coverage to their clients.
• Group Captive: An insurer established by a group of companies with similar businesses or exposures
writing only the risks of its owners and/or affiliates.
• Association Captive: An insurer that insures risks of the member organisations of an association, and
that may also insure the risks of affiliated companies of the member organisations and the risks of
the association itself.
• Other: An insurer carrying on insurance business that does not fit into any of the above categories.
8 2018
LINES OF BUSINESS |
PROPERTY
Although not significant for the overall market, the greatest year-on-year percentage increase was ex-
perienced by the cyber risk line of business which saw an increase in premium of $26.3 million (2017-
$42.0 million; 2016- $15.7 million) a nearly two-fold increase in premiums written.
Property and casualty catastrophe includes property catastrophe, industry loss warranty, workers compensation,
3
catastrophe cover and flood. For the purposes of this report, this line is included with the Property lines of business instead
of the Casualty lines of business.
Bermuda captives wrote about 47% of all business in casualty lines in 2017
compared to 45% in 2016.
• Motor (20%)
Significant year-on-year percentage increases were seen in professional liability (2017- $2.1 billion;
2016- $0.7 billion) and general liability (2017 - $3.6 billion; 2016 - $2.5 billion) lines.
10 2018
ASSETS | COMPOSITION
40%
35%
30%
25%
20%
15%
10%
5%
0%
Quoted Investment
Intercompany
Investment Advances
Cash
Segregated
Accounts
Unquoted
Investments
Other Assets
2017
2016
2017 2016
Bonds 73% 81%
Equities 17% 12%
Other 11% 7%
Total 100% 100%
Over 80% of captives’ quoted and unquoted bond and debentures are A.M. Best (or equivalent) rated
A or better as seen in Table 9.
2017 2016
Rating AAA 32% 27%
Rating AA 34% 45%
Rating A 16% 15%
Rating BBB 9% 6%
Rating BB 4% 1%
Rating B 1% 2%
Rating Below CCC 4% 4%
Total 100% 100%
12 2018
LIABILITIES AND CAPITAL
AND SURPLUS
Similar to 2016, last year 17% of limited purpose insurers reported having segregated accounts. These
insurers have set aside segregated account assets to cover 176% (2016 - 209%) of segregated account
liabilities. Over 50% of business written in the cells related to workers compensation, motor, and
general liability.
The full liability composition for the market is shown in Chart 3 below.
60%
50%
40%
30%
20%
10%
0%
Capital & Surplus
Segregated
Accounts
Unearned Premiums
Insurance/
Reinsurance
Balances Payable
Amounts due to
Affiliates
Other Liabilities
2017
2016
See Annex 1 for more detail on liability composition. 2018 CAPTIVE REPORT 13
PROFITABILITY RATIOS
In 2017, the median loss ratio and combined ratio for Bermuda general business captives was 54%
and 77%, (2016 – 49% and 75%) respectively, as shown in Chart 4. Note the increase in loss ratio as
insurers paid claims primarily related to natural catastrophes in 2017. Overall, the combined ratio is
relatively unchanged as insurers restructured in a bid to increase operational efficiency.
100%
80%
60%
40%
20%
0%
Captive
Class 1
Class 2
Class 3
14 2018
ANNEX 1
All Categories
Class 3
Class 2
Class 1
Quoted Investments 35% 9% 53% 33%
Unquoted Investments 3% 1% 4% 3%
Unearned Premiums 4% 2% 5% 5%
All Categories
Class 3
Class 2
Class 1
Property Catastrophe 43% 24% 5% 65%
Agriculture 1% 1% 0% 1%
16 2018
ANNEX 3
All Categories
Class 3
Class 2
Class 1
General liability - Public, Products, Umbrella, Product recall 26% 36% 11% 30%
Credit / Surety 4% 2% 4% 4%
Medical Malpractice 1% 2% 3% 0%
Political Risks 0% 1% 0% 0%
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