Bermuda P-C Firms Move Into Life Re
Bermuda Correspondent
Within the past year, many of Bermudas largest property-casualty carriers have decided to expand into life reinsurance. Why? Most cite diversification, the volatility of p-c earnings, the greater stability of life reinsurance business, economies of scale, and the demographics of aging populations.
In addition, Bermudas life reinsurance sector has also been boosted by the arrival of new capital dedicated solely to that market, as well as the introduction of tax-efficient hedge fund investments wrapped in life reinsurance.
One of Bermudas offshore competitors is the Cayman Islands. Until this year, the Caymans largest company in terms of physical presence was Scottish Annuity & Life, founded in 1988 with $250 million of seed capital to reinsure annuities and life products, and to issue customized variable life and annuity products for the high net-worth market.
Commenting late in April this year that "Bermuda is the capital of the global insurance industry," SAL Chairman Michael C. French announced that his company had applied to the Bermuda government for permission to conduct its holding company operations from Bermuda. In addition, SAL will redomesticate its flagship subsidiary, Scottish Annuity & Life Insurance Company (Cayman), to Bermuda.
The present Bermuda market leader, Annuity and Life Re (Holdings), has been growing by leaps and bounds since its formation in March 1998. The companys face amount of life reinsurance in force escalated by 68 percent to $77.0 billion in 2000, while net operating income grew by 21 percent. The insurer said it completed over 50 life reinsurance transactions in less than three years.
ACE subsidiary Tempest Reinsurance expanded into life, health and annuity reinsurance last year. It appointed Kin K. Gee to the new position of chief life and health officer last June. ACE says it has already begun working towards offering primary life and health insurance products in 2002 when its agreement not to compete with CIGNA expires. (ACE had entered into the agreement after buying Cignas p-c operations in July 1999.)
ACE is looking forward to hitting the ground running, developing strategies and carrying out analysis in preparation for the new insurance offerings, said a company representative in a statement. Life and health insurance products will maintain ACEs strategy of "continued diversification," says ACE Chairman and CEO Brian Duperreault.
Another company considering a move into life is Overseas Partners, which is, in CEO Mary Hennessys words, "wildly over-capitalized," despite swallowing Stockton Res finite team a few months ago and forming OpCat, a strategic partnership to write catastrophe reinsurance with RenaissanceRe. Ms. Hennessy and her team are considering a variety of options, among them life insurance, but writing long-tail business would be a significant break with the companys past.
Then there's Max Re, where almost 70 percent of net written premiums earned in its first full year of operations ending Dec. 31, 2000–$283.3 million out of $401.8 million–is life and health reinsurance-related. Max Re offers wealthy individuals–notably U.S. investors–the results of a portfolio that is 40 percent invested in hedge funds with great tax efficiency, and has filed for a $200 million initial public offering.
The model has proved attractive: Hampton Re, backed by J.P. Morgan (which has 7 percent of the equity), was formed in Bermuda this spring to assume blocks of in-force life reinsurance. "We have completed, or are about to complete, 15 transactions, with more in the pipeline," said Bill Walker, president and CEO of Hampton Re.
Most of the deals are U.S.-based, said Phil Bieluch, senior vice president and chief actuary at Hampton Re. "We differ from our competitors, such as Max Re, in that we will not invest policyholder capital in hedge funds, but in traditional fixed income instruments," he added. At least four other similarly structured companies are in the pipeline.
Two recent Bermuda startups have opted to write both p-c and life reinsurance. Imagine Re says it intends to write contracts in both sectors. Term life, variable annuities, universal life, corporate-owned life and disability products are the likeliest areas of focus on the life and annuity side. Sage Life (Bermuda), the offshore subsidiary of Sage Life in South Africa, will offer five new asset allocation funds under its offshore banner.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 13, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.