The Bermuda market continues to broaden and deepen, despite softness in most sectors of insurance and reinsurance worldwide, as Roger Crombie explains.
Bermuda watchers recall a time, not so very long ago, when the Bermuda insurance market meant captives and little else. Today, the Bermuda market is broader and deeper, led by ACE (whose purchase early this year of CIGNA's casualty/property operations gives it a presence in 47 countries), XL Capital and Centre Solutions.
Despite the continuing soft market, 1998 was Bermuda's best in a dozen years for new company incorporations. A total of 96 new insurance and reinsurance companies were added to the register, demonstrating what registrar of companies, Kymn Astwood, calls “Bermuda's unique ability to attract new business”.The 1998 additions take the total number of insurers and reinsurers on the Bermuda register to 1,493. Bermuda has managed better than 90 new companies in each of the past five years.
Mr Astwood will be demonstrating his confidence in the island's insurance sector by joining Arrow Reinsurance Co Ltd, Goldman Sachs' entry into the Bermuda market, on 1 June after four years as registrar of companies. His successor in the post has yet to be named, although insiders suggest that Jeremy Cox, son of Bermuda's finance minister Eugene Cox, is a hot contender.
The extent to which the Bermuda insurance and reinsurance market continues to expand is shown by the following selected highlights of activity during the 12 months ending 31 March 1999. One significant casualty has occurred during that time: New Cap Reinsurance Corporation (Bermuda) Ltd, a class four company.
April 1: Exel Ltd (now XL Capital). announces the completion of the acquisition of Great Lakes American Reinsurance Co, which has been renamed X.L. Insurance Company of America, Inc.
April 2: Chubb Atlantic Indemnity Ltd forms a new subsidiary, Chubb Atlantic Reinsurance Specialists Ltd, to underwrite and market reinsurance to the 1,500 captives registered in Bermuda.
April 2: ACE Ltd hires Bruce Jones to head its new captive facility, which will target captives with predominantly casualty portfolios, on both a single and multi-line basis.
April 3: XL becomes the third largest stakeholder at Lloyd's with its $2.1 billion purchase of Mid Ocean Ltd, whose Brockbank managing agencies boost XL's stake in Lloyd's to 6% of total capacity.
April 9: Annuity & Life Re (Holdings) Ltd raises $256.2 million in an initial stock sale. Duff & Phelps assigns a preliminary single A claims paying rating ability and AM Best assigns an A (excellent) rating.
May 11: Centre Solutions (Bermuda) Ltd issues $83.5 million in catastrophe bonds in a private placement led by Goldman Sachs.
May 14: Swiss Reinsurance Co announces plans to open a branch office in Bermuda.
June 16: ACE subsidiary ACE USA Inc. announces it will acquire the majority of the stock of Creditor Resources Canada Ltd, a privately held marketer of credit insurance and vehicle service contracts, based in Burnaby, B.C.
June 17: ACE agrees to buy Tarquin plc, a Lloyd's underwriter, for about $500 million. Tarquin owns Lloyd's managing agency Charman Underwriting Agencies Ltd and Tarquin Underwriting Ltd, its corporate capital provider.
June 25: Templeton International Inc. and AGC Life Insurance Co are to form a new Bermuda insurer, Templeton American General Life of Bermuda Ltd, to develop, sell and administer private placement variable life insurance products tailored for wealthy individuals.
July 2: PartnerRe is to expand its US reinsurance operations and invest $100 million into a US subsidiary, PartnerRe US. Its operations were originally a part of French reinsurer SAFR, purchased in 1997 by PartnerRe and subsequently integrated into the group.
July 3: The combined capital and surplus of Bermuda's class four insurers and reinsurers grew by 6% in 1997 to $9.4 billion. Gross premiums written decreased 3% to $3.3 billion. Net premiums fell 7% to $2.8 billion. Total assets of the class four companies rose by 7% to $17.6 billion.
July 6: Stockton Holdings Ltd, parent of Bermuda based Stockton Reinsurance Ltd, completes a private placement of $173.5 million.
July 10: XL acquires an indirect majority voting stake in Reeve Court Insurance Co for $100 million. Reeve Court offers specialised investment and estate planning products, including life insurance, to trusts and wealthy individuals.
July 15: Mutual Risk Management Ltd (MRM) buys CompFirst Ind. and Avreco Corp. Georgia based CompFirst is a managing general agent specialising in workers' compensation and excess medical stop loss. Chicago based Avreco is a specialty brokerage operation dealing with medical malpractice, excess property and professional liability.
Aug 7: Travelers Property Casualty Corp. is to form Travelers (Bermuda) Ltd, a class three Bermuda insurer and reinsurer, with initial capital of $10 million. The company will be managed by Mutual Risk Captive Group Ltd, an MRM subsidiary.
Sep 1: PartnerRe buys the active reinsurance arm of Winterthur Insurance Co for $750 million in cash from Credit Suisse Group.
Sep 8: New York based American Capital Access Holdings Inc (ACA), with outside investors, forms GCA Ltd, a Bermuda based reinsurer of low-rated municipal bonds and asset-backed securities, with an anticipated initial capital of $290.4 million.
Sep 10: An airline underwriting consortium is established in Bermuda by ACE Insurance Co Ltd; XL Insurance Co Ltd; and Overseas Partners Reinsurance Ltd (OPL). The new entity is providing catastrophe insurance cover for the airline industry, covering aviation, D&O, property and other related or associated exposures in a single policy form. ACE and XL will have 40% each of the capacity, while Overseas Partners will complete the remaining 20% with up to $250 million in aggregate limits for each airline on either an annual basis or longer.
Oct 5: XL enters into a joint venture with Financial Security Assurance Holdings Ltd (FSA) to create two new Bermuda based financial guaranty insurance companies. Each will have a minimum capitalisation of $100 million. Financial Security Assurance International Ltd. will be an FSA subsidiary; XL Financial Assurance Ltd will be a subsidiary of XL Insurance.
Oct 29: Cathay Life Insurance Co, Taiwan's largest life insurance company, is to establish a subsidiary in Bermuda, using the island as a base for its international expansion and to co-operate with foreign insurers for investment projects and penetration into East Asian markets.
Nov 5: MRM agrees to buy the International Advisory Services (IAS) group of companies. International Advisory Services Ltd, a subsidiary, has more than 100 captive clients with annual premiums in excess of $1.1 billion. The IAS group will act as an autonomous unit within MRM under the direction of IAS founder and president, David Ezekiel.
Dec 2: Japanese trading house Sumitomo Corp intends to launch a joint venture rent-a-captive facility called Bluewell Reinsurance Co (Bermuda) Ltd, which is expected to generate about $10 million of annual premium volume within three years by offering rent-a-captive facilities to mid-sized companies and/or insurance agencies.
Dec 11: IRMG, the risk and advisory captive management company, incorporates a Panama company, IRMG Panama, S.A. It has also entered into co-operation agreements in Brazil with Catalyst Re Consulting and in Mexico with Asescor Consultores.
Dec 14: Exel changes its name to XL Capital Ltd.
Dec 21: Specialty reinsurer Stockton Reinsurance Ltd agrees in principle to pay £9.85 million for Crowe Insurance Group Ltd, one of the largest remaining independent managing agencies at Lloyd's. Crowe, part of Ockham Holdings Ltd, manages six syndicates, with total 1999 premium income capacity of £230 million.
Dec 22: ACE Ltd is reported to be talking to CIGNA about buying its property/casualty insurance business.
Jan 6: RenaissanceRe Holdings and US based State Farm Ltd form Top Layer Reinsurance, a Bermuda based reinsurer which will cover large property catastrophe risks with limits of up to $500 million, with total capacity of up to $3 billion.
Jan 7: Centre Solutions (Bermuda) Ltd issues $56.6 million in catastrophe bonds, a securitised deal to protect the company against hurricane losses in Florida.Jan 11: Bermuda-registered Gemini Re Holdings Ltd files for a $400 million initial public offering. The company is being formed by former Bermuda finance minister Grant Gibbons and former Centre Solutions president David Brown, reported in May to have parted company with the new venture. Gemini Re will be a multi-line insurer and reinsurer targeting long duration risks, including traditional life and annuity, workers' compensation, medical malpractice and disability reinsurance, as well as structured settlements.
Jan 11: A Swiss Re survey reveals that Bermuda based reinsurers have taken a 5%, or $6 billion, share of the global market.
Jan 12: RenaissanceRe Holdings puts the business units of its US based subsidiary, Nobel Insurance Co up for sale, seven months after buying the company for $63 million. Renaissance takes a $40 million charge in the fourth quarter from Nobel's activities.
Jan 13: ACE Ltd agrees to pay $3.45 billion cash for the property and casualty businesses of CIGNA Corp. The purchase moves ACE into the top 20 players in the US property and casualty markets, with about 9,000 employees and operations in 47 countries.
Feb 5: MRM Hancock Ltd, the London subsidiary of MRM, becomes an accredited broker at Lloyd's, offering MRM and its clients access to the Lloyd's market. MRM Hancock is an international insurance and reinsurance broker specialising in the placement of reinsurance for captive insurance companies and other specialty programmes in the London and international markets.
Feb 16: XL and Connecticut based reinsurer NAC Re Corporation sign a definitive merger agreement in an all stock transaction. The combined organisation will have assets of $13.3 billion and shareholders' equity of $5.6 billion based on 1998 figures. NAC Re is to become XL's platform for the United States.
Feb 26: Registrar of companies Mr Astwood appoints John McKenna of Ernst & Young as inspector into New Cap Reinsurance Bermuda. After receiving Mr McKenna's report, Mr Astwood successfully petitions the Supreme Court of Bermuda for the appointment of a provision liquidator on 22 April. He states: “Loss reporting on retrocessions from its Australian subsidiary had accelerated in early 1999 beyond levels expected by the New Cap Bermuda actuaries and showed no signs of tapering off. These losses had resulted in the insolvency of the company.”
Mar 1: MRM enters into an agreement to buy Captive Resources, Inc., a Schaumberg, Illinois based provider of services to member owned group captive insurance companies. CRI has 50 employees and 1998 revenues of about $8 million.
Mar 5: New York investment bank Lehman Brothers establishes a four-man Bermuda office for Lehman Re, its Bermuda subsidiary. A further 31 staff are based at Lehman Advisors in New York. Lehman Risk Advisors is to deal with finite and political risk and the investment trading end of the insurance and reinsurance venture. Lehman Re is capitalised at $500 million, some 10% of the firm's capital equity.
Roger Crombie is the Bermuda correspondent of Global Reinsurance, a regular contributor to local and international publications and the author of a history of the Bermuda law firm Conyers Dill & Pearman. He is also a fellow of the Institute of Chartered Accountants of England and Wales.