The progress of evolution has continued in the Bermuda market over the last year. ACE and XL Capital, the Bermuda market leaders, have mutated through acquisition into multi-line insurers, even going head-to-head on the acquisition of Capital Re. Smaller players, too, are showing themselves adept at adapting to changing conditions.

ACE's acquisition of the property and casualty business of CIGNA took a little longer to digest than had been planned, and resulted in more redundancies than had at first been thought necessary, but ACE has restructured its capital and borrowings with a high degree of success to emerge a well balanced international insurance giant.

Bermuda lives in a competitive world. First, the Paris based Organisation for Economic Co-operation & Development (OECD) threatened sanctions against any jurisdiction using tax advantages to compete for business. Bermuda was able to persuade the OECD that it belongs on the A-list of closely-regulated jurisdictions and the OECD finally relented altogether.

In late spring 2000, four large American insurers with Bermuda subsidiaries moved to have the US Congress close down what they described as a “tax loophole”, which allows insurers such as PXRE and Everest to move to Bermuda without penalty, and which allows the likes of ACE and XL Capital to prosper in Bermuda's more intelligently-regulated marketplace. To everyone but the American insurers, that “loophole” is known as “mobility of capital”. Hampered by their own inefficiency and poorly managed investment portfolios, the US companies sought, in emotive language, to handicap their more efficient rivals by the imposition of a Bermuda-specific tax on income.

Here is a diary of events in Bermuda over the last 12 months.


Jul 7: US-based PXRE Corp (PXRE) is to reorganise the company to create a new Bermuda-based holding company, PXRE Group, with a Bermuda reinsurance subsidiary, to strengthen the company's competitive position within its reinsurance markets.

Jul 8: Broking and underwriting company, Stirling Cooke Brown Holdings (SCB), announces that Nicholas Mark Cooke is to stand down from his executive role as president and ceo of the company. He will retain his position as non-executive chairman of the board and continue to advise in the areas of client development and marketing. Len Quick, chief of the US operations of SCB, is appointed as chief operating officer and interim ceo of the company.

Jul 8: RAM Reinsurance announces the completion of a second round of capital funding, totalling more than $57 million. The new round gives RAM Re approximately $133 million in shareholders' equity and $121 million in statutory capital. The second round of financing includes $30 million from Transatlantic Holdings, a new investor, through its subsidiary, Transatlantic Reinsurance, $15 million from the PMI Group and $12.5 million from High Ridge Capital Partners.

Jul 13: XL Capital announces that Clive Tobin will succeed Robert Cooney as president and ceo of XL Insurance (XLI), one of the principal insurance operating units of XL Capital. Mr Tobin's appointment follows Mr Cooney's decision to leave the company to pursue the formation of Max Re, a new Bermuda reinsurer. Mr Tobin was previously an executive vice president of XLI.

Jul 19: Jeremy Cox is appointed as Bermuda's registrar of companies, succeeding Kymn Astwood, who has taken up a position at the head of Arrow Re, a Bermuda subsidiary of Goldman Sachs. Mr Cox has worked in the registrar's office since 1993 and had most recently been Bermuda's inspector of companies. His father, Eugene Cox, is Bermuda's minister of finance and his older sister, Paula Cox, is minister of labour and home affairs.

Jul 30: XL Capital and Les Mutuelles du Mans Assurances Group (MMA) sign a joint venture agreement to form a new French reinsurance company, Le Mans Ré. The new company will operate from headquarters in Le Mans, France, and has been capitalised at Frf 1 billion (US$ 162.5 million). XL is contributing cash of Frf 600 million (US$ 97.5 million) to Le Mans Ré for a 49 % in the new company. MMA contributes the 40-year-old operations of its reinsurance division, Mutuelles du Mans Réassurance and holds a majority stake in Le Mans Ré. Representatives of XL's wholly owned subsidiary, XL Mid Ocean Reinsurance, occupy four of the nine seats on LeMans Ré's board of directors.

Aug 6: Mutual Risk Management (MRM) posts second quarter results showing operating income up 17 % to an all-time high. For the quarter ended June 30, the company records operating income of $19.6 million or 45 cents per share, compared with $16.8 million or 41 cents in the same quarter last year.

Aug 9: UPS is found guilty in a US tax court of setting up a Bermuda corporation, Overseas Partners (OPL), as an insurance company to avoid paying income taxes. The judge orders UPS to pay taxes on the money sent to the Bermuda company. One effect of the ruling is that OPL loses its UPS reinsurance business, a significant source of revenue. OPL also owns, manages and leases real estate properties valued at more than $1.5 billion. OPL maintains an investment portfolio of approximately $2.5 billion.

Aug 17: US niche insurer Markel is to buy Bermuda reinsurer Terra Nova for $905 million or $34 per share. Markel is based in Glen Allen, Virginia and markets and underwrites specialty insurance products and programmes to a variety of special markets.

Aug 19: Standard & Poor's raises its senior debt and counterparty credit ratings on MRM to A- from BBB+. Major factors in the improved standing are MRM's “very strong operating performance”, its conservative operating leverage ratio of 4:1, limiting gross premiums written to capital, and its “seasoned management”.

Sep 1: Unaudited financial statements for the first half of 1999 show that BF&M, embroiled in a court case with shareholders who are suing for substantial damages following a decision to split the company in two, suffered “very substantial legal expenses” totalling $3 million in the six months to June 30. This results in net earnings of $3.5 million for the period. However, the company noted that results before the legal expenses showed an increase of 16 % in earnings for the first half-year to $6.5 million.

Sep 20: Everest Reinsurance Holdings forms a holding company in Bermuda. Everest provides insurance and reinsurance to life and property/casualty insurers. Based in Liberty Corner, New Jersey, Everest is also to form a reinsurance company called Everest Reinsurance (Bermuda).

Sep 28: Warnings about reduced fee income from its programme business and a downturn in the workers compensation market hurt MRM's share price. The company, however, remains upbeat about its marketing and business plans.

Oct 5: Stockholders of PXRE Corporation approve the company's previously announced reorganisation as a Bermuda based holding company. The reorganisation involves the creation of PXRE Group and a Bermuda reinsurance subsidiary. PXRE Group becomes the parent holding company of PXRE Corporation, which will continue to head up PXRE's US operations.

Oct 6: One day before the shareholders of Capital Re Corporation (Cap Re) are to vote on the ACE offer to acquire the company, XL Capital makes an unsolicited bid to buy the company, in an all-cash offer valued at $456 million. The offer sparks an all-Bermuda bidding war between ACE and XL. During October, ACE exercises an option to appoint two members of Cap Re's board and raises its bid price; a day later XL raises its offer and says it will pay a $25 million termination fee and set up a $50 million stand-by commitment for Cap Re if the XL bid is successful. Both sides raise their offers again before month's end and a judge strikes down an application from ACE to enforce its original agreement with Cap Re.

Oct 7: US insurer Mutual Insurance Corporation Of America (MICOA) is to move its operations to Bermuda. MICOA believes it is one of the first medical professional liability companies in the United States to offer rent-a-captive services, which the company is offering via a newly formed subsidiary, MICOA Consulting.

Oct 11: Founder Nicholas Brown resigns from his position as managing director and head of London broking operations of Stirling Cooke Brown Holdings to pursue new business ventures.

Oct 25: IPC Holdings reports net income of $7.8 million for the quarter ended 30 September 1999, down 30 % compared to the $11.1 million reported for the third quarter of 1998.

Nov 10: XL pulls out of the race for Cap Re. ACE completes its acquisition of Cap Re three months later.

Nov 19: OPL forms a subsidiary, Overseas Partners Cat (OpCat), to underwrite worldwide property catastrophe reinsurance programmes. OpCat enters into an agreement with RenaissanceRe Holdings for the provision of underwriting services. OPCat is capitalised with $400 million and intends to bring “disciplined capacity and excellent security to the property cat reinsurance marketplace”.

Dec 17: The BF&M case ends with an out-of-court settlement. The settlement, on the basis of no wrong-doing by any party, provides for the payment by BF&M of US$35 million, in conjunction with additional payments by the other defendants. Legal costs for all parties are expected to exceed $15 million.


Jan 5: AM Best assigns a financial strength rating of A- (Excellent) to Max Re, a Bermuda reinsurance start-up led by former XL executive Bob Cooney. The rating follows the completion of an initial private offering by the insurer's parent, Maximus Capital Holdings, through which it raised $331 million of equity capital. The parent intends to raise additional equity capital. Max Re will focus on traditional, finite and specialty risk reinsurance of long tail liabilities that carry relatively predictable payout patterns, such as annuities, structured settlements, life insurance, disability income, workers' compensation and medical malpractice insurance.

Jan 18: PartnerRe is the first to provide information on claims from two intense windstorms which caused severe damage to highly industrialised and populated areas in western Europe in December 1999. On December 25 and 26, the first of the two storms, Lothar, caused extensive damage in France, Switzerland and Germany. Maximum wind speeds were measured at 162 mph. During the night of December 27, the second storm, Martin, struck central and southern France with maximum winds of 118 mph. The two storms have been termed the most severe windstorm catastrophe in France in 400 years. Combined insured market losses from Lothar and Martin will exceed $6 billion.

Feb 10: In common with most other Bermuda reinsurers, XL Capital releases 1999 figures which show that improvements due to hardening in the market have been offset by the cost of the winter storms. In XL's case, fourth quarter operating profit of $157.3 million is reduced to $44.4 million after accounting for storm losses. Others in the Bermuda market do not fare as well and many record losses for the fourth quarter that severely reduce, or completely eradicate, the profits of the first three quarters.

Feb 28: PartnerRe expands its agricultural reinsurance service capabilities worldwide through the addition of a professional team of 10 from Agricultural Risk Management (ARM), a subsidiary of Aon Risk Services. PartnerRe says it is responding to growing demand by providing specialist risk management and reinsurance services in agriculture. The new staff are led by former managing director and founder of ARM, William Dick, and include specialists located in the UK, US, Argentina, Chile and New Zealand.

Mar 2: XL Capital restructures its operations by forming a new subsidiary holding company to oversee the expansion of its insurance businesses outside the Americas and Bermuda. The new company encompasses the operations of several existing XL subsidiaries, including XL Europe, Brockbank Underwriting and Brockbank Insurance Services. Brian O'Hara, president and ceo of XL, chairs the board of directors of the new company; the chairman of its executive management board is Mark Brockbank, currently ceo of The Brockbank Group, who is appointed ceo of the new company.

Mar 7: Four US insurers petition Congress for the repeal of what they describe as “the Bermuda tax loophole”. Chubb, Hartford, Kemper and Liberty Mutual, who all have Bermuda subsidiary operations, call for an end to relocation offshore by the likes of PXRE and Everest and for a tax on the worldwide income of companies such as ACE and XL who have subsidiary operations in the US. Within two months, representatives Johnson and Neal introduce legislation aimed specifically at Bermuda insurers. ACE and XL both cry foul at this protectionist move and Bermuda Premier Jennifer Smith reveals that her government has been working to have the legislation struck down. Nevertheless, the legislation, which Congress is expected to broaden to include all offshore jurisdictions, appears likely to be passed before the end of 2000, heralding a new era of global protectionism. The Bermuda-US tax treaty will require significant amendment if the proposed legislation is enacted.

Mar 8: Lehman Re, the Bermuda reinsurance subsidiary of Lehman Brothers Holdings, writes its first business, a $150 million securitisation of California earthquake risk. The 22-month transaction transfers to investors the risk associated with certain levels of insurance industry losses in California from earthquakes and resulting fires. Securities were offered to investors by a special-purpose Cayman Islands company, Seismic, which in turn entered into a swap agreement with Lehman Re.

Mar 15: Tokio Millennium Re (TMR) is formed, the first Japanese reinsurer in Bermuda. A Class 3 company, TMR is part of a strategy by Tokio Marine and Fire Insurance, the world's largest non-life company, to diversify its exposure to earthquake and other risks. Capitalised at $125 million, TMR quickly arranges a $200 million risk swap deal with State Farm Insurance on earthquake cover written by both companies.

Mar 20: Duff & Phelps Credit Rating Co. (DCR) reaffirms its ‘A+ claims paying ability rating on Arrow Reinsurance Company. Arrow Re's objective is to facilitate insurance-related risk securitisations and to provide reinsurers with access to capital markets. The company employs a ‘matched book' strategy, where it first accepts and then hedges different forms of risks via reinsurance contracts or swaps and securitisations, and earns a spread based on the risk it retains.

Apr 7: ACE completes the financing structure for its acquisition of the property and casualty operations of CIGNA with a $300 million public offering, which completes the replacement of the interim financing related to the July 1999 acquisition.

Apr 13: Sovereign Risk Insurance, the Bermuda-based political risk insurance joint venture between ACE and XL Capital, offers a new political risk insurance product tailored specifically for cross border capital markets transactions. The new product covers bond offerings by emerging market issuers against currency inconvertibility and currency non-transfer risks in the country of the issuer. Sovereign has per-project limits of $125 million and is able to provide time limits out to 15 years, making this coverage particularly well suited for cross border 144A bond offerings and private placement.

Apr 24: Everest Re Group reports an 11.8 % increase in operating income and a 29.3 % improvement in net income for 2000, following its relocation to Bermuda.

Apr 26: The OECD shelves its planned report on harmful tax jurisdictions, due in June, and replaces it with a proposed report on “uncooperative tax havens”, due out in July 2001. The Bermuda government had previously indicated it would not appear in the original report. Bermuda has co-operated fully with the OECD and so is unlikely to appear on next year's list.

May 3: ACE Bermuda Insurance and Willis launch a strategic partnership based on the establishment of an ACE-owned protected cell company (PCC) in Guernsey. ACE PCC will write a wide range of alternative risk financing products which, when combined with the security benefits provided by PCCs, is expected to create substantial new capacity for non-traditional exposures. ACE PCC is owned 100% by ACE Bermuda. It will operate under a partnership with Willis, who will provide management and marketing input.

May 15: SCOR Group announces it is to pay $155 million for PartnerRe Life. The total consideration for the transaction includes the assumption of $10 million of liabilities. The sale includes PartnerRe Life and its subsidiaries Republic Vanguard Life Insurance, Investors Insurance and Investors Marketing Group.

May 25: The Financial Stability Forum on money-laundering releases a report, grouping jurisdictions considered to have significant financial offshore activities into three categories, reflecting their perceived quality of supervision and perceived degree of co-operation. Bermuda is placed in Group II, jurisdictions generally perceived as having legal infrastructures and supervisory practices devoted to supervision and co-operation relative to the size of their financial activities.

May 31: Bermuda's Annuity and Life Re (Holdings) purchases Capitol Bankers Life Insurance Company from Life Reassurance of America for $13.2 million. Capitol Bankers will offer facultative and supportive reinsurance services to US life insurers.

June 2: Most members of the US Congress do not support imposing additional taxes on US based insurance companies operating in Bermuda or other foreign locations, says an aide working with the House Ways and Means Committee. The purpose of proposed legislation is to close a so-called “tax loophole”, which its backers say allows Bermuda based insurance companies doing business in the US to avoid paying income tax. The proposed legislation is sponsored by Representatives Nancy Johnson, (Republican of Connecticut), Richard Neal (Democrat of Massachusetts) and Robert Matsui, (Democrat of California).

June 9: ACE Bermuda forms a new division, ACE Financial Solutions International (AFSI), to provide non-traditional insurance and finance-related solutions to international companies facing complex risk management issues. AFSI will incorporate the former tailored risk solutions operations of ACE Bermuda.

June 19: Bermuda is one of six jurisdictions to be exempted by OECD from its list of “harmful tax regimes”. The government of Bermuda has given guarantees not to introduce any legislation unacceptable to the OECD and to correct existing legal anomalies.

June 26: Credit Suisse First Boston sets up its first captive insurer, Boston Re, in Bermuda. The captive is managed by Willis Management (Bermuda). Boston Re will underwrite loans and security offerings from borrowers and will place up to $2 billion of treaty reinsurance.

July 3: Overseas Partners (OPL) signs a definitive agreement to acquire Reliance Reinsurance Company, including 50 professionals and staff who formerly managed Reliance Reinsurance, a subsidiary. OPL does not indicate how much it will pay for Reliance, but says the transaction excludes the assumption of any liabilities for existing business written in Reliance Re. The Hartford Financial Services Group and Kemper Insurance Companies have made similar announcements about their intentions to buy the specialty lines and large casualty risk businesses of Reliance, respectively.

July 21: XL Capital becomes a strategic investor in Agora Capital Management, an investment management firm with headquarters in Bermuda. XL acquires a minority equity stake in Agora for an undisclosed purchase price. Agora maintains offices in Geneva and is soon to open an office in London. Formed in 1998 by former Goldman Sachs Commodities Corporation executives, Agora provides customised, high-end services to institutional investors through a portfolio approach that blends multiple investment strategies with a strong focus on risk management. Agora currently works with more than 30 different alternative investment managers.

  • Roger Crombie is the Bermuda correspondent of Global Reinsurance. He is based in Bermuda and contributes regularly to local and international business publications. He is also a fellow of the Institute of Chartered Accountants of England and Wales.