Bermuda Segregated Account Companies Drive Growth in Captive Insurance Sector 2023

In 2023, Bermuda's segregated account companies (SACs) expanded their footprint in the captive re/insurance sector, with over 2,000 active cells marking an 8.6% year-over-year increase according to the Bermuda Monetary Authority (BMA). This growth reflects a trend where risk owners are increasingly utilizing protected cell structures to manage complex global exposures efficiently. The BMA plans to update its regulatory guidance for SACs following industry consultations, aiming to provide clearer expectations as these structures cover multiple lines of business. SACs constitute around 15% of all captive registrations and generate about 40% of captive premiums in Bermuda, highlighting their significant role in the market. Property catastrophe risks dominate SAC business, which is predominantly reinsurance at 89%, catering to high-severity risks requiring ringfenced capital and customized participation. The broader Bermuda captive market wrote $31 billion in gross premiums in 2023, with 71% of underlying risks originating from North America and Bermuda, underscoring the jurisdiction's strong ties with regional buyers. New captive formations totaled sixteen, led by sponsors from construction, financial services, and technology sectors, largely consistent with the market's typical makeup. Bermuda’s captive market is characterized by robust capitalization, conservative investment strategies, and resilience through industry cycles and geopolitical changes. Short-tail property insurance remains the primary captive activity, representing 45% of premiums, while cyber insurance saw a 22% increase, and long-tail lines, including general liability and workers' compensation, made up 35%. The sector maintained profitability, evidenced by an average combined ratio of 79%, with balance sheets favoring liquid and high-quality assets. The captive market's performance occurs within a larger commercial insurance landscape that has grown premium volume and capital, with 2024 premiums exceeding $188 billion and equity rising to $178 billion. Stress testing indicates insurers maintain capital well above regulatory minimums. The BMA emphasizes Bermuda's global role in claims payment, having processed $1.1 trillion in gross claims from 2016 to 2024, reinforcing Bermuda’s position as a reliable platform for capital and risk transfer. Emerging trends include BMA's supervisory policy on stablecoins for captives and increasing adoption of artificial intelligence to improve operational efficiency and risk management, which also presents new regulatory challenges.