A report from Bermuda’s financial regulator shows how the island’s captive insurance market, profitably wrote over $31 billion in gross premium in 2022.

The Bermuda Monetary Authority continues to see significant interest in companies wanting to establish new captives or increase their usage of existing captives.

In 2022, 18 new captives set up in Bermuda, in 2023 there were 16 newcomers and last year there were 17.

Profitability ratios showed that the Bermuda captive market, both collectively and at each class level, remained profitable, with the average combined ratio at 75 per cent, and the average loss ratio at 53 per cent.

Most of the risk assumed, originated in North America and Bermuda.

The leading industry sector of the parent company shifted from administrative and support services (22 per cent) in 2021 to energy, power and utilities (26 per cent) the next year. Of the new formations, 14 were classified as pure captives, writing only risks of the parent company and or affiliates.

“The future looks bright with many dynamic changes in the strategies used by Bermuda captives,” the BMA wrote. “Major themes that have emerged are sustainability, enhancing efficiencies and minimising loss experiences.”

The regulator said that while rates have levelled out for some captives, others continue to report significant changes.

“One especially active area in this respect has been in property programmes, which have had continued capacity concerns that have translated into greater contention,” the organisation added. “Exclusions in the parent companies’ traditional insurance policies have also required adjustments to their captives’ policies to fill the gaps.”

The BMA pledged to continue working diligently to gain in-depth understanding of the proposed business and the capital available to facilitate efficient responses.

The demographics of leading captive parent industries has remained constant. Financial institutions are leading with 14 per cent of the market, followed by automotive, manufacturing and retail sectors with 12 per cent, and shipping, transport and storage sectors also with 12 per cent.

In 2022, casualty longtail coverage accounted for 34 per cent of all businesses written, a slight increase over the 32 per cent written in 2021, while 66 per cent of all business written was short-tail coverage.

The top two lines in short-tail coverage business in 2022 were property and casualty catastrophe at 45 per cent, and warranty and residential value at 18 per cent. The top two lines in longtail coverage were general liability at 30 per cent, and workers’ compensation at 23 per cent.

The organisation noted loss and loss expense provisions combined with unearned premiums totally $44 billion (30 per cent of all liabilities), capital and surplus of over $74 billion and minimal balances due (4 per cent of liabilities).

“Bermuda captives have collectively positioned themselves well to ensure their ability to make claim payments as losses occur,” the BMA wrote.