As the global retirement protection gap swells to a staggering $51 trillion, Bermuda is emerging as a hub for the financial tools designed to close it. The gap results from a shortfall between what people have saved for retirement and what they actually need.

That is where Bermuda’s growing role in asset-intensive reinsurance comes in.

Last month, the Bermuda Monetary Authority released its Insights and Reflections on Asset-Intensive Reinsurance in Bermuda, highlighting how the island’s regulatory ecosystem is helping to support global retirement security.

According to the report, asset-intensive insurance, including annuities and pension risk transfers, have become a key part of the solution, but these products come with challenges of their own: complex asset-liability management and pressure from shareholders for steady returns.

AIR, meanwhile, allows reinsurers to assume the assets as well as liabilities of AII issuers, freeing up capital and creating space for growth. Bermuda has become a top destination for these deals. The need for AIR has been driven by an ageing population, longer lifespans and the shift away from traditional pensions.

“The Insights paper underscores the significant role of AIR in Bermuda’s thriving insurance and reinsurance market and Bermuda AIR in the global AII market,” according to Brad Adderley and Max Tetlow, partners at Appleby, in a recent insight piece.

AIR enables insurers to improve capital efficiency and manage longevity and investment risks more effectively, they wrote.

According to the BMA, 80 per cent of AIR deals in Bermuda are collateralised, reducing counterparty risk, and more than three quarters of assets held by long-term insurers are investment-grade or higher. The median liquidity ratio stands at 418 per cent even under extreme stress testing.

Bermuda’s regulator has been quick to adapt. The BMA applies risk-based solvency requirements and aligns with global regulatory standards.

“The BMA’s commitment to aligning with international standards like [Intensive Core Principle] 13 further strengthens Bermuda’s position as a leading AIR domicile, instilling confidence and stability in an increasingly volatile world,” Mr Adderley and Mr Tetlow noted.