A market discussion on the state of Bermuda’s life and annuity sector shows that assets under management have been barrelling towards $1 trillion.

A Bermuda lawyer closely allied with the industry believes it is time the sector was considered to be a key pillar of the economy, separate from the rest of the international insurance industry.

Brad Adderley, managing partner Bermuda of international law firm Appleby, raised this point during a Bermuda Finance 2022-2023, Life and Long-term Re/Insurance Roundtable, in association with Bermuda International Long-term Insurers and Reinsurers.

Writing for the Appleby website, Mr Adderley outlined how the discussion, held at the offices of Hannover Re (Bermuda), examined the current landscape.

And during the meeting, he said: “The life sector is a fascinating story. We talk about pillars of the economy; for me, this is a key pillar now.

“We always seem to lump insurance into one pillar but I like to break it down – life is a separate pillar. We had a number of new entrants last year, all with a hiring plan and all creating substance here.

“Those jobs will be going from two to maybe five to maybe 50 positions eventually. That is in addition to the established companies hiring. That is interesting. How many large P&C businesses were formed last year? Not many big ones.

“The life space is increasingly important to Bermuda. It has helped fill the gap. And what is really exciting is all the different companies are doing something different. They don’t all have the same business model.

“That means they have to talk to the BMA early about what they’re doing and how does it work within the BMA regulation.”

Market participants are optimistic about the future of the industry although there is concern that there is a shortage of insurance talent in the pipeline.

Mr Adderley said: “I’m concerned about talent. In every paper there are references to companies trying to keep talent, buying talent. It’s a worldwide issue.

“For me, it’s important to get people through the door, and give them a good experience. I think we will see additional vehicles raising additional capital, which means the need for more talent.

“If we can attract the talent, and keep them here, that is almost the crux of it all.

“It’s the circle of life. If we can get the right talent, if we can hire enough actuaries, the deals will flow and the sector will grow.”

Talent has been another important reason the island has been successful in attracting life business in the past.

Helen Souza, business development manager, Bermuda Business Development Agency noted: “Life is now definitely a very important pillar for Bermuda. We have partnered with Biltir on a new focus group for the sector to make sure we complement each other. The other big reason people are choosing Bermuda [as a domicile] is because of the expertise here, the access to capital and talent.”

The panel agreed that a key reason for Bermuda’s success and growing reputation in the industry was because of the responsiveness of the regulator.

James Claxton, associate partner at EY commented: “That’s why people are coming to Bermuda rather than other locations. We have a melting pot of specialties and responsiveness. It’s truly a global place to do business.”

Ahwaz Chagani, chief actuary at Oceanview Re said that his company’s strategic decision to be in Bermuda was related to competitive pressures in the direct business and the ability to differentiate by delivering better policyholder returns through reinsurance.

But the group noted that interest rate increases may slow down the rising amount of Bermuda-bound long-term companies.

Patience Maina, assistant director at Bermuda Monetary Authority, said that it has so far been a positive story.

She said: “Assets under management are more than $800 billion now, so close to a trillion.”

The growth was being driven by low interest rates and the arrival of a lot of pension risk transfer business.

But she also pointed to demographics: “There is a growing middle class, especially in Asia. We are seeing a fair bit of Asia business coming in because there is demand for life products and saving products in that region. Meanwhile, in the West, there is an ageing population seeking retirement solutions.”

But Mr Adderley returned to the issue of rising interest rates: “The increase in interest rates may adversely affect new entrants to the market. Perhaps things will slow down, as people put the brakes on, or the second half of the year might be the same.”

Mr Chagani added: “As a direct writer and reinsurer, we’re seeing the number of blocks being transferred has scaled back. Many of those blocks were written with high guaranteed returns. But now that rates are rapidly rising, companies are rethinking whether they need to offload those blocks.

“We have had a low interest rate environment for a very long time: it’s almost 13 to 14 years since the global financial crisis. During this time, a lot of those blocks already either took losses or were reinsured. So, there are fewer blocks out there and more reinsurers trying to get access to them.

“With rates rising, companies are contemplating whether they should cash out or continue keeping those assets. Equally, other insurers are thinking that those blocks are using too much capital or are no longer part of their core business so they want to exit for capital or strategic reasons.”