Michelle Moloney, chief risk officer at Pacific Life Reinsurance, last night welcomed proposed enhancements to the regulatory regime for life reinsurance, but joked that she had to “think a little more” on fee amendments.

The BMA released a consultation paper on the enhancements last month, addressing changes it has seen in the life insurance industry in business models and the sector as a whole.

The enhancements will touch on areas such as the capital calculation and the risk margin calculation.

Speaking in the Updates to the Life Sector panel at the Bermuda Risk Summit 2023, Ms Moloney said the enhancements were a benefit to Bermuda.

“Maintaining a strong regulatory regime is essential to all of us,” Ms Moloney said. “In this industry, we are making a promise that we may not completely fulfil for 50 years, or even longer, so we have to make sure we are here for the long haul.”

Martini Maringi, of the BMA, said the life insurance industry has gone through a significant transformation globally. He said these changes were driven not so much by the sector itself but by much broader factors such as investment strategy.

“Asset allocations have evolved,” he said. “They are not where they used to be. There has been greater allocation to more complex investments, with greater allocation to structured assets.”

He pointed to a convergence between life insurance expertise and asset management expertise. He said capital talent has dealt with increased demand over the past decade by evolving the industry.

“This situation is not unique to Bermuda,” he said. “Supervisors worldwide are having to review their frameworks and make enhancements.”

Mark Yu, of New England Asset Management, welcomed “a more robust and well-thought-out framework”.

“This is a timely framework to address interest-rate impact to life annuity,” Mr Yu said. “I am hopeful and confident this new framework will help us address the evolving life industry.”

Mr Maringi said: “Our thinking and mindset looks through the reinsurance layers and into the policy holders,”

He said it was important to remember that the underlying policy holder is a real person.

“This is not just reinsurance, but real life, and real policy holders needing the solutions that are being provided here,” Mr Maringi said. “In our supervisory process, and in our design and policymaking, we take a lot of time thinking about this and about the consumer and the policy holder.”

He said he and his BMA colleagues feel the “enormous weight” of that responsibility.

Curtis Dickinson, the former finance minister and executive adviser to the Bermuda International Long-Term Insurers and Reinsurers, moderated the panel.

He said: “We have an ageing population worldwide, and there is a corresponding worldwide need for sustainable income solutions for retirees.”

He said having a good regulatory regime and strong industry in place ultimately benefited policy holders.

“On the challenge side, it is cost,” Ms Moloney said. “If you look back ten to 15 years, most pensions were underfunded. Since then we have had historically low interest rates up until 12 months ago. Traditionally, the solution would have been corporate bonds but we know that would not have helped in a low interest-rate environment.”

She said longevity improvement has made the problem deeper and longer.

She said the BMA’s proposed scenario-based approach allowed companies to access broader asset classes that were both a better fit and more aligned for the duration of a liability.

“By being able to access broader asset classes, not only do you improve your position because of diversification in your assets, but you have better ALM, and your balance sheet is more resilient,” she said.

She said Bermuda is ripe for bringing in new capital.

“The P&C industry indicated this 20 or 30 years ago in the amount of capital they were able to bring in,” she said. “The life insurance industry is just demonstrating it more recently.”

EY associate partner James Claxton was also a panellist.

The Bermuda Risk Summit 2023 closed on Wednesday at the Hamilton Princess & Beach Club, after hosting 400 people, half of them from overseas. The event was presented by the Bermuda Business Development Agency.