BMA: long-term insurers’ assets increased 15.6% in 2023
Total assets in Bermuda’s long-term insurance sector grew 15.6 per cent in 2023, the Bermuda Monetary Authority has reported.
At year-end, insurers held total assets of $1.275 trillion, up by $173.8 billion.
Total liabilities were $1.140 trillion, up from $984 billion in the prior year, an increase of 15.8 per cent.
The island’s financial services regulator included the figures in the 31-page Bermuda Long-Term Insurance Market Analysis and Stress Testing Report.
Operationally, firms reported net income of $10.4 billion in 2023, down from $11 billion in the prior year.
The sector recorded $169.8 billion of gross written premiums, up 24 per cent over the prior year, and net written premiums of $125.7 billion, up 27.7 per cent.
Capital and surplus increased 15.6 per cent to $135 billion, up from $116.8 billion year-on-year.
Return on assets fell to 0.8 per cent from 1 per cent in 2022.
Return on equity fell to 7.7 per cent from 9.5 per cent in the prior year, while return on investment increased to 3.9 per cent from near zero in 2022.
Bermuda’s long-term sector is comprised of direct and indirect insurers and reinsurers underwriting risks ranging from mortality, longevity, critical illness, disability and group life, among other products, predominantly on a portfolio or cohort basis.
The BMA said the growth of this sector is driven by demand from direct insurers or institutions using reinsurance for exposure, risk, balance sheet volatility and capital management in light of the challenging economic environment and an ageing population with improved mortality.
As of year-end 2023, the BMA said, approximately two thirds of the long-term sector reserves are allocated to longevity and financial business, and the remaining business is related to mortality and critical illness.
The United States accounted for more than 70 per cent of Bermuda’s long-term insurers’ reserves, followed by Asia.
European business, including Britain, continues to represent less than 5 per cent of the allocated reserves.
The largest asset allocation for the sector was in corporate bonds, representing 55.7 per cent of total investments at year-end 2023.
Fixed-income securities with an investment-grade rating comprised more than 75 per cent of total investments at the 2023 year-end and for the four prior years presented.
Securities with sub-investment grade ratings were less than 3.1 per cent of total investments, and less than 1.2 per cent of total investments were unrated. Additionally, 17.3 per cent of total investments were in the non-fixed-income class.
The BMA wrote: “Overall, the Bermuda long-term sector shifted investments to higher-quality assets in 2023.”
The BMA said the sector had a robust solvency position with a median solvency ratio of 259 per cent at year-end 2023.
On an individual basis, firms were well positioned capital-wise to absorb the impacts of the prescribed adverse financial market stress scenarios. Overall, the sector demonstrated resilience to the stress tests.
The BMA said the enhanced liquidity stress test indicated Bermuda long-term insurers maintain a substantial portion of their assets in liquid forms resulting in high liquidity coverage ratios under normal and distressed circumstances that are against the BMA’s minimum liquidity coverage ratio.
However, the BMA said it identified several firms that face liquidity shortages under the prescribed stress scenarios and is undertaking engagement with these firms to ensure adequate risk mitigation measures are in place.
• For the full report, see Related Media
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