Insurance coverage Bulletin – Spring 2021 | Conyers

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What a 12 months it has been since our final Insurance coverage Bulletin in March 2020. Though the complete influence of Covid-19 on the re/insurance coverage

business stays unclear, the necessity to retain capital to satisfy potential losses has contributed to a basic hardening of the market after 15 years of soppy market situations characterised by extra capability, low costs and extra relaxed coverage phrases.

The improved pricing and market outlook of latest months has attracted extra capital into the business to fund offers and progress alternatives. Conyers’ market- main insurance coverage authorized practices in Bermuda and Cayman have seen an excessive amount of exercise together with incorporation of recent insurers, word choices by current insurers and M&A exercise. We hope you discover this overview of latest developments within the insurance coverage and reinsurance sectors insightful and informative studying.

Bermuda market

The pandemic and ensuing financial fallout did little to dampen insurance coverage M&A exercise in 2020, and a sturdy 12 months for M&A exercise is predicted for 2021.

M&A offers within the Bermuda market prior to now twelve months embody White Mountains Insurance coverage Group Ltd’s acquisition of Ark Insurance coverage Holdings Ltd, Sirius Worldwide Insurance coverage Group’s mixture with ThirdPoint Reinsurance Ltd to create SiriusPoint Restricted, The Carlyle Group’s acquisition from AIG of a majority stake in Fortitude Group Holdings, Monument Re’s acquisition of GreyCastle Holdings Ltd., and Arch Capital Group Ltd.’s acquisition of Watford Holdings Ltd.

The historical past of Bermuda’s re/insurance coverage sector has proven {that a} laborious market sometimes ends in an inflow of capital to the jurisdiction and numerous start-ups. The hardening market of 2020/21 has proved no totally different. In response to PwC, an estimated US$12-15 billion {dollars} of recent capital flowed into the Bermuda market in 2020 each by way of funding in new entities and capital elevating by current gamers (over US$6.5 billion).

New insurance coverage registrations in Bermuda numbered 67 in 2020. The flurry of incorporations consists of basic enterprise reinsurers reminiscent of Conduit Reinsurance Restricted, Vantage Danger Ltd and a Bermuda department of Chaucer Insurance coverage Firm. New long-term reinsurers embody Ivy Re, Pacific Life Re and Dai-ichi Life Re.

Insurance coverage-linked securities have confirmed significantly enticing to traders as markets have been disrupted by Covid-19. Bermuda’s Particular Function Insurer regulatory framework and ease of itemizing on the Bermuda Inventory Alternate (BSX) make sure the jurisdiction stays a world chief in ILS. In 2020, 253 new ILS securities have been listed on the BSX, up from 155 in 2019, with a mixed nominal worth of US$15.77 billion. This represents a progress of 63% 12 months on 12 months. The entire variety of ILS listed securities on the BSX stood at 590 on the finish of 2020, with a mixed nominal worth of US$43 billion, representing over 90% of worldwide market cap excellent.

The disaster bond market ended 2020 significantly strongly. There has additionally been an uptick in curiosity in sidecars and the collateralised market. Bermuda now presents a Collateralised Insurer class that caters for extra advanced ILS buildings.

The life reinsurance market continues to be a progress space for the jurisdiction; regardless of this sector being hardest-hit by the pandemic, 9 new long-term firms registered in Bermuda in 2020. Lengthy-term insurance coverage and reinsurance property have risen to over US$300 billion, overtaking each business property & casualty and captive property.

Bermuda stays the world’s largest captive domicile with 680 energetic captive licences on its register on the finish of 2020, producing roughly US$40 billion in annual gross written premiums. Twelve new captives registered in 2020.

Cayman Islands market

The Cayman Islands insurance coverage and reinsurance business stays buoyant with progress in each captives and reinsurance and Conyers stays the main insurance coverage and reinsurance regulation agency within the jurisdiction.

Cayman continues to be the main jurisdiction for healthcare captives representing nearly one-third of all healthcare captives globally.

There are 775 licensed insurance coverage entities at the moment registered within the Cayman Islands and the variety of advanced group captive and sponsored platform buildings utilizing Segregated Portfolio Corporations (SPCs) is rising 12 months on 12 months with 21% of the whole class B, C and D insurance coverage firms in 2020 shaped as SPCs. Portfolio Insurance coverage Corporations (PICs) stay a helpful possibility for facilitating sure buildings significantly within the M&An area.

There stays important momentum on the rein- surance entrance with reinsurance firms repre- senting roughly 10% of the premiums for all the business and the numbers proceed to develop.

This progress is pushed by numerous insurance coverage firms redomiciling to Cayman from numerous jurisdictions, notably Barbados, a rise within the variety of Class B(iii) reinsurance licensees and numerous new Class D reinsurance firms, together with RBC Reinsurance Firm (Cayman) Restricted, CIBC Cayman Reinsurance Restricted, and F&G Cayman Re Ltd.

A Cayman reinsurance business group – Cayman Worldwide Reinsurance Corporations Affiliation (CIRCA) was just lately established, with founding members Aureum Re, Barents Re, CIBC Cayman Reinsurance Ltd., Greenlight Re, Knighthead Annuity & Life Assurance Firm, Nassau Re (Cayman) Ltd. and United Insurance coverage Firm, all of whom are main reinsurers. This is a vital step within the evolution and maturing of the reinsurance business within the Cayman Islands. Conyers suggested CIRCA on a pro-bono foundation to determine the organisation as a basis firm and supplied the affiliation with bespoke governing documentation and recommendation.

Authorized and Regulatory Updates

BERMUDA

Reporting cyber occasions and cyber danger administration

Bermuda’s Insurance coverage Act 1978 has been amended to mandate the reporting of fabric cyber occasions by insurers, insurance coverage managers and insurance coverage intermediaries.

The Insurance coverage Modification Act 2020, which grew to become operative on 5 August, comes into power at a time when there are rising numbers of profitable cyber assaults internationally and elevated vulnerability on account of distant working throughout the Covid-19 pandemic.

In October 2020, the Bermuda Financial Authority (BMA) issued a Code of Conduct for the insurance coverage sector on operational cyber danger administration. The Code got here into power on 1 January 2021 and registered insurance coverage firms are required to conform by 31 December 2021.

ISAC buildings for insurance coverage

Conyers suggested on the incorporation of the primary integrated segregated accounts firm (ISAC) and integrated segregated account (ISA) below Bermuda’s new Included Segregated Accounts Corporations Act 2019 (ISAC Act), which grew to become operative in January 2020. Each the ISAC and ISA have been registered as insurers. For extra info, click on right here.

In December 2020, the BMA issued Steering Notes with respect to the appliance of the ISAC Act, significantly in relation to insurance coverage and hybrid buildings. The Steering Notes state: “ISAC buildings current a singular capacity to have ISAs writing insurance coverage enterprise, funding fund enterprise and digital asset enterprise (upon acquiring approval from the Minister of Finance) all working inside the similar ISAC construction, for instance, a platform for the Insurance coverage- Linked Securities (ILS) market to have ISAs writing insurance coverage enterprise and ISAs conducting funding fund enterprise to function inside the similar ISAC construction.”

Internationally Lively Insurance coverage Group idea

In December 2020, as a part of its overview to replace Bermuda’s business insurance coverage regime, the BMA issued a session paper proposing the introduction of an Internationally Lively Insurance coverage Group (IAIG) idea to satisfy the rules and requirements of the Worldwide Affiliation of Insurance coverage Supervisors’ Widespread Framework.

IAIGs shall be topic to further regulatory necessities and disclosures that shall be transposed to Bermuda’s framework in the end. Amendments to the Insurance coverage Act 1978 shall be essential to make provision for insurance coverage teams to adjust to particular requirements after they meet minimal standards as an IAIG. These modifications are anticipated to enter into power on 30 June 2021. Study extra right here.

CAYMAN

The Cayman Islands Authorized Providers Act 2020

The Cayman Islands Authorized Providers Act 2020 was gazetted on 7 January 2021 and is anticipated to return into power later this 12 months.

The enactment of the LSA will help in defending and selling the fame of the Cayman Islands as a number one worldwide monetary centre, the place authorized, company, {and professional} companies are supplied in accordance with worldwide regulatory requirements, and in compliance with the jurisdiction’s home laws and worldwide obligations in relation to anti-money laundering and terrorist financing.

The LSA now offers a complete authorized framework that may make sure that Cayman Islands regulation is just practised by attorneys which are correctly certified, regulated and accountable. The LSA additionally seeks to strike a stability between a wide range of public coverage issues and regulatory targets involving the Cayman Islands authorized career. Study extra right here.

CIMA Regulatory Coverage – Licensing for Class B Insurers

The Cayman Islands Financial Authority (CIMA) coverage, issued in relation to the grant of licenses to Class B insurers pursuant to part 4 of the Insurance coverage Act, offers a definition of “associated enterprise” and a top level view of the process and evaluation standards for licensing Class B insurers (with explicit element in relation to suit and correct standards and administration, enterprise plans, funding and collateral preparations and compliance preparations). The coverage additionally specifies procedures for the reclassification of Class B licenses, offers further steering for segregated portfolio firms and units out info regarding file retention and redomiciled entities. Learn extra right here.

CIMA rule on cybersecurity

Entities regulated below the Insurance coverage Act have been required to implement cybersecurity measures in proportion to their cyber danger profile by 27 November 2020 following the discharge of the Rule and Assertion of Steering on Cybersecurity for Regulated Entities by the Cayman Islands Financial Authority on 27 Could 2020. Learn extra right here.

 

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