In early 2022, an article published by McKinsey prophesised long-term impetus in an insurance market category which in recent years has been (by any estimation), high growth – the acquisition and reinsurance of in-force, Life and Annuity books. Predicting an increase in interest in the segment by PE houses, the private equity industry already holds a lengthy historical association with life insurance, having sponsored a series of consolidators in the European and Asian markets, in addition to direct ownership of life businesses themselves. Attracted to strong risk-adjusted returns and cash, a number of well-known permanent capital vehicles have been registered, built and successfully operated offshore as fully regulated life companies, which have the ability to offset multi-jurisdictional longevity and mortality risks in the global Savings and Retirement system.

Over a five-year period, the list of these asset-intensive life reinsurance structures has steadily grown: To (arguably) the inaugural model in this sector (Athene) must now be added the names of Fortitude Re, Global Atlantic, Talcott Re, Oceanview and others which have successfully targeted books of US annuities. For those seeking complex European and UK liabilities, Monument and Athora Life Re have been joined by a growing list of new entrants. Last but not least, group funded reinsurance vehicles in Bermuda, such as Phoenix Re and L&G Re have been expanding their own operations on the island.

The past year has seen yet more new vehicles: Martello Re, Phoenix, Agam, and a number of new license applications which are currently under consideration. Bermuda - long considered a stable economic and political environment - holds a well-earned reputation for being a leading international financial centre. The trend is being driven by a number of factors, including the growing demand for higher-yielding alternative investments, a need for stable sources of capital in an uncertain economic environment, and a desire for asset managers to differentiate themselves from their competitors. Fundamentally, a well-capitalised global life insurance industry is nonetheless still not sufficiently well capitalised, to insure the ageing populations of Western society: New capital and risk diversification are the order of the time.

New markets are, of course, normally followed by new regulation, and in April the Bermudan Monetary Authority announced a consultation which will result in increased asset-sided protocols, processes, analysis and certification. Other changes on the horizon include extra measures around lapse risk, as global rates rises have caused policyholders to review their arrangements. Bermuda’s status as a Solvency 2 equivalent jurisdiction is matched by recognition across the federalised US NAIC regulation regime, so it’s perhaps no surprise to see that this marketplace is becoming more heavily institutionalised, and a number of senior industry figures foresee this evolutionary process as a catalyst for greater bilateral or consolidated activity between US, long-mortality carriers and Europeans with long-longevity profiles.

Mckinsey’s 2022 article has proven prescient…