ROUNDTABLE: LONG-TERM REINSURANCE
Q1: TELL US ABOUT YOUR ORGANISATIONS
“Our strategy is to build an insurance and reinsurance group focused on Europe.”
Amy Ponnampalam: Athora Life Re is a reinsurance carrier within the Athora Group. Athora was spun off from Athene in 2018. We have a similar business model and strategy to Athene but with a focus on traditional guaranteed products in the European market.
Overall, our strategy is to build an insurance and reinsurance group focused on Europe through acquisitions, portfolio transfers and reinsurance.
Since our inception in 2018, we have acquired insurance operations in Ireland, Belgium and the Netherlands; we also have insurance operations in Germany which we inherited when we spun off from Athene. Our dedicated M&A function is based in London
Athora’s three primary growth channels are reinsurance, M&A, and organic new business—two of the companies that we have acquired (in Belgium and the Netherlands) are open to new business.
To focus is more on reinsurance and reinsurance transactions, which is the part I’m most involved in, we are essentially offering a full quota share reinsurance solution, taking on asset risk, biometric risk and behaviour risk, and our target market is continental Europe and Ireland.
Many people will be aware of the challenges facing European insurers because of the sustained low-interest rate environment there, especially as traditional guaranteed products have typically had very high guarantees compared to current interest rates.
As a result, consolidation in the insurance sector in continental Europe is no new thing—we have been seeing it for years. There is a market there for us, and what we look to do is offer a range of solutions to solve the problems faced by these insurers.
Insurers that are wanting exit portfolios of risk, can either sell or transfer the portfolio, or use a reinsurance solution to transfer the risk. And that’s essentially where we come in.
“We are globally active: our biggest markets are the UK and Ireland.”
David Howell: We are the closest to what you might call a traditional old-school reinsurer on this call. Pacific Life acquired Scottish Re’s UK-based international business in 2008 when Scottish Re’s US business got into trouble.
We have been Pacific Life Re for the last 12 years. Pacific Life is a US mutual insurer, and we effectively provide two sources of diversification for them.
First, we are globally active: our biggest markets are the UK and Ireland, but we do quite a bit in Australia and parts of Asia as well. We also participate in the retrocession market in North America.
Second, we are focused on insurance risk—mortality, longevity and morbidity—which is very different from our parent’s risk profile.
For us, Bermuda is the best jurisdiction as we wanted an environment that was focused on reinsurance instead of being an insurance regulator which also oversees some reinsurance.
There is a lot of talk about Solvency II equivalence but having US reciprocal recognition is helpful as well—and we will see more business coming from our US carrier into the reinsurance company on Bermuda because of that.
Our lines of business are primarily traditional protection lines—term insurance, critical illness, and income protection in some markets—combined with UK longevity originating from both individual annuities and pensioner risk transfer transactions.
We do look at longevity in other markets, but so far our activity has been focused on the UK in that line.
Unlike most others on the call, we have not historically accumulated assets which is due to our desire to provide diversification to Pacific Life’s US operations. However, as we have now created a solid base of diversification, we are looking to take on more asset-intensive business within Pacific Life Re.
“We focused attention on developing customised reinsurance solutions.”
Patrick Kelleher: Somerset was established in 2014, following a period of time where a couple of trends became apparent, including the consolidation of the life reinsurance market—particularly in the US, where a large group of companies merged to make a group of around five that controlled about 80 or 90 percent of the reinsurance market.
Since the financial crisis, there has been an extended period of low interest rates and shifting strategies, with retail companies focusing on retirement income markets and trying to come up with better solutions for their customers.
These developments have made reinsurance capacity, and asset-intensive insurance and retirement income products more important.
We formed the company with a team of experts experienced in the traditional insurance and reinsurance markets, and we focused attention on developing customised reinsurance solutions for life insurance companies with the emphasis on more asset-intensive life insurance and annuity products.
We’ve seen a good response to these product offerings. We have completed portfolio transfers and we now offer recurring reinsurance agreements to provide support for a new business—I think that’s called flow reinsurance these days.
The idea is to build a well-diversified portfolio along the lines of the traditional reinsurers but focused on a different segment of the market.
Over time, we aim to create a financial security system that can grow, maybe add new geographies, and create more diversification on both sides of the balance sheet, which in turn creates a secure financial security system.
We’re in the earlier stages of development. We have a little over half a billion of capital, and we are just passing three billion of assets under management, but we have developed a well-diversified portfolio with a number of very well established insurers.
“The Island is a preferable jurisdiction for our international clients.”
Martin Laframboise: Sun Life Financial International (SLFI) pioneered the offshore concept for life insurance in global high net worth space in the 1990s, with trust ownership and custodianship anchoring the life insurance contract in Bermuda.
Our company focuses on ‘client for life’ and it’s integrated into our business model.
High net worth clients need innovative, offshore life insurance solutions to help them achieve their wealth preservation and accumulation goals.
They look to Bermuda for a stable, internationally recognised political and regulatory environment to safekeep their assets. Combined with Sun Life’s financial strength and long history, the Island is a preferable jurisdiction for our international clients.
We serve high net worth clients worldwide but specifically in Asia. Through our Sun Life International Hubs strategy, we have recently implemented a diversified system whereby Hong Kong serves the Hong Kong and North East Asia market, Bermuda serves the offshore clients globally, and our newly established Singapore branch serves the local market in Singapore and most of South East Asia.
Our Bermuda office offers products and services suitable for private bank clients, where local carriers are not necessarily able to provide them.
We provide innovative offshore solutions in more than 70 countries for clients around the world and our very large individual life insurance cover means that we are able to offer a leading capacity in order to respond to their demand.
“Our business is now focused on markets in Europe, Canada and potentially others.”
Thomas Olunloyo: We have been in Bermuda since 2014. We are the international pension risk transfer (PRT) writing arm of the UK-based L&G group, the leading writer of PRT in that market—although it also has aspirations to write PRT business outside the UK.
We have a direct writing vehicle in the UK and US, but we see the PRT opportunities outside those two markets as being primarily through reinsurance.
Our business is now focused on markets in Europe, Canada and potentially others in the future. We have clients in all those territories in addition to taking on a large quota share of all L&G UK PRT business, as well as reinsuring mortality risk from our US affiliates.
“Our goal is to build a diversified pool of liabilities in the Bermuda marketplace.”
James Bracken: We were established in 2018. Effectively, we are a composite reinsurer, so unlike everyone else here, we do P&C reinsurance as well as life and annuity reinsurance.
We were formed when AIG spun out around $35 billion of liabilities from its balance sheet to us and we basically created the infrastructure to support that business. After that, we were purchased by the Carlyle Group and a number of other investors.
Earlier this year we became a standalone company that is distinct and separate from AIG. Our main aim is to do new block reinsurance business, predominantly in the US.
We target partnerships with insurers to develop solutions to take on their long dated reserves so they may free up capital, resources, and management attention thereby allowing them to focus on new and core product development and premium growth.
Ultimately, our goal is to build a diversified pool of liabilities in the Bermuda marketplace.
AIG looked at most jurisdictions to form a reinsurer for its legacy portfolio—which represents insurance reserves associated with discontinued lines of P&C and L&A insurance businesses—and Bermuda is one of few jurisdictions that allows for life and non-life reinsurance liabilities to be housed in a single entity.
Second, we felt that the Solvency II capital framework was attractive. Third, we liked the strength, reputation and capability of the regulator and, from a human resources perspective, there is a lot of very good talent on the Island to get business going.
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