BILTIR: mature beyond its years

Bermuda International Long Term Insurers and Reinsurers (BILTIR) is the trade association that represents the interests of Bermuda’s life re/insurance industry. In the 10 years since it was founded it has become an essential part of the fabric of the Island’s broader re/insurance community, well known and respected beyond its shores.

It is the mouthpiece for the life insurance industry on crucial matters such as tax and regulation. It also regularly speaks out to champion the efforts of its members to contribute to the social advancement of the Island via charitable initiatives and educational programmes.

BILTIR’s birth came about as the solution to a very specific problem. The EU had decreed that companies doing business in the EU needed to achieve Solvency II equivalence, a problem for re/insurers in Bermuda which did a significant amount of business in Europe but operated under very different regulations. For a time, the issue appeared to pose an existential threat to the industry.

The Bermuda Monetary Authority (BMA) understood the scale of the challenge for the re/insurance community. It hosted a series of meetings designed to gather feedback on the major regime transformations needed to achieve Solvency II equivalence. At that time, one of the major hurdles to securing equivalence was the setting of the liability discount rate, which determines the amount of reserves a company needs to hold on its economic balance sheet. In the EU, Solvency II finally adopted the Omnibus II directive to determine the liability discount rate and the matching adjustment.

Sylvia Oliveira, BILTIR chair and chief executive officer of Wilton Re Bermuda, recalls: “Bermuda’s property and casualty (P&C) sector had been working with the BMA on achieving Solvency II equivalence for several years, but the long term industry was brought into the conversation very late in the game.

“The BMA had to mobilise quickly and, at the time, it seemed nearly impossible to find a solution that would not drive business away.”

Richard May, the BMA’s assistant director for the long term sector, coordinated efforts to solicit feedback from the Bermuda life industry, initially as part of a working group. As a result of this process, Bermuda adopted a robust capital framework and an economic balance sheet using interest rate scenario shocks to ensure sufficient policyholder protection in the case of future interest rate shifts.

This means that Bermuda life companies must calculate reserves under eight different interest rate scenarios and hold the highest calculated amount. It also secured the crucial prize of equivalence for BMA-regulated re/insurance entities.

Speaking with one voice

The episode marked the birth of BILTIR, which was formally incorporated on June 9, 2011. The working group had revealed the extent to which the industry would benefit from a trade association, which could serve as a conduit with the regulator. The BMA encouraged the creation of a trade association, recognising that it would be more efficient to have a single point of contact to engage with on behalf of the whole sector.

“It was amazing how much work went into preparing the industry for Solvency II, which showed how important it was for the carriers to work together,” says Chip Gillis, the former chief executive officer of Athene Life Re and BILTIR’s first leader and de facto chair—although it is a title he never officially held.

“The P&C industry already had the Association of Bermuda Insurers and Reinsurers (ABIR). The P&C sector had different concerns and sensitivities versus life and annuity reinsurance companies, and it was clear we needed our own version of ABIR to address the issues that were of concern to us,” he recalls.

Gillis was deeply involved in BILTIR’s formation, working in close partnership with the BMA, and he is generous and effusive in his praise for the leadership it showed in helping the industry obtain Solvency II equivalence for Bermuda.

“Jeremy Cox and Craig Swan had the foresight to assign Richard May to hosted meetings at the Fairmont where they could ask questions of industry participants and we could ask questions of the regulator,” Gillis recalls. “It was clear that everyone had the same interest: making sure Bermuda had a strong regulatory framework and environment for the life sector.”

It took around 12 months to establish BILTIR, from the idea’s conception to the trade association’s being up and running, with all its by-laws and committees in place. At launch BILTIR had five members: Athene Life Re, Transamerica Life Re, Aurigen Re, Front Street Re, and Wilton Re Bermuda. The founding board members were Gillis, Craig Fowler, Will Rinehimer, Chris Stroup, the late Mike Smith and Casper Young, and there were four committees, including ones for tax, regulatory and legal, capital, and financial reporting.

At the time, assets under management (AUM) in the long term sector were $157 billion. In 2019, AUM in the sector had grown to $544 billion, and the BMA estimates the figure to be around $607 billion for 2020. BILTIR member companies manage the majority of these assets.

An early example of the good-natured and collaborative spirit that was to characterise BILTIR’s approach to decision-making was what to name the new organisation. Gillis remembers a big debate about what the trade association should be called, and credits Smith of Wilton Re with eventually coining the name by which it is now known.

In keeping with its early task of helping to formulate a strategy for achieving Solvency II compliance, BILTIR’s earliest preoccupations principally concerned tax and regulatory matters. It served as the industry’s contact point with the Ministry of Finance and the BMA, providing industry feedback to the government, as well as channelling information back the other way, explaining government thinking to its members.

As BILTIR’s remit expanded, so did its influence in Bermuda’s long term community. In terms of its membership, BILTIR experienced relatively slow and steady growth for the first five years, recalls Oliveira, with things picking up over time. “In the last four or five years there has been a large uptick in our membership,” she says.

As founding chair, Gillis oversaw BILTIR’s earliest initiatives, as distinct companies that were at least nominally competitors learned to work together.

“A trade association creates an interesting dynamic for an industry, where competitors are in a position to collaborate,” he says. “As regulated companies, we have a common goal to protect the integrity of Bermuda and have a voice in sharing with the BMA the developing global needs of re/insurers.”

Oliveira plays down the sense of competition between life re/insurers in Bermuda, however. “The association has never had a problem with competitive clashes among our members,” she says. “The industry is quite unique in that we cover very different products, different risks, in different markets, although there is some overlap.

“We have yet to encounter a topic on which our members have had wildly opposing views.”

More to life than tax and regulation

Over time the scope of BILTIR’s activities has expanded beyond the issues of tax and regulation. The re/insurance industry in Bermuda as a whole is acutely aware of the benefits of harmonious relations between business and the community. It understands how it benefits from a steady supply of qualified and motivated employees, and from improving the quality of life for Bermudians generally.

To these ends, BILTIR it is clearly proud of its philanthropic work, seeing the promotion of social cohesion in Bermuda as a key part of its current role.

BILTIR organises Lunch and Learn meetings to raise the profile of its work in the community, and has helped members organise work permits, which can be a challenge for those going through the process for the first time. Having identified the need to develop local talent as a top priority for the industry, BILTIR has also been proactive in encouraging members to offer internships.

BILTIR is particularly vocal about the work it has done with schools in Bermuda to encourage students to think about career opportunities in the sector. It has run a 12-week maths tutorial programme with CedarBridge Academy to promote the skills needed in the sector.

Since 2016 it has offered the BILTIR Education Award to selected students at CedarBridge to finance their further education at overseas colleges and universities. This is arranged as part of the Association of Bermuda International Companies (ABIC) Educational Awards Programme, which launched in 1977 and has helped more than 600 Bermudian students to pursue further education abroad.

BILTIR’s charitable and educational work supplements the considerable efforts of its members individually. According to BILTIR, its members supported more than 50 charitable initiatives in 2020, making donations of over $4 million to a range of projects, including hospitals and COVID-19 relief efforts, religious and family support groups, and donations to schools. Given that many Bermuda class C re/insurers—or life re/insurers—also have P&C divisions that operate as distinct legal entities that have their own philanthropic programmes, the re/insurance community as a whole is generous in its support of the Bermuda community.

While the industry is rightfully proud of the investments BILTIR and its members have made in Bermuda itself, the real measure of its success remains the victories it has won in steering the tax and regulatory environment in ways that have ensured Bermuda’s success as a place to do business.

Over the last 10 years Bermuda has endured criticism about its tax fairness from its larger neighbours, in the form of EU’s tax haven blacklist to the east and the US Base Erosion and Anti-Abuse Tax to the west. BILTIR has played a key role in navigating the Island through these and other challenges.

Oliveira says: “The work BILTIR did around Solvency II stands out as a huge milestone. The BMA was able to meet the requirement for an economic balance sheet by implementing an interest rate scenario shock solution proposed by BILTIR. Equivalence was achieved without having to be equal to Europe’s matching adjustment approach.”

The approach it took is similar to shock approaches used in the US and Canada, Oliveira notes. “Geographically, and in terms of regulation, Bermuda is very much in between North America and Europe, and open for business with both continents,” she adds. BILTIR is under no illusions about the scale of the challenges it faces going forward. Some of these challenges will look similar to those that have come before: regulation is always changing, and the job of finding a balance that keeps Bermuda aligned, while maintaining its competitive advantage, is never done.

Other challenges may look quite different. “Looking forward I think BILTIR will have big changes to contend with in terms of technology, with things such as artificial intelligence and machine learning, and how the industry adjusts to that,” says Gillis.

“BILTIR members all have great databases and access to data, we just have to make sure we make the best use of it. Bermuda has always been a centre of innovation, we have the best service providers around to advise us, so we are well positioned to meet this challenge.”

Gillis highlights the increasing risk of a return of inflation in coming years, a beast that has remained relatively muted since BILTIR’s inception, especially in terms of the impact it will have on the pensioners many of its members serve. “We will have to manage and mitigate that risk for policyholders,” he says. “In that scenario we will see rates rise as well, which will create more opportunities for us.”

Oliveira agrees. “Low interest rates have provided opportunities for life re/insurers, as well as the obvious challenges on the investment side,” she says. “Investors have been seeking additional yield in alternative asset classes, and many have found rational economic treatment of this asset class in Bermuda.”

BILTIR’s ultimate goal is to establish Bermuda as the global centre for life, in the same way it already is for catastrophe risk on the P&C side.

“Bermuda is already number one in the world in a number of reinsurance categories,” says Gillis. “As the long term sector continues to grow, you will see Bermuda viewed as number one in life, annuity and retirement reinsurance products serving life companies and consumers in the US, UK, EU and Asian markets.”

Oliveira is also bullish about the prospects for the industry. “The life market is growing rapidly and that is set to continue,” she insists. “There are endless opportunities for innovation, in areas such as retirement benefits, for example. Solvency II equivalence is a big reason why this is possible, for the transactions from the UK and Europe.

“US National Association of Insurance Commissioners qualified and reciprocal jurisdictional status will likely lead to continued growth from US counterparties too.”

A birthday is always an opportunity for reflection as well as celebration, and both chairs are entitled to feel satisfied at the maturity of the organisation they have helped build.

“I am very proud of what BILTIR has grown into,” says Gillis. “The long term sector now manages more than more than $600 billion in assets, and I am sure Bermuda is now number one, globally, in a number of different categories for long term business, perhaps the biggest being retirement benefits.”

Bermuda International Long Term Insurers and Reinsurers biltir.bm

Image: Shutterstock.com/greenbutterfly

Share this page