Bermuda insurance market adds 82 new firms in 2006
NEW YORK, Jan 24 (Reuters) - Bermuda, which has about 1700 insurers, added 82 new insurance firms in 2006, a 10 percent increase over last year, bolstered by growing demand for reinsurance.
"This is a clear indication of the continued confidence the market has in Bermuda as a leading global insurance and reinsurance center," Supervisor of Insurance Jeremy Cox, said in a bulletin on Wednesday.
Bermuda, a 21-square mile British territory about 700 miles off the U.S. seaboard, is home to an insurance market capitalized at more than $100 billion and including such major players as Ace Limited (ACE.N), XL Capital Ltd. (XL.N) and Renaissance Re Holdings Ltd. (RNR.N).
The market was given a boost in 2006 from a wave of new reinsurers forming to take advantage of a shortage in property- catastrophe coverage after costly storms in 2005, particularly Hurricane Katrina, wiped more than $65 billion from insurers' balance sheets.
Bermuda's rate of insurance incorporations reached a three- year high, according to the regulatory data.
Bermuda's insurance market, 50 years in the making, has attracted business because the island imposes no corporate income tax and companies can incorporate quicker than in some other jurisdictions.
As it has gained stature, it has also drawn large brokers, such as Marsh & McLellan Cos Inc. (MMC.N) and Aon Corp. AOC.N to open large offices, creating a one-stop shop for corporate insurance buyers.
Bermuda, already ranked as the fourth largest global insurance market after Germany, the United States and Switzerland, according to a 2005 industry survey from New York- based ratings firm Standard & Poor's.
The majority of 2006's incorporations were large, highly- capitalized reinsurers, the Bermuda bulletin said.
Several of the post-Katrina incorporations, including Validus Holdings Ltd. and Flagstone Reinsurance Holdings Ltd. filed for IPOs in recent months, another indicator Bermuda's insurance market is flourishing.
Reinsurers contract with insurers to assume some of the risk in policies already sold to individuals and corporations, effectively providing insurance for insurers.
Sidecars, a type of reinsurance vehicle that gained popularity last year, made up a significant number of the new incorporations.
Sidecars are set up to provide reinsurance to a sponsor company and funded by outside investors.
"On the commercial side, it was no surprise that the most significant trend of the year related to the formation of a number of sidecars, which entered the market to take advantage of capacity gaps in the property-catastrophe arena," said Shanna Lespere, deputy insurance regulator.
In 2006, hedge fund and private equity investors poured as much as $5 billion into sidecars, most of which were formed on Bermuda. "Even in the early part of 2007 we continue to see interest in this (sidecar) area," said Lespere.
The number of captive insurers -- generally formed by large corporations as a means of self-insurance -- incorporated in Bermuda also continued to rise in 2006, according to the bulletin.
Bermuda's 82 new incorporations compared with 50 in the Cayman Islands, an offshore center that is one of the largest captive domiciles after Bermuda.
((Reporting by Lilla Zuill; editing by Andre Grenon +1 646 223 6281; Email: Lilla.Zuill@reuters.com)) Keywords: INSURANCE STATS/
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