Bermuda and Offshore Reinsurance Markets

Introduction

Bermuda is the global capital of reinsurance. Approximately one-third of all global reinsurance capital is domiciled on the island, and ABIR (Association of Bermuda Insurers and Reinsurers) member companies reported record gross written premium exceeding $171 billion in 2023. Bermuda's combination of regulatory sophistication, tax efficiency, and deep talent in specialty reinsurance and insurance-linked securities has made it the jurisdiction of choice for traditional reinsurers, PE-backed life reinsurance vehicles, ILS fund managers, and catastrophe bond issuers.

For FIG bankers, Bermuda matters because many of the most active participants in insurance M&A (both as acquirers and targets) are Bermuda-domiciled entities, and understanding the Bermuda regulatory framework is essential for advising on cross-border transactions.

Bermuda's dominance as a reinsurance hub rests on three pillars:

Regulatory quality: the Bermuda Monetary Authority (BMA) applies a framework that has been deemed equivalent to the EU's Solvency II, allowing Bermuda-based reinsurers to conduct business in Europe without additional regulatory burdens. The BMA's regime is robust (Class 4 and Class E insurers undergo the most rigorous oversight of any general business insurer class) but efficient, with faster licensing and approval timelines than many onshore jurisdictions. Beginning January 2025, Bermuda's internationally active insurance groups must comply with the International Capital Standard (ICS), further harmonizing with global solvency standards.

Tax efficiency: Bermuda has historically offered a tax-neutral environment with no income or corporate taxes for reinsurance companies. While Bermuda is implementing a 15% corporate income tax (aligning with the OECD global minimum tax framework), the island's established infrastructure, talent base, and regulatory reputation ensure its continued relevance.

Expertise and infrastructure: decades of reinsurance and ILS activity have concentrated specialized talent (underwriters, actuaries, brokers, lawyers, fund managers) on the island, creating a self-reinforcing ecosystem that is difficult for competing jurisdictions to replicate.

Insurance-Linked Securities (ILS)

Capital markets instruments that transfer insurance risk (primarily catastrophe risk) from insurers and reinsurers to institutional investors. The most common ILS structure is the catastrophe bond (cat bond), in which investors provide collateral that is used to pay claims if a specified catastrophe event occurs. If no qualifying event occurs during the bond term, investors receive their principal back plus a coupon reflecting the risk assumed. Other ILS structures include sidecars (special-purpose vehicles that co-invest alongside reinsurers in specific books of business), industry loss warranties (ILWs), and collateralized reinsurance. Bermuda is the preferred domicile for ILS funds and vehicles, with the Bermuda Stock Exchange capturing approximately 93% of global ILS listings.

Bermuda's position as the ILS hub has strengthened dramatically. Catastrophe bond issuance reached $25.6 billion in 2025, eclipsing the 2024 record of $17.7 billion by 45%. Total outstanding cat bond notional exceeded $47.5 billion listed on the Bermuda Stock Exchange. The market attracted 15 first-time sponsors in 2025, reflecting broadening adoption of cat bonds as a capital management tool.

Reinsurance sidecars (SPVs that provide additional capacity alongside traditional reinsurers) reached a record $19.6 billion at year-end 2025, with $17.9 billion in property sidecars and $1.7 billion in casualty sidecars. The growth of casualty sidecars is a notable development: historically, sidecars focused exclusively on property catastrophe risk, but investors are now pivoting to longer-duration casualty yields, creating new structures in Bermuda.

Despite the implementation of the 15% corporate minimum tax, Bermuda's competitive position remains strong. Competing offshore jurisdictions (Cayman Islands, Dublin, Singapore) attract some reinsurance and ILS activity, but none offer the combination of regulatory sophistication, established infrastructure, and concentrated expertise that Bermuda has built over decades. The island's regulatory equivalence with Solvency II and its early adoption of the ICS framework give Bermuda-domiciled entities seamless access to European and global markets, an advantage that is difficult for newer jurisdictions to replicate.