5 reasons Bermuda is a hot destination for SPVs, especially for insurance-linked securities

While Bermuda can and does establish and administer SPVs for a wide range of purposes, it has become known as a go-to centre for SPVs that house insurance-linked securities. The island has other specialities too, including thriving SPV markets for shipping, aircraft and container leasing transactions.

Why has Bermuda become the world’s largest market for insurance-linked transactions?

Bermuda has become adept at structures designed to allow insurance or reinsurance companies to transfer risk from their balance sheets to capital markets, while offering diversity for investors. Local legislation has also evolved to facilitate this kind of vehicle.

What are the key reasons to consider Bermuda for your SPV?

1. Growing market  

Insurance-linked securities are an increasingly popular asset class, allowing investors in public markets and private equity to diversify their portfolios. They are not without risk, but returns can be good. Current stock market volatility means insurance-linked securities are a major driver of new SPV incorporations in Bermuda.

2. Specialist knowledge

With insurance-linked transactions, the SPV sits between the insurance business and investors, issuing both the security and the contract. Managing and maintaining the SPV to everybody’s satisfaction takes in-depth knowledge and Bermuda is a world leader in the field.

3. Legal framework

Legislation on the island is designed to facilitate the transactions needed. Regulators have found the right balance between protecting participants and making SPV regulations proportionate and easy to use. The regulator is sympathetic to the needs of the industry.

4. Simplicity over complexity  

Rules around SPVs are split into two groups: more robust rules offering EU levels of protection for riskier transactions, such as those involving commercial insurance companies; and simplified rules for transactions with less risk. With their qualified, accredited investor base, insurance-linked securities fall into the second category, allowing a more straightforward environment in Bermuda.

5. Taxation

SPVs are generally set up as exempted companies and are not subject to tax. The government has guaranteed that Bermuda based SPVs will not be taxed until at least 2035, and that date may eventually get pushed further into the future.

How can Ocorian support insurance-related SPVs in Bermuda?

Ocorian is a one stop shop for insurance linked securities services and we have an established office and ILS team in Bermuda providing solutions to insurers and reinsurers looking to transfer underwriting risk to the capital markets. We understand how to have your transaction approved by local and global regulators in a fast and efficient way. We also support the securitisation of insurance by facilitating the creation of ILS structures such as sidecars, special purpose insurance (SPI) and transformers, issuing catastrophe bonds and other risk-linked securities. 

“In terms of regulation and tax, there’s not much between setting up an SPV in Bermuda and another jurisdiction like Cayman. The difference is really around specialism. In Bermuda we’re seen as the specialists in insurance-linked securities, alongside asset-based leasing deals. We have developed the expertise and talent on the island to facilitate these kinds of transactions” Sherman Taylor, Head of Capital Markets at Ocorian in Bermuda.

How can I find out more information?

Contact Sherman and the team to get the advice you need and download our useful jurisdictional SPV guide below.