BMA Report provides insights into the resilience of Bermuda’s commercial long-term reinsurance sector

The recently-published results of the Bermuda Monetary Authority’s (BMA) 2025 Global Finance Crisis (GFC) stress test demonstrate Bermuda’s long-term commercial reinsurance sector’s the “strong ability” to withstand severe economic challenges.

The aim of the exercise was to evaluate the sector’s ability to withstand severe market shocks, assess recapture risk for reinsurers, and identify risk concentrations or other potential vulnerabilities worthy of further attention. Some of the stress scenario risk factors that were incorporated include interest rate shocks, credit spread widening, equity market decline, real estate devaluation and credit default events.

The results of the GFC stress test found that Bermuda’s long-term reinsurance sector has strong ability to withstand severe economic challenges, a win for Bermuda. In summary, the results show that the sector maintains adequate capital buffers, with the majority of entities able to withstand the prescribed stresses due to being adequately capitalised - without experiencing recapturing events and also without relying on management actions.

The report also highlights areas for continued attention and monitoring, such as the need for companies to maintain enhanced credit risk monitoring and prudent management of credit concentrations. It also emphasised the importance of robust recovery planning and capital management frameworks.

The GFC stress test results will enable the BMA to refine its risk-based supervisory approach and focus resources on entities and risk areas that demonstrate greater vulnerability. The BMA seeks to address the findings of the test, while maintaining a regulatory framework that appropriately balances financial stability with the long-term reinsurance sector’s continued development.