Why Bermuda provides the perfect regulatory environment for Kuvare Life Re
The BMA’s supportive regulatory environment was a key motive for setting up the company on Bermuda.
Founded in 2016, Kuvare Life Re (KLR) is the Bermuda-based reinsurance arm of Kuvare. The Kuvare Group was established to serve US middle-income consumers by anticipating the growing demand for retirement products and particularly annuities. While founding a Bermuda reinsurer, at first glance, might not seem to be core to its mission, it actually complements and strengthens Kuvare’s platform for many key reasons, according to Kevin Hovi, president and chief financial officer at KLR.
“IT FEELS AS THOUGH WE HIT A NEW MILESTONE EVERY FEW WEEKS; THE GROWTH HAS BEEN SPECTACULAR.” KEVIN HOVI, KUVARE LIFE RE. “First among these is that, by running our own US life companies, we know what cedants value in, and expect to be delivered by, a strategic reinsurance partner,” Hovi says.
“If demand from middle-income consumers grows the way we think it will, it stands to reason there will be demand from medium-sized US insurers for capacity. These insurers face challenges earning yields to cover liabilities from traditional corporate investment income portfolios, so a Bermuda partner can help middle-market insurers either grow business or exit business that just doesn’t make sense for them any more.
“Second, for our own US retail insurers to serve our policyholders most efficiently, having access to Bermuda balance sheets provides a competitive advantage that other smaller insurers don’t have.
“So, while a big emphasis for the US team is concentrated on delivering winning solutions to middle-market consumers, our reinsurance operation focuses on smartly deploying and growing capital for our own businesses and extending that expertise to our institutional partners.”
KLR has achieved several significant milestones since its foundation, and this has echoed the growth of Kuvare as a group, which has grown to $17 billion of assets, including its Bermuda build. Acquiring Guaranty Income Life (2016), United Life (2018) and Lincoln Benefit Life (LBL) (2019) gave Kuvare a strong US platform, and by 2020 Kuvare has organically grown the retail premium of these carriers by over $1 billion since they became Kuvare companies. In addition, it has added $1.5 billion of institutional reinsurance onshore.
“It feels as though we hit a new milestone every few weeks; the growth has been spectacular,” says Hovi. “The most recent milestone was our first SEC Rule 144A market issuance where we raised $225 million of fresh capital via an investment-grade preferred offering.
“From a Bermuda perspective, we’ve grown alongside the US platform and had the opportunity to work with great partners across four block deals and one flow transaction. Focusing on the most recent milestone, KLR has announced new A- ratings from both AM Best and KBRA, which is a validation of what we’ve done, and we hope a great tailwind for even more growth.”
“COMING TO BERMUDA PROVIDES AN INSURANCE PASSPORT TO THE US, EUROPE AND BEYOND, BUT MOST IMPORTANTLY IT PROVIDES A HIGH LEVEL OF CREDIBILITY TO OUR COUNTERPARTIES.” This comes against a backdrop of an active time in KLR’s market sector, which has seen the arrival of a number new annuity and reinsurance entrants backed by asset managers seeking to deploy capital and grow assets. However, KLR differs from its peers in some key ways.
“While we are backed by private capital, our asset management is in-house and directed by our own internal team of top-class management professionals with excellent track records, and further supported by best-in-class third-party managers,” says Hovi.
“Our founding CEO, the CIO and I have all had careers in asset management within insurance companies, so we approach asset management from an insurance mindset first. We attempt to gain access to the most efficient asset classes appropriate for insurers, focusing on diversified, attractive investment-grade opportunities where we can earn incremental returns from size, complexity or structure.”
Hovi credits the Bermuda Monetary Authority (BMA) with creating an environment that supports companies such as KLR and builds Bermuda’s international reputation.
“Coming to Bermuda provides an insurance passport to the US, Europe and beyond, but most importantly it provides a high level of credibility to our counterparties. We’ve found them a strong and responsive regulator to work with,” he says.
“Bermuda’s model is more of a forward-looking economic approach, compared to the US, which operates on a more historical basis. This suits certain blocks of business better than others, so we like having the flexibility to work within both models in order to help solve cedants’ issues, as we provide them access to both an onshore reinsurance option via LBL, in addition to KLR as our offshore reinsurance platform for third parties.”
“In many ways, our roll-out timing has been excellent from the standpoint of growing our business the past few years, just as the economic balance sheet framework has been established. We do expect to stay abreast of continuing initiatives and enhancements to the BMA’s framework in coming years.”
As a result of the BMA’s efforts, there are plenty of companies in Bermuda that look and feel like KLR to varying degrees, and Hovi expects more players will continue engaging in the space.
“While there are nuances across the sector in terms of different types of liability risk, as well as the way they approach investing, we believe Bermuda provides a strong platform to help onshore markets solve the challenges of low interest rates and ultimately provide financial solutions to policyholders,” he says.
Now that KLR has obtained its A- ratings from AM Best and KBRA, Hovi looks forward to continuing its strong growth track record by pursuing attractive opportunities. He expects to add to the team, making sure the company has enough talent and scale to support further growth.
“We expect to expand the client list and are always keen to explore new product lines or markets,” he says. “Our flexibility is ultimately one of the most attractive things we can provide to counterparties.”