BERMUDA Law and Practice Contributed by: Brad Adderley, Matthew Carr, Max Tetlow, Cathryn Minors, Josephine Noddings, Aleisha Hollis, Melinda Mayne, Milaun Perott and Mya Gibbons, Appleby
ILS Structures Some of the more common ILS structures in today’s market are as follows. Catastrophe bonds These bonds are capital market alternatives to tra- ditional catastrophe reinsurance. Initially targeting high-risk appetites with high yields and covering single perils, modern catastrophe bonds now often cover multiple perils. They are typically structured as low-risk/investment-grade offerings, backed by over- collateralisation or third-party insurer guarantees. Reinsurance sidecars These fully collateralised entities – traditionally joint ventures between insurance/reinsurance companies – are increasingly deployed as vehicles for third-party capital in reinsurance underwriting. Life reinsurance sidecars, in particular, can utilise Class E insurers, pro- viding a broader and more flexible approach than pre- viously recognised, and contingent capital structures provide insurers with capital during defined periods following specific qualifying events. They are a prac- tical solution in scenarios where insurance for low- probability, high-severity events is scarce. Extreme mortality bonds Issued to protect against significant deviations in mor- tality rates, these bonds are triggered by events like pandemics, wars or natural disasters, and are struc- tured similarly to other asset-backed securities. Longevity swaps These transfer the risk of pension scheme members living longer than expected from pension schemes to insurers or banks. They are crucial for defined ben- efit schemes, mitigating longevity risk and serving as a stepping stone towards pension risk transfer. The market for longevity swaps is expanding and adapting to meet diverse scheme requirements. Industry loss warranties These reinsurance contracts are triggered based on predetermined industry loss estimates from specified events, functioning like swap contracts.
• the contract expressly provides in writing that the third party may enforce a term. 6.6 Consumer Contracts or Reinsurance Contracts This does not differentiate from 6.4 Legal Require- ments and Distinguishing Features of an Insurance Contract . With no statutory definition of an “insurance contract”, both consumer and reinsurance contracts encompass the same base elements of offer, accept- ance, consideration, capacity, intention to create legal relations and legality. Bermuda is the world’s leading domicile for insur- ance-linked securities (ILS) transactions. With a highly regarded regulatory framework, sophisticated legal system, developed infrastructure and global compa- nies with a physical presence, Bermuda maintains a reputation as a quality jurisdiction that has demon- strated its ability to respond to changes in market con- ditions while meeting its clients’ commercial needs. As of October 2025, the BMA revealed that there had been 47 new insurer registrations since the beginning of the year. Bermuda’s (re)insurance market is com- prised of over 1,200 (re)insurers holding total assets in excess of USD1.6 trillion and writing a gross premium of approximately USD268 billion. 7. Alternative Risk Transfer (ART) 7.1 ART Transactions The Bermuda Stock Exchange (BSX) is the global leader in the listing of ILS, holding approximately 90% of the market. As of Q1 2025, listing of catastrophe bond notes on the BSX rose by 5% in notional limit terms to end the period at a new high of USD47.53 billion. Bermuda has been in the ILS market for more than 20 years and was involved in some of the first deals in the mid-1990s. The influx of capital has been the main catalyst for the growth of the ILS market. Many investors are now developing their own modelling and due diligence capabilities, and cedants are now spon- soring deals as a way of securing more competitive prices.
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