Fidelity Starts an Annuity Reinsurer in Bermuda

Fidelity Investments is starting a Bermuda-based reinsurer that will start out reinsuring retail fixed annuities issued by the company’s Fidelity Investment Life Insurance Co. business.

The new reinsurer, Soteria Reinsurance Ltd., will also provide reinsurance for Fidelity Investment Life moves to absorb employers’ pension plan risk through pension risk transfers, according to a brochure posted by Fidelity’s Boston-based parent company, Fidelity Management & Research Co., in March.

Fidelity is not yet saying much in public about the new reinsurer, but other companies have said they start reinsurance affiliates in Bermuda to take advantage of Bermuda’s more flexible investment rules and sophisticated insurance regulatory system, which is viewed as a peer both by U.S. insurance regulators and European Union insurance regulators.

What It Means

Fidelity could use its new reinsurer in Bermuda to sell more fixed annuities and to make more money on the annuities it sells.

For advisors, the news suggests that financial services companies will find ways to meet client demands for income protection, in spite of the need to manage their own exposure to guarantee risk.

The Background

Fidelity has had insurance operations in Bermuda since 1969, and its main arm in Bermuda, FIL Ltd., recently won the Bermuda Hospitals Board corporate blood drive.