Manulife, the Canadian insurance giant, is selling its reinsurance business in Barbados to an American firm.
Manulife Financial Corporation, which once dominated the life insurance sector in Barbados, has agreed to sell its life reinsurance unit to Pacific Life Insurance, a United States insurer based in Newport Beach, California.
When the sale is completed in the third quarter, Manulife expects to post an after-tax gain of CAN$275 million (BDS$571 million).
Manulife’s Retrocession Unit employs about 90 people in a string of locations that stretch from Toronto, Barbados and Singapore to Boston and Cologne in Germany. The unit assumes risks from life insurers and it carries net life insurance equivalent to BDS$212 billion on its books.
“The life retrocession business does not align with Manulife’s strategy because of changes in the life reinsurance market going forward,” said Donald Guloien, Manulife’s chief executive officer.
“Although this business is profitable, it does not have a growth profile acceptable to us. Also, as a result of more restrictive regulatory requirements for this business, a buyer in another jurisdiction can operate this business with less capital.
“The transaction releases capital which will be invested in higher growth business or to reduce leverage.”
Basically, the Manulife unit insures reinsurance companies. Barbados is a haven for reinsurance or “captive insurance” firms in Canada, the United States, Europe and elsewhere.
Bermuda is considered the world’s insurance capital, with The Bahamas, Cayman Islands and British Virgin Islands vying for a considerable portion of market.
Reinsurance is an important element in Barbados’ offshore financial services sector, which is expected to face increasingly stiff competition now that Canada is opening up its market to domiciles or countries with which it has tax information-exchange agreements as distinct from double taxation agreements.
It is not known how the sale would affect an ongoing lawsuit that Barbadians and others have filed against Manulife in Canada. The case has been before the Canadian courts in Ontario for several years.
Andre-Philippe Hardy, a market analyst at the Royal Bank of Canada, said that the sale of the Manulife unit in Canada, Barbados and elsewhere was probably influenced by trends in the business and the long-term outlook.
“The life retrocession market has been in decline in recent years as primary insurers increased their retention of written business, thereby reducing business opportunities for life retrocession companies,” Hardy wrote.
When the Pacific Life acquisition is completed, the deal is expected to give the California company a 41 per cent share in North American individual retrocession business.
