Evergreen Life Limited: Why We Decided to Locate our Insurance Company in Bermuda

23 September 2010

Evergreen Life Limited (“Evergreen Life”) was established in Bermuda, with the primary goal of creating the leading Private Placement Variable Universal Life (“PPVUL”) product in the market.  In the knowledge that our policies would be acquired by sophisticated high net worth investors who would all be professionally advised, we were determined to create a product that knowledgeable advisors would conclude was structured in the most secure and tax efficient manner for their clients.  One of the most critical milestones in the entire process was the decision as to where Evergreen Life should be located.   After extensive research into a number of jurisdictions and consultation with several top advisors in the industry, Bermuda was our clear choice.

The fact that Bermuda is internationally recognized as a stable and well developed insurance jurisdiction was a major factor in our choice of location.  Of the utmost importance, was the ability to structure our company and product in such a manner that policyholders would have no exposure to the general accounts of our life insurance company, thereby enhancing the financial stability of the policy.  The legislation and regulations of Bermuda were critical in achieving this.  Bermuda has a highly developed and proven segregated account legislation that protects policyholders’ segregated accounts from any claims against the insurance company.  Each segregated account is (and always remains) legally distinct from funds owned by the insurance company and is consequently totally protected from any potential creditor of that company. 

A crucial factor in determining the choice of territory was the ability to institute the most stringent policyholder protections available.  Two key elements in our having achieved this are our reinsurance agreements and our Private Act, The Evergreen Life Limited Act 2008, (the “Evergreen Act”).  Evergreen Life will always purchase reinsurance on 100% of the insurance component of each policy, from large highly rated reinsurance companies.  In jurisdictions outside of Bermuda, reinsurance proceeds are typically paid to the insurance companies’ general account. This could become subject to the claims of creditors.  In Bermuda, however, we were able to eliminate this risk by structuring Evergreen Life so that the reinsurance proceeds are processed through a segregated account, thereby totally shielding the policyholder from any potential claim by a creditor of Evergreen Life. 

Bermuda law allows the legislature to pass a private act which is particular to the policies insured by that company.  By way of a special application by Evergreen Life, the Bermuda Parliament passed the Evergreen Act, which provides an extra layer of protection for policyholders.  The Evergreen Act enabled us to enhance the Segregated Account Laws to provide increased security for policyholders.  We used the Evergreen Act to augment the treatment of reinsurance proceeds by legislating, and therefore ensuring, that a potential liquidator of Evergreen Life is legally bound to recognize the nature of the segregated accounts (whereby the assets of an account are held securely and solely for the benefit of the policyholder and may never become comingled with any funds of the insurer).  The Act also gave us, inter alia, the ability to modify the provision regarding death claims, which we did by allowing claims to be paid in kind, thereby facilitating investments in alternative asset classes in the knowledge that these would not have to be forcibly liquidated at a time which might subsequently not be opportune.

In creating the premier PPVUL product, we knew that investment flexibility would be a very important feature for our policyholders. While still being prudent, we were determined to give policyholders access to a wide range of investment choices.  Compared to jurisdictions such as the U.S, Bermuda allows insurance companies to provide policyholders with a much greater degree of flexibility in respect of both permitted investments and investment managers.  Evergreen Life is not restricted to offering the limited investment choices that regulators in certain jurisdictions will allow. 

The level of friction costs was another very important consideration in selecting a jurisdiction as it was important for us to minimize policyholder expenses.  Locating in Bermuda enables Evergreen Life to keep policy costs low. 

In addition to the various benefits mentioned above, the process of obtaining a license and forming the company in Bermuda was highly efficient.  All of the individuals with whom we interacted in Bermuda were very knowledgeable, professional and responsive.  We engaged Appleby, a prominent law firm, to assist us in the formation of Evergreen Life and have been working with Marsh Management Services (Bermuda) Ltd., part of Marsh’s Captive Solutions Group (“Marsh”) in relation to the administration of the Bermuda entities.    It is certainly advantageous working in a jurisdiction where the individuals from the various organizations regularly work together as a team. 

The process of obtaining the Evergreen insurance license was detailed and thorough.  Going through such a rigorous process is an advantage in the marketplace as knowledgeable professional advisors to potential policyholders are aware of the level of review to which we were subjected.  The process first ensured that the owners of our company were legitimate.  The level of information which had to be provided was very specific.  The examination of our PPVUL product and how our company would be managed was then examined in minute detail.  The Bermuda authorities focused on ensuring that we would always have prudent procedures in place, that we are knowledgeable and that we have the required experience.  PPVUL is a somewhat unique insurance product with regard to the manner in which it is required to be managed.  The Bermuda Monetary Authority (“BMA”) augmented their review committee with an expert to evaluate this factor as well as other technical aspects of our application.    

The BMA requires every insurance company to which it issues a license to engage the services of a licensed Insurance Manager.  The Insurance Manager is required to undertake the administration of the life insurance program.  As a result, numerous organizations have developed high levels of expertise and knowledge in order to service the operational needs of insurance companies.  This gives policyholders comfort, knowing that a BMA approved Insurance Manager with the necessary expertise is required to manage their policies.  We were impressed with many of the Insurance Managers we met and entered into an agreement with Marsh, given their high quality infrastructure, software, policy management team and accounting personnel.

Choosing the best jurisdiction in which to locate Evergreen Life was a very important decision both for us and our policyholders.  Having conducted in depth research with top professionals and having discovered the many advantages as described above, the choice of Bermuda turned out