MassMutual Helps Form Bermuda Reinsurer, Sends It $14B in Business

Massachusetts Mutual Life Insurance has worked with two outside investment companies — Centerbridge Partners and Brown Brothers Harriman — to start Martello Re Ltd., a big life and annuity reinsurer.

MassMutual said Wednesday it would reinsure $14 billion in general account liabilities with Martello Re, which is based in Hamilton, Bermuda. MassMutual ended the third quarter of 2021 with about $208 billion in general account liabilities.

MassMutual did not say how much of the business reinsured with Martello Re will be annuities, how much will be life insurance and how much will be other types of business.

What the Deal Means

For MassMutual, the deal could help free up capital by putting some business under the jurisdiction of the Bermuda Monetary Authority.

Traditionally, U.S. life insurers have invested most of their trillions of dollars of reserves in high-grade corporate bonds. In recent years, because of the effects of low interest rates on bond yields, they have put more money in arrangements that U.S. insurance regulators see as being alternative investments, such as private equity deals, real estate and long-term infrastructure bonds.

One advantage of running a life insurance business in Bermuda is that it provides more generous treatment of alternative assets, such as private equity investments, when calculating a life insurer’s risk-based capital ratio.

For life insurance agents and policyholders, the Martello Re arrangement could mean that MassMutual will be in a better position to maintain benefits and hold down price increases, despite the effects of low interest rate on corporate bond portfolio yields and high COVID-19 life insurance and disability insurance claims.

The Players

MassMutual is a Springfield, Massachusetts-based life insurer that was founded in 1851. It is organized as a mutual insurer, meaning that it is owned by its policyholders. It’s the parent of Barings, a Charlotte, North Carolina-based investment manager that was founded in 1762 and has $387 billion in assets under management.

Centerbridge is a New York-based investment firm that was founded in 2005 and has about $33 billion in capital under management.

Brown Brothers Harriman is a New York-based investment firm founded in 1818 that has $5.4 trillion in assets under custody.

The Martello Re Deal

MassMutual’s Barings unit put out the press release announcing Martello Re’s birth.

Barings said it and Centerbridge will contribute by managing Martello Re’s assets.

MassMutual, Centerbridge, Brown Brothers Harriman, and a group of institutional investors and family offices, including Hudson Structured Capital Management, have raised a total of $1.65 billion in capital for Martello Re.

Brown Brothers Harriman’s wealth strategies unit raised $410 million for the new reinsurer from 754 investors in late 2021 through a pooled investment fund interests offering, according to a report the firm filed in December with the SEC.