Your web browser is out of date. Update your browser for more security, speed and the best experience on the Bermuda Monetary Authority.

LICENSING

The BMA has a dedicated licensing and authorisations team that reviews all proposals to set up new businesses. In addition to internal staff review, applications are subject to independent review and decision by a committee of senior Authority staff. Applications are closely vetted for the fitness, propriety and underwriting experience of the management, the plausibility of the proposed business plan and the level of capitalisation relative to the proposed risk profile, amongst other factors.

As required by the Act, the Authority maintains a register giving details of each licenced insurer. This is available for inspection by members of the public in the Public Files at the Registrar of Companies.

Application of the Act

a) Timeliness of Reporting

An important element of companies’ statutory responsibility relates to their obligation to file an annual audited financial return with the Authority. Actuarial certification of loss reserves are required annually for Class 3 and Class 4 companies, and triennially for Class 2 companies.

b) Solvency Margin Maintenance

The Authority requires insurers to maintain strict minimum solvency margins, which vary according to the class of the insurers, (which is in turn determined by the nature and risk of the business to be conducted). For example, Class 4 companies, representing entities writing property/catastrophe or excess liability coverage, have a minimum solvency margin of the greater of $100 million, 15% of net loss reserves and 50% of net premiums written (after deductions of any premiums ceded not exceeding 25% of gross premiums written).

It is noteworthy that, in spite of the scale of Bermuda’s insurance sector, the incidence of insolvency remains very low. This reflects the conservative approach taken to new incorporations and the proactive nature of the Authority to intervene at the early stages when potential solvency problems appear.

c) Statement of Principles

The Authority has published a Statement of Principles (‘the Principles’), which has been made pursuant to section 2A of the Insurance Act 1978 (‘the Act’). The Principles relate to the Authority’s decisions on whether to register an entity, to cancel the registration of a registered entity, to impose conditions upon a registration, or to give certain directions to a registered entity. These Principles are of general application and seek to take account of the wide diversity of registered entities that may be licenced under the Act, as well as relevant institutional and market developments.

The Multi-Licence System

Bermuda has a multi-licence system of regulation which categorises general business insurance companies into seven classes, long-term insurance companies into five classes, a class for Special Purpose Insurers and Collateralized Insurers, as well as providing for composite companies. Additionally, licenses are available for intermediaries (brokers, agent, salesmen), insurance managers and insurance marketplace providers.

Bermuda also offers regulatory sandbox licenses for companies carrying on business in an innovative and experimental manner, in parallel with the regular licenses mentioned above.

CLASS 1: 

A single-parent captive insurance company underwriting only the risks of the owners of the insurance company and affiliates of the owners.

Class 1 insurers are required to maintain minimum capital and surplus of $120,000.

CLASS 2: 

Multi-owner captives which are defined as insurance companies owned by unrelated entities, provided that the captive underwrites only the risks of the owners and affiliates of the owners and/or risks related to or arising out of the business or operations of the owners and affiliates.

A Class 2 licence will also apply to single-parent and multi-owner captives writing no more than 20 percent of net premiums from risks which are not related to, or arising out of, the business or operations of their owners and affiliates.

Class 2 insurers are required to maintain minimum capital and surplus of $250,000.

CLASS 3: 

Applies to insurers and reinsurers not included in Class 1, 2, 3A, 3B, or 4. This includes structured reinsurers’ writing third party business; insurers writing direct policies with third party individuals; single-parent, group, association, agency or joint venture captives where more than 20 percent of net premiums written is from risks which are unrelated to the business of the owners.

Captive Insurers underwriting more than 20% and less than 50% unrelated business.

Class 3 insurers are required to maintain minimum capital and surplus of $1 million.

CLASS IIGB: 

An insurer carrying on general business in an innovative manner.

Class IIGB insurers are required to maintain minimum paid up share capital of $120,000, and available capital and surplus equivalent to the Enhanced Capital Requirement as calculated by the BSCR-IIGB model.

CLASS 3A: 

Small commercial insurers whose percentage of unrelated business represents 50% or more of net premiums written or net loss and loss expense provisions and where the unrelated business net premiums are less than $50 million.

Class 3A insurers are required to maintain minimum capital and surplus of $1 million.

CLASS 3B: 

Large commercial insurers whose percentage of unrelated business represents 50% or more of net premiums written or net loss and loss expense provisions and where the unrelated business net premiums are more than $50 million.

Class 3B insurers are required to maintain capital and surplus of $1 million.

CLASS 4: 

Insurers and reinsurers underwriting direct excess liability insurance and/or property catastrophe reinsurance risks.

Class 4 insurers are required to maintain minimum capital and surplus of $100 million.

Special Purpose Insurer and Collateralized Insurer: 

The Insurance Linked Securities (ILS) and Alternative Capital Market has developed into an important segment of the Bermuda Insurance Market. To that end the Authority has developed two purpose-built frameworks to register and supervise ILS and alternative capital business.

The Special Purpose Insurer (SPI)

The SPI Class was introduced in 2009 to facilitate the transfer of specific insurance risk to the capital markets. SPIs may only conduct Special Purpose business. Special Purpose Business as per the insurance Act 1978 is insurance business which an insurer fully collateralizes its liabilities to the person insured. The assets supporting the liabilities of an SPI shall be cash and cash equivalent paid-up and held to the benefit of the cedant. Given the fully collateralized nature of an SPI the Authority is able to apply a $1 minimum solvency capital requirement. An SPI can be registered as restricted or unrestricted and facilitate life or non-life business.

  • Restricted SPI – An SPI who conducts special purpose business with a specific insured approved by the Authority
  • Unrestricted SPI – An SPI who conducts special purpose business with any insured

Collateralized Insurer (CI)

The ILS and wider alternative capital market has evolved since the introduction of the SPI class and requires a broader scope framework to conduct certain Special purpose business. Therefore, the Authority introduced the CI class in 2019. The CI class supplements the SPI class in order to facilitate special purpose business that requires broader flexibilities, more specifically broader criteria for the interpretation of full collateralization. In order to maintain prudent oversight while exercising a pragmatic approach to the nature of the risk within a CI, the Authority deploys a Collateralized Bermuda Solvency & Capital Requirement model (BSCR). The broader definition of full collateralization in the CI class means the framework must respond to the increase risk factors which are (1) operational, (2) Credit and (3) Market risks. Similar to the SPI class the CI class can accommodate Life or non-life business. However, there is no distinction regarding cedants as a CI is registered to write business openly.

LONG-TERM - CLASS A: 

A single-parent long-term captive insurance company underwriting only the long-term business risks of the owners of the insurance company and affiliates of the owners.

Class A insurers are required to maintain minimum capital and surplus of $120,000.

LONG-TERM - CLASS B: 

Multi-owner long-term captives which are defined as long-term insurance companies owned by unrelated entities, provided that the captive underwrites only the long-term business risks of the owners and affiliates of the owners and/or risks related to or arising out of the business or operations of their owners and affiliates.

A Class B licence will also apply to single-parent and multi-owner long-term captives writing no more than 20 percent of net premiums from risks which are not related to, or arising out of, the business or operations of their owners and affiliates.

Class B insurers are required to maintain minimum capital and surplus of $250,000.

LONG-TERM - CLASS C: 

Long-term insurers and reinsurers with total assets of less than $250 million; and not registrable as a Class A or Class B insurer.

Class C insurers are required to maintain minimum capital and surplus of $500,000.

LONG-TERM - CLASS D: 

Long-term insurers and reinsurers with total assets of $250 million or more, but less than $500 million; and not registrable as a Class A or Class B insurer.

Class D insurers are required to maintain minimum capital and surplus of $4,000,000.

LONG-TERM - CLASS E: 

Long-term insurers and reinsurers with total assets of more than $500 million; and not registrable as a Class A or Class B insurer.

Intermediaries, Insurance Manager and Insurance Marketplace Provider

Insurance Agent

A person who, with the authority of an insurer, acts on its behalf in relation to any or all of the following matters: the initiation and receipt of proposals, the issue of policies and the collection of premiums, being proposals, policies and premiums relating to insurance business.

Insurance Broker

A person who arranges or places insurance business with insurers on behalf of prospective or existing policyholders.

Insurance Manager

A person who holds himself out as a manager in relation to one or more insurers, whether or not the functions performed by him as such go beyond the keeping of insurance business accounts and records

Insurance Marketplace Provider

A person who establishes a platform – of any type – for the purpose of buying, selling or trading contracts of insurance.

The Regulatory Sandbox Licenses:

IGB

An insurer carrying on general business in an innovative and experimental manner. These companies operate within the insurance regulatory sandbox to test new technologies and offer innovative products, services, and delivery mechanisms to a limited number of policyholders in a controlled environment and for a limited period of time. They subsequently target to be licensed under Section 4 of the Act.

ILT

An insurer carrying on long-term business in an innovative and experimental manner. These companies operate within the insurance regulatory sandbox to test new technologies and offer innovative products, services, and delivery mechanisms to a limited number of policyholders in a controlled environment and for a limited period of time. They subsequently target to be licensed under Section 4 of the Act.

IA

An insurance agent carrying on the business of an insurance agent in an innovative and experimental manner. These agents operate within the insurance regulatory sandbox to test new technologies and offer innovative products, services, and delivery mechanisms to a limited number of clients in a controlled environment and for a limited period of time. They subsequently target to be licensed under Section 10 of the Act.

IB

An insurance broker carrying on the business of an insurance broker in an innovative and experimental manner. These brokers operate within the insurance regulatory sandbox to test new technologies and offer innovative products, services, and delivery mechanisms to a limited number of clients in a controlled environment and for a limited period of time. They subsequently target to be licensed under Section 10 of the Act.

IM

An insurance manager carrying on the business of an insurance manager in an innovative and experimental manner. These managers operate within the insurance regulatory sandbox to test new technologies and offer innovative products, services, and delivery mechanisms to a limited number of clients in a controlled environment and for a limited period of time. They subsequently target to be licensed under Section 10 of the Act.

IMP

A person who establishes a platform of any type – for the purpose of buying, selling or trading contracts of insurance in an innovative and experimental manner. These companies operate within the insurance regulatory sandbox to test new technologies and offer innovative products, services, and delivery mechanisms to a limited number of policyholders (or other clients) in a controlled environment and for a limited period of time. They subsequently target to be licensed under Section 10 of the Act.

 

Additional information on the insurance regulatory sandbox is available in the Insurance/Innovation section.

feedback icon