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LICENSING

The BMA has a dedicated insurance 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.

Entities wishing to apply for a license under the Insurance Act 1978 (the “Act”) must file an application for consideration by the Insurance Assessment & Licensing Committee [IALC]. The IALC bulletin provides an overview of the IALC process.

IALC applications will be assessed in the context of the minimum criteria for registration set out in the Schedule contained in the Act.

Applications for licensing under the Act shall be sent via email to Authorisations_eApplications@bma.bm together with the appropriate documents as set out in the IALC bulletin. Completed Personal Declaration Forms must be enclosed with the IALC application in connection with all Directors, Officers, and Senior Management appointments.

The business plan submitted by the applicant should address the matters set forth in the IALC Bulletin, in addition to the requirements discussed in the following documents, as applicable, which are accessible here on the BMA website:

  • Insurance Code of Conduct
  • Insurance Manager Code of Conduct
  • Insurance Brokers and Insurance Agents Code of Conduct
  • Guidance Note - Special Purpose Insurers
  • Information Bulletin - Fit and Proper Persons
  • Fit and Proper for Intermediaries
  • Role of Principal Representative

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 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 licensees into general insurance company classes, long-term insurance company classes, special purpose insurer classes, innovative classes, collateralised insurer classes and intermediaries:

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 which is equal to, or in excess of, an amount derived from the greater of premium and reserve based formulas, subject to a $120,000 floor.

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 which is equal to, or in excess of an amount derived from the greater of premium and reserve based formulas, subject to a $250,000 floor.

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.

Class 3 insurers are required to maintain minimum capital and surplus which is equal to, or in excess of an amount derived from the greater of premium and reserve based formulas, subject to a $1 million floor.

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 which is equal to, or in excess of an amount derived from the greater of 1) a risk-based capital model reflective of tail risks, 2) a premium based formula, 3) a reserve based formula, and 4) a $1 million floor.

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 minimum capital and surplus which is equal to, or in excess of an amount derived from the greater of 1) a risk-based capital model reflective of tail risks, 2) a premium based formula, 3) a reserve based formula, and 4) a $1 million floor.

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 which is equal to, or in excess of an amount derived from the greater of 1) a risk-based capital model reflective of tail risks, 2) a premium based formula, 3) a reserve based formula, and 4) a $100 million floor.

SPECIAL PURPOSE INSURERS: In order for a company to receive consideration for registration as an SPI, it would have to meet the criteria discussed in the SPI Guidance. The SPI will be licensed as either restricted or unrestricted. A restricted SPI may conduct special purpose business with specific cedents approved by the Authority. Whilst unrestricted SPIs may transact with any cedent, if the cedent is rated A- or higher, in terms of its financial strength, by AM Best or an equivalent rating from a rating agency recognised by the Authority.

COLLATERALIZED INSURER: means an insurer that carries on special purpose business, but is not a “Special Purpose Insurer”. Collateralized Insurers write business on a fully collateralized or fully funded basis.

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 that is equal to or in excess of, an amount derived from an asset based formula subject to a $120,000 floor.

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 that is equal to, or in excess of an amount derived from an asset based formula, subject to a $250,000 a floor.

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 that is equal to, or in excess of an amount derived from the greater of 1) a risk-based capital model reflective of tail risks, 2) an asset based formula, and 3) a $500,000 floor.

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 that is equal to, or in excess of an amount derived from the greater of 1) a risk-based capital model reflective of tail risks, 2) an asset based formula, and 3) a $4,000,000 floor.

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.

Class E insurers are required to maintain minimum capital and surplus that is equal to, or in excess of an amount derived from the greater of 1) a risk-based capital model reflective of tail risks, 2) an asset based formula, and 3) an $8,000,000 floor.

INOVATIVE INSURANCE CLASSES: The Sandbox will allow companies 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. Having reviewed a company’s proposal, the BMA would determine the legislative and regulatory requirements that would be modified for its duration within the Sandbox. This will be communicated to the company. The Sandbox includes general business classes IGB and IIGB; long-term business class ILT; and innovative intermediaries IAs, IBs, IMs and IMP.

At the end of a successful Sandbox proof-of-concept, the company may make a “change of class” application to be licensed to existing Classes (i.e., Classes 1, 2, 3, 3A, 3B or 4 if a general business insurer, Classes A, B, C, D or E if a long-term insurer, Special Purpose Insurer, Collateralized Insurer, Insurance Manager, Broker, Agent or Salesman) and will be fully subject to the relevant legal and regulatory requirements.

Innovative Insurers may be required to obtain a Digital Asset Business Act (DABA) licence if the activities to be conducted are in the scope of the DABA legislation.

INSURANCE MANAGER: means a person who, not being an employee of any insurer, 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 AGENT: A person who with the authority of an insurer acts on its behalf in relation to any or all of the following matters, that is to say, 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 policy-holders.

INNOVATION HUB: promote broader dialogue beyond the occasional queries where an industry participant desires to work closely with the BMA and receive regulatory guidance on standards and expectations related to innovative insurance solutions. The dialogue may be with respect to activities or services that are either 1) directly regulated by the Authority or; 2) although not directly regulated by the Authority, are offered to, and considered in the Authority's assessment of, regulated entities.

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

 

Key contacts in the Licensing team:

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