The Insurance Department (comprising of the Insurance Supervision department and License and Authorisations department) is responsible for the supervision, regulation and inspection of Bermuda’s insurance companies and for the licensing of all insurance companies, brokers, agents and managers. The Insurance Act 1978 (the “Act”) provides the Authority with substantive licensing, supervision and intervention powers.
The Authority always seeks to act in the best interests of both current and prospective policyholders while facilitating the continued development of a viable, healthy, competitive and innovative insurance industry. The Authority has a risk-based supervisory process, which categorises regulated entities according to a number of parameters within each class of insurance.
Key elements of the Authority’s supervisory regime include (i) scrutinizing statutory financial returns quarterly and annually; (ii) meetings with senior management as needed; (iii) performing on-site visits and inspections; and (iv) hosting or participating in supervisory colleges periodically.
Additionally, the Insurance Department works in collaboration with other departments within the Authority to provide supervision that reflects the nature, scale and complexity of registrants in accordance with the proportionality principle. As an example, actuarial certification of insurance liabilities is required annually for Class 3, 3A, 3B, Class 4 insurers and all Long-Term business, and tri-annually for Class 2 insurers. The Authority is able to concentrate its resources in those areas that need most attention, placing particular weight on the early identification of areas of non-compliance and possible emerging problems.
The Authority is a charter member of the International Association of Insurance Supervisors (“IAIS”) and continues to be closely involved with that body in the development of guidelines for global insurance regulation.
The Authority’s risk based supervisory approach involves the application of appropriate supervisory intensity to key areas of risk, including where material amounts of business are transacted with unrelated parties. Reliance is placed on transparency and ongoing disclosures where counterparties are deemed to be sophisticated and capable of understanding the risks underlying their business and determining their degree of tolerance for them.
In developing its regime, the Authority seeks foremost to act in the best interests of existing and prospective policyholders while facilitating the continued development of a viable, healthy, competitive and innovative insurance industry. This approach has been applied to (re)insurance and captive insurance businesses in Bermuda for over 20 years. During that period, the Authority has also been assisted in implementing supervision that is both appropriate and effective by the existence of a mature financial market infrastructure, and it has been able to tailor its supervisory approach accordingly.
A key component of the Authority’s supervisory regime is the requirement for companies to provide to the Authority annual statements audited by an approved auditor. The auditor is required to express an opinion on the reasonableness of the statements and on whether the statutory ratios comply with the requirements of the Act and Regulations.
In addition to the reviews conducted by approved auditors and actuaries, the Authority’s staff carry out detailed on-site reviews, coupled with comprehensive off-site analysis.
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