The Bermuda Monetary Authority (BMA) has been reviewing Bermuda’s group supervision regime over recent years with a view to updating and enhancing the same. On 4 December 2024, the BMA issued a consultation paper entitled Proposed Enhancements to the Insurance Group Supervision Framework (Paper). The consultation period closes on 15 January 2025.
The enhancements proposed by the BMA are intended to strengthen its group-wide supervision framework to provide for direct supervision of insurance groups, as opposed to the hybrid model of supervision currently utilised by the BMA.
There are seven separate proposals put forward by the BMA for consultation, although they follow the same key theme; the enhancement of the ability of the BMA to have control over the parent of the insurance group. Of note are proposals for:
- the removal of the “designated insurer” and the introduction of the concept of a “designated insurance holding company”. The designated insurance holding company will assume the role and responsibilities that currently reside with the ‘designated insurer’ (the term ‘designated insurer is to be repealed and such role will no longer exist). These responsibilities will include reporting, ensuring compliance with the group supervision rules, and payment of group annual fees;
- the introduction of mandatory group supervision where an insurance group is headed by a Bermuda ultimate parent entity – which will likely cause more insurance groups to fall under group supervision by the BMA;
- the creation of a minimum set of direct powers in relation to designated insurance holding companies of insurance groups, including those designated as internationally active insurance groups. Such powers will be used when necessary and applied proportionately, relative to the nature, scale, and complexity of the insurance group. They are expected to include the power to:
- apply to the courts in Bermuda to issue injunctions restraining specified actions by a designated insurance holding company;
- issue penalties against a designated insurance holding company;
- object to an appointment or removal of officers and controllers of the designated insurance holding company if they are not, or no longer fit and proper;
- require a designated insurance holding company, in case of any contraventions, to submit a plan detailing the manner, specific actions to be taken and the timeframe within which the designated insurance holding company will bring itself or the relevant member of the insurance group into compliance with the relevant provision of the Act or applicable rules; and
- present a petition to the courts in Bermuda for the designated insurance holding company to be wound up.
- notification requirements in respect of, and in some instances the BMA’s ability to object to, certain transactions involving a designated insurance holding company, including new or increased shareholder control, amalgamation with or acquisition of another firm, acquisition of controlling interest in certain undertakings, and the sale of an insurer.
The Paper further advises that the BMA is working to issue additional rules that will be specifically applicable to internationally active insurance groups, which rules will embed the provisions of the Common Framework for the Supervision of internationally active insurance groups as adopted by the International Association of Insurance Supervisors.
The consultation on the proposals set out in the Paper closes on 15 January 2025.
Following completion of the consultation, proposed legislation giving effect to the proposals will be finalised. Once the new legislation is in effect (date to be confirmed), existing insurance groups will have a transitional period of one year to prepare for implementation of the new requirements. There will be no grandfathering for existing structures.
