Bermuda: Bermuda Corporate Insurance Brief: Market Insights

Last Updated: 30 August 2018
Article by Nick Miles

Beneficial ownership register

Many Bermuda-registered companies are now subject to new beneficial ownership registration requirements by virtue of the Companies and Limited Liability (Beneficial Ownership) Amendment Act 2017, although this is likely to be of limited significance for Bermuda insurers and their affiliates, given that it does not extend to companies registered under the Insurance Act 1978 or to companies whose shares are listed on an appointed stock exchange or to their subsidiaries.

Companies that are affected must maintain beneficial ownership registers at their registered offices, including details of beneficial owners and any "relevant legal entities", and must provide beneficial ownership information to the Bermuda Monetary Authority (the BMA).
The requirements came into force on 23 March 2018 and companies have until 23 September to comply.

Register of company bye-laws

In line with the Financial Action Task Force's (FATF) 2012 Recommendations (Revised Standards), in particular Recommendation 24, a draft consultation paper was published by the Registrar of Companies seeking feedback on legislative changes proposed by the Premier and Minister of Finance, according to which the bye-laws of all companies registered in Bermuda are to be filed electronically with the Registrar of Companies.

The consultation period expired on 23 February 2018. Changes were implemented by the Companies Amendment Act 2018 and came into force on 21 March 2018. As a result of the changes, every company limited by shares or having a share capital has until 21 September 2018 to file with the Registrar of Companies details of the provisions in its bye-laws providing for: the transfer of shares and the registration of estate representatives of deceased shareholders; the duties of the secretary to the company; and the number of members required to constitute a quorum at any general meeting of the members of the company. The information will be held by the Registrar but will not be publicly available.

The International Sanctions (Policing and Crime Act) Amendment Regulations 2017 and other sanctions-related developments

The International Sanctions (Policing and Crime Act) Amendment Regulations 2017 came onto force on 4 December 2017. They amend the International Sanctions Regulations 2013 by providing for automatic implementation in Bermuda of Orders of the UK Privy Council, when scheduled to the Regulations, whether or not the Order specifically states that it is extended to Bermuda.

The Regulations bring into force in Bermuda the UK Policing and Crime Act (Financial Sanctions) (Overseas Territories) Order 2017. Under the UK Policing and Crime Act 2017, HM Treasury has the power to create a temporary financial sanctions regime to implement a regime imposed by a new UN Security Council Resolution. Such regulations cease to have effect when the EU implements the UN Security Council Resolution or after the end of a default period. The International Sanctions (Policing and Crime Act) Amendment Regulations 2017 provide for such temporary regimes to be extended to Bermuda.

On a related note, the Proceeds of Crime (Miscellaneous) Act 2018 has clarified the jurisdiction of the BMA to monitor regulated financial institutions and take effective measures to secure their compliance with international sanctions obligations.

Roll-out of the anti-money laundering/anti-terrorist financing supervisory regime to persons carrying on financial guarantee business – insurers excluded

Earlier this year, the BMA consulted on proposed legislative amendments that would add entities who carry on "financial guarantee" business to the AML/ATF supervisory jurisdiction of the BMA.

Trade finance, including lending, factoring, financial guarantee and related business activities, have been identified by the FATF as prone to abuse in facilitating money laundering.

Entities carrying on these activities in Bermuda have hitherto not been required to comply with the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 (the 2008 Regulations), unless they were a "regulated financial institution" (RFI) by virtue of being licensed under the Banks and Deposit Companies Act 1999 or by virtue of being insurers or brokers of direct life insurance business or insurance managers licensed under the Insurance Act 1978. Insurers carrying on solely general (P&C) business, for example, are not subject to the 2008 Regulations. That would have changed had an unqualified reference to financial guarantee business been added to the relevant definition of a RFI.

As was announced at the end of May 2018, the BMA has concluded that financial guarantee business carried on by P&C insurers is sufficiently low-risk not to warrant the addition of such insurers to the BMA's AML/ATF supervision just on the basis that they carry on financial guarantee business. Thus, while the Proceeds of Crime (Miscellaneous) (No. 2) Act 2018, which was passed by the House of Assembly and Senate in July 2018, includes "financial guarantee" business on the list of activities that render a person who carries them on a RFI under the Proceeds of Crime Act 1997 (and thus a person subject to the 2008 Regulations), it excludes such business when carried on by a person registered as an insurer under the Insurance Act 1978.

This will no doubt come as a relief to P&C insurers. However, such insurers should continue to monitor the position carefully, pending the outcome of Bermuda's FATF review this year.

The Proceeds of Crime (Miscellaneous) (No. 2) Act 2018 will come into operation when gazetted.

It should be noted that that act adds other insurance-related activities, including the "underwriting and placement of life insurance and other investment related Insurance", to the list of financial activities that render a person carrying them on an RFI. Whether that will be calibrated in due course, to exclude, for example, life reinsurance business activities, remains to be seen.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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