On 4 December 2024, the Bermuda Monetary Authority (BMA) issued its consultation paper entitled "Proposed Enhancements to the Insurance Group Supervision Framework," outlining regulatory updates to strengthen the BMA's group-wide supervision framework. The consultation period closed on 15 January 2025.
The enhancements proposed by the BMA provide for direct supervision of insurance groups, reflecting the growth and sophistication of Bermuda Insurance Groups, including the designation of a number of Bermuda Insurance Groups as Internationally Active Insurance Groups (IAIGs). The main theme of such proposals is the ability of the BMA to have control over the parent of the insurance group.
The proposals are summarised below:
- the introduction of mandatory group supervision where, either the insurance group is headed by a "specified insurer" as defined in section 27B(9) of the Insurance Act 1978 (the "Insurance Act") or where not headed by a "specified insurer", the insurance group is headed by a parent entity which is a body corporate incorporated, formed or registered in Bermuda that is not itself a subsidiary of any other entity (an ultimate parent entity). The BMA will continue to have discretion whether to become group supervisor in instances where mandatory group supervision might not apply;
- amendments to section 27D of the Insurance Act to clarify that the BMA cannot withdraw as group supervisor if the criteria for mandatory supervision has been met (assuming no changes);
- the removal of the "designated insurer" concept and the introduction of a "designated insurance holding company". The designated insurance holding company, once designated by the BMA, will be registered and will assume the current roles and responsibilities currently attributed to the designated insurer;
- enabling direct powers of the BMA over the designated insurance holding company of insurance groups including the power to inter alia, issue penalties against the designated insurance holding company, object to the appointment or removal of officers and controllers of the designated insurance holding company if they are not fit and proper, and to present a petition to the courts in Bermuda for the designated insurance holding company to be wound up. Currently enforcement of the BMA's powers can only be done via the designated insurer. Such powers will be exercised proportionately, relative to the nature, scale and complexity of the insurance group;
- shareholder controller changes of the designated insurance holding company will be subject to prior notification requirements, as currently apply to designated insurers; and
- designated insurance holding companies will be required to seek the BMA prior no-objection for certain "material changes" including the amalgamation with or acquisition of another firm, acquisition of controlling interest in certain undertakings and the sale of an insurer, pursuant to amendments proposed to section 30JB of the Insurance Act.
In tandem with the proposed enhancements covered under the consultation paper, it is anticipated that additional group supervision rules will be issued embedding the Common Framework provisions which will be applied specifically to IAIGs. Once the new legislation is in effect, existing insurance groups will have a transitional period of one year to prepare for implementation of the new requirements.
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