BERMUDA Law and Practice Contributed by: Brad Adderley, Matthew Carr, Max Tetlow, Cathryn Minors, Josephine Noddings, Aleisha Hollis, Melinda Mayne, Milaun Perott and Mya Gibbons, Appleby
1. Basis of Insurance and Reinsurance Law 1.1 Sources of Insurance and Reinsurance Law The principal legislation governing companies in Ber- muda is the Companies Act 1981, as amended (the “Companies Act”), under which the majority of com- panies in Bermuda are incorporated by registration. In addition to the Companies Act, (re)insurance com- panies and (re)insurance intermediaries in Bermuda are also governed by the provisions of the Insurance Act 1978 and related regulations, rules and guidance notes, each as amended from time to time (the “Insur- ance Act”), which applies to any person carrying on insurance business in or from within Bermuda. “Insur- ance business”, which includes reinsurance, is the business of effecting and carrying out contracts to: • protect persons against loss or liability to loss in respect of risks to which they may be exposed; or • pay a sum of money or render money’s worth on the occurrence of a loss event. Insurers in Bermuda should also be aware of the provi- sions of the Life Insurance Act 1978 (the “Life Act”), the Segregated Accounts Companies Act 2000 (the “SAC Act”), the Incorporated Segregated Accounts Companies Act 2019 (the “ISAC Act”) and the Non- Resident Insurance Undertakings Act 1967 (each as amended), as applicable. 2. Regulation of Insurance and Reinsurance 2.1 Insurance and Reinsurance Regulatory Bodies and Legislative Guidance The Supervision (Insurance) Department of the Ber- muda Monetary Authority (BMA) is responsible for the supervision, regulation and inspection of Bermu- da’s insurance companies and for the licensing of all insurance companies, brokers, agents and managers. The Insurance Act provides the Supervision (Insur- ance) Department, also referred to as the “Author- ity” or BMA, with substantive licensing, supervision and intervention powers. According to the Authority,
it always seeks to act in the best interests of both current and prospective policyholders while facilitat- ing 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: • scrutinising statutory financial returns quarterly and annually; • meeting with senior management as needed; • performing on-site visits and inspections; and • periodically hosting or participating in supervisory colleges. The Authority works to provide supervision that reflects the nature, scale and complexity of registrants in accordance with the proportionality principle. The Authority is a charter member of the International Association of Insurance Supervisors and is routinely involved in the development of guidelines for global insurance regulation. As stated by the Authority, its risk-based superviso- ry 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 trans- parency and ongoing disclosures where counterpar- ties are deemed to be sophisticated and capable of understanding the risks underlying their business, and determining their degree of tolerance for those risks. Commercial insurers are required to demonstrate cap- ital adequacy with respect to the Bermuda solvency capital ratio (BSCR), which is computed per the BMA’s standard capital model or an internal capital model approved by the BMA. The BSCR is a risk-based capi- tal model that takes into account the risk character- istics of different aspects of the insurer’s business. Under the Bermuda Economic Balance Sheet frame- work, there are typically two approaches to calcu- lating the BEL: the standard approach and the SBA (as defined in the following). The BMA’s standard
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