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
of any other affiliates of that group or of its own shareholders. A Class B insurer is wholly owned by two or more unrelated persons and intends to carry on long-term business in respect of which not less than 80% of the premiums and other consideration will be written for the purpose of one of the following: • insuring the risks of any of those persons or of any affiliates of any of those persons; or • insuring risks that, in the BMA’s opinion, arise out of the business or operations of those persons or any affiliates of any of those persons, and that would be registrable as a Class A insurer, but for the fact that (i) not all of the business that it intends to carry on, but at least 80% of the premiums and other considerations written, will consist of the long-term business described under the require- ments for a Class A insurer; or (ii) it intends to carry on long-term business in respect of which not less than 80% of the premiums and other considera- tions written will, in the BMA’s opinion, arise out of the business or operations of the person by whom it is owned or any of the affiliates of that person. A Class C insurer has total assets of less than BMD250 million and is not registrable as a Class A or Class B insurer. Special-Purpose/Collateralised Insurers An SPI is an insurer that carries on special-purpose business. “Special-purpose business” means insur- ance business under which an insurer fully collateral- ises its liabilities to the persons insured through the proceeds of any one or more of the following: • a debt issuance where the repayment rights of the providers of such debt are subordinated to the rights of the person insured; • some other financing mechanism approved by the BMA; • cash; and • time deposits. Restricted special-purpose business means special- purpose business conducted between an SPI and specific insureds approved by the BMA.
A collateralised insurer is an insurer that carries on special-purpose business but is not an SPI. Collateral- ised insurers allow for a more flexible approach to col- lateral, cedant and product than is permitted for SPIs: • cedants may be unaffiliated unrated entities; • collateral may be a combination of cash and con- tingent collateral; • a wider range of eligible investments is permitted as collateral; and • claw-back of collateral is permissible. Requirements for Registration Insurers must meet the “minimum criteria” for registra- tion, as follows: • officers and controllers must meet a fitness and propriety test; • suitable corporate governance policies and pro- cesses must be established according to the nature, risk profile, size and complexity of the insurer; • a minimum of two individuals must effectively direct the business of the insurer; • there must be a suitable number of non-executive directors on the board of directors of the insurer (the “Board”); • business must be conducted in a prudent manner; • the position of the insurer within the structure of any group to which it belongs must not obstruct effective consolidated supervision; and • the business of the insurer must be carried on with integrity and the professional skills appropriate to the nature and scale of the insurer’s activities. An insurer must also meet minimum margins of sol- vency. For a general insurer, this is calculated by refer- ence to the greater of net premiums and discounted loss reserves and other insurance reserves. A mini- mum floor of BMD120,000 applies for single-parent captives and BMD100 million for Class 4 reinsurers. The minimum margin of solvency for long-term insur- ers is a proportion of assets reported on the insurer’s statutory balance sheet, subject to a minimum floor of BMD120,000 for single-parent captives and BMD8 million for Class E insurers (or 2% of the first BMD500 million of assets plus 1.5% of assets above USD500 million, whichever is greater; here BMD = USD).
34 CHAMBERS.COM
Powered by FlippingBook