BERMUDA Law and Practice Contributed by: Oliver MacKay, Michael Frith, Kyle Masters and Jennifer Haworth, Carey Olsen
4.4 Aggregation and Limits of Liability Aggregation, occurrence wording, and limits of liabil- ity can be central where a single event or connected series of events produces losses across multiple insureds, locations, periods or layers. Potential areas of dispute include the relevant unifying factor, the number of occurrences, attachment points, deducti- bles, exhaustion of limits and the interaction between underlying and excess cover. 4.5 Sanctions and Illegality Issues Sanctions and illegality may affect whether cover attaches, whether an exclusion applies, and wheth- er an insurer can lawfully investigate, settle or pay a claim. Bermuda insurers and financial institutions have had to address sanctions affecting Russian and Bela- rusian entities, as well as issues arising from Russian aircraft registered in Bermuda. 4.6 Late Payment and Claims Handling Practices Bermuda law does not recognise a separate con- cept of bad faith as a basis for awarding damages against an insurer for claims handling and there are no statutory remedies specifically for late payment of insurance claims. Insurers are nevertheless regulated by the Bermuda Monetary Authority (BMA) and must conduct business prudently. The BMA’s Insurance Code of Conduct expects insur- ers to implement policies requiring claims to be han- dled in a timely, fair and transparent manner and to avoid aggressive, coercive or discriminatory claims- handling practices. 4.7 ESG and Climate-Related Coverage Bermuda reinsurers are expected to consider ESG risk within their overall risk-management framework. Cli- mate change risk has been identified by the BMA as a significant financial risk and insurers are expected to take a proactive and proportionate approach to managing and, where possible, mitigating that risk in underwriting, operations and investments. 4.8 Delegated Authority and Claims Responsibility Delegated underwriting and claims-handling arrange- ments are often used by Bermuda insurers and rein-
Bermuda International Conciliation and Arbitration Act 1993 – although an award may be challenged on the limited grounds derived from the New York Conven- tion. 4. Coverage Disputes 4.1 Evolving Trends in Coverage Disputes A continuing area of importance is coverage involv- ing Bermuda’s statutory segregated-account regimes. Insurers use segregated accounts for rent-a-captive solutions, insurance-linked securities transactions, and separation of reserves among business lines, and disputes arising from those structures cannot always be determined solely by reference to ordinary common-law coverage principles. Bermuda decisions in 2022 and 2023 addressed the integrity of asset and liability segregation. 4.2 Policy Wordings and Interpretation Developments Insurance and reinsurance contracts are subject to the ordinary rules of contractual construction. Terms may also be implied as a matter of law or judicial con- struction. Under the Segregated Accounts Companies Act 2000, specified terms are implied into contracts written by segregated accounts companies, includ- ing provisions protecting assets linked to one account from liabilities not linked to that account. Bermuda law continues to apply the common-law duty of utmost good faith, including disclosure and misrepresentation principles, and the traditional con- sequences of breach of warranty. 4.3 Cyber and Technology-Related Coverage Issues Cyber and technology exposures may generate dis- putes concerning the scope of affirmative cybercover, silent cyber-exposure in traditional policies, definitions of computer systems and security failures, causation, aggregation, business interruption, dependent busi- ness interruption, data restoration costs, ransomware payments, and exclusions for war or hostile acts.
37 I NSURANCE L I T IGATI O N 2026
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