Bermuda’s insurance framework: A look at BMA’s recent key proposals

In December 2024, the Bermuda Monetary Authority (BMA) released three consultation papers, each designed to strengthen oversight and enhance market transparency. These proposals cover group supervision, the prudent person principle (PPP), and public disclosures for commercial long-term insurers.

We delve into each proposal, highlighting the most critical developments and their potential impact on the Bermuda insurance market.

Strengthening group supervision

The BMA plans to strengthen its authority over insurance groups under the Insurance Act 1978. Core proposals include:

• Mandatory group supervision: Where a Bermuda-based parent entity controls an insurance group, the BMA must act as group supervisor.
• Clear withdrawal criteria: The BMA can exit group supervision only if there are major changes in structure or operations-ensuring clarity about when and how it may withdraw.
• Formal “insurance holding company” definition: This term will appear in law, giving the BMA the power to designate a holding company and require registration for direct oversight.
• Transaction and ownership controls: Enhanced rules will oblige holding companies to notify the BMA of major ownership changes and material transactions.

By supervising top-level entities rather than focusing solely on a “designated insurer,” the BMA gains stronger mechanisms to uphold good governance across the group. Boards and senior executives should be ready to demonstrate how decisions are made at the holding-company level and how group-wide risks, especially those in non-insurance segments are managed.

Application of the Prudent Person Principle

Under the second consultation paper, new instructions and guidance specify how insurers and groups must adopt the PPP, emphasising capital preservation, appropriate liquidity, and policyholder interests above all else. Key proposals include:

• Investment strategy and governance: Insurers must prioritise capital preservation, align investments with liabilities, ensure diversification, and maintain strong board oversight, even when outsourcing investment management.
• Risk management: A robust framework is required to assess and monitor risks in complex and illiquid assets, conduct stress testing, and ensure compliance with regulatory requirements.
• Use of derivatives: Derivatives should be used strictly for risk management or portfolio optimisation, not speculation, with rigorous oversight and monitoring.

Effective 1 July 2025, these updates will be integrated into the Insurance Code of Conduct and related rules. This means companies will be required to take measures to align assets with liabilities, ensure diversification and proper use of derivatives, and build systems for stress testing.

Enhanced public disclosures

The third consultation paper aims to improve transparency for insurers, with the following highlights:

• Detailed asset reporting: Insurers must provide detailed breakdowns of their investments, covering illiquid, complex, and affiliated assets with unique identifiers (like CUSIPs) to increase clarity and comparability.
• Liability disclosures: Public reporting must include liability profiles, such as gross and net reserves, currency exposures, and duration, allowing stakeholders to assess the adequacy of asset-liability management.
• Asset-liability management (ALM) insights: Insurers must disclose how their investment strategies align with liabilities, along with stress-testing results, liquidity management measures, and risk mitigation practices.
• Uniform reporting template: A standardised format will ensure consistency across the sector and support meaningful comparisons.

These requirements are planned to be effective from 31 December 2025. Although enhanced disclosures may require further data integration and reporting infrastructure, the benefit is greater stakeholder confidence which is a key advantage in an increasingly competitive global insurance marketplace.

Key takeaways

Collectively, these proposals underscore Bermuda’s commitment to high regulatory standards, robust governance, and safeguarding policyholder interests. From direct supervision of holding companies to thorough vetting of investment strategies and transparent public reporting, the BMA is signalling that Bermuda-based insurers must strive for best-in-class risk management.

For senior executives and boards, this is an opportunity to refine governance frameworks, strengthen capital planning, and reinforce stakeholder trust. Organisations that move quickly to adopt these principles may find themselves well-placed in an increasingly competitive global insurance market.

Need more guidance?

For further guidance on adapting to these changes, please email us – info@4-most.co.uk.