Insurance Act 1978

Summary

The Insurance Act 1978 is Bermuda's principal insurance legislation, establishing the framework under which the Bermuda Monetary Authority (BMA) registers, classifies, supervises and, where necessary, sanctions or winds up insurers and insurance intermediaries operating in or from Bermuda. It covers the full regulatory lifecycle: registration and classification, ongoing prudential and reporting requirements, group supervision, controller and material-change notifications, disciplinary powers, and insolvency/winding-up procedures.

Registration and classification: Requires insurers to be registered and classified (e.g. Class 1-4, Class 3A/3B, Collateralized/Special Purpose, Class A-E for long-term business, innovative Class IGB/ILT/IIGB/IILT insurers), and requires insurance managers, brokers, agents, salesmen and insurance marketplace providers to be separately registered.
Prudential standards: Empowers the Authority to set and adjust enhanced capital requirements, statutory capital and surplus, and insurance reserves, and to require recovery plans from insurers and insurance groups.
Financial reporting: Requires insurers and registered intermediaries to prepare and file statutory (and, where applicable, GAAP) financial statements, declarations of compliance, and actuarial/loss reserve specialist opinions, and to appoint approved auditors and actuaries.
Governance and location requirements: Requires certain classes of insurer to maintain a head office and principal representative in Bermuda, keep records in Bermuda, and restricts non-insurance business, dividend payments, capital reductions and loans to directors.
Group supervision: Establishes a group supervision regime including designation of insurance holding companies, appointment of group actuaries and auditors, and group-level capital and recovery-plan requirements, including provisions for Internationally Active Insurance Groups (IAIGs).
Notifications and change of control: Requires notification to the Authority of changes in shareholder control, changes of officers, material changes to an insurer, insurance group or insurance marketplace provider, and cyber reporting events.
Enforcement and discipline: Gives the Authority powers of investigation, entry and information-gathering, and disciplinary tools including civil penalties, public censure, prohibition orders and injunctions.
Insolvency and cancellation: Sets out solvency margin requirements, winding-up procedures for insurers (including those with long-term business), and grounds and process for cancellation of registration.

The Act also requires registered persons to conduct business prudently and with integrity, including compliance with Bermuda's anti-money laundering and anti-terrorist financing laws (Proceeds of Crime Act 1997, Anti-Terrorism (Financial and Other Measures) Act 2004, and related regulations) and any applicable international sanctions, and to maintain sufficient capital, indemnity insurance and adequate records and systems of control.

Key obligations

Insurers must be registered with, and classified by, the Authority before carrying on insurance business in or from Bermuda.
Insurance managers, brokers, agents, salesmen and insurance marketplace providers must be registered with the Authority.
Insurers and insurance groups must maintain eligible/statutory capital and surplus sufficient to meet enhanced capital requirements and minimum solvency margins.
Insurers must prepare, have audited, and file statutory financial statements and returns with the Authority, including declarations of compliance.
Certain classes of insurer must appoint an approved loss reserve specialist and/or approved actuary and obtain actuarial certificates of long-term business liabilities.
Insurers in specified classes must maintain a principal office and principal representative, and a head office, in Bermuda, and keep business records in Bermuda.
Registered persons must notify the Authority of changes in shareholder control, changes of officers, material changes to the insurer or insurance group, and cyber reporting events.
Insurance managers, brokers, agents and insurance marketplace providers must maintain adequate professional indemnity insurance cover.
Registered persons must maintain adequate accounting records and systems of control and conduct business with integrity, in compliance with AML/CFT legislation, the Authority's codes of conduct, and applicable international sanctions.
Insurers must obtain Authority approval or comply with restrictions before paying dividends or reducing capital where solvency requirements are affected.
Designated insurance holding companies and insurance groups subject to group supervision must comply with Authority Rules, appoint approved group auditors/actuaries, and prepare recovery plans where required.

Applies to

insurers (Class 1, Class 2, Class 3, Class 3A, Class 3B, Class 4, Collateralized Insurers, Special Purpose Insurers), long-term business insurers (Class A, Class B, Class C, Class D, Class E), innovative insurers (Class IGB, Class ILT, Class IIGB, Class IILT), insurance managers, insurance brokers, insurance agents, insurance salesmen, insurance marketplace providers, innovative intermediaries (IAs, IBs, IMs, IMPs), insurance holding companies, insurance groups, including Internationally Active Insurance Groups (IAIGs)

Summary

Key obligations

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