Stakeholder Letter - Consultation Paper - Proposed Instructions and Guidance on the Application of the Prudent Person Principle (2026-06-09)

Summary

This is a stakeholder letter from the BMA summarising industry feedback on its December 2024 Consultation Paper on the Prudent Person Principle (PPP) and setting out the Authority's responses. It confirms how proposed enhancements to the Insurance Code of Conduct and the Insurance (Group Supervision) Rules 2011 will be finalised and implemented, rather than introducing new rules itself.

• Proportionality: BMA confirms PPP compliance will continue to be assessed case-by-case, applying the Code's existing Proportionality Principle, which is reaffirmed in the updated Guidance Note.
• No sector bifurcation: The PPP will apply uniformly across long-term and property and casualty insurers; no separate regime will be created for property and casualty business.
• Group structures: Entities may rely on centralised group governance, but the legal entity board must ensure group policies suit its specific business and must be able to demonstrate it retains effective control and oversight.
• Look-through approach: Investment risk assessment at portfolio or fund level remains acceptable, but insurers must still understand the risks of underlying individual assets consistent with the Insurance (Prudential Standards).
• GAAP reliance: Reliance on GAAP valuation alone will not be sufficient to demonstrate PPP compliance; insurers must show they have considered all PPP elements based on proportionality and applicability.
• Transition timing: The amended Code will take effect upon issuance, but in-scope insurers have until 31 December 2026 to become compliant with the amendments.

The letter is directed at Bermuda's regulated commercial insurers (Classes 3A, 3B, 4, C, D and E) and insurance groups for which the BMA acts as Group Supervisor, ahead of finalised Instructions and Guidance being issued.

Key obligations

• In-scope insurers must be compliant with the amended Insurance Code of Conduct provisions on the Prudent Person Principle by 31 December 2026.
• Insurers must demonstrate consideration of all PPP elements based on proportionality and applicability rather than relying solely on GAAP valuation procedures to evidence compliance.
• Legal entity boards within group structures must be able to demonstrate they retain effective control and oversight of governance processes even where centralised group policies are used.

Applies to

Bermuda regulated commercial insurers (Classes 3A, 3B, 4, C, D and E), insurance groups for which the BMA is the Group Supervisor

Deadlines

• 31 December 2026: Deadline by which in-scope insurers must be compliant with the amendments to the Code implementing the Prudent Person Principle enhancements.
• upon issuance: The amended Code takes effect upon issuance of the finalised Instructions and Guidance.