Consultation Paper on New Insurers and Insurance Market Place (2019-05-14)

Summary

This is a Bermuda Monetary Authority consultation paper proposing new regulatory classes for insurers and a new category of insurance intermediary. It seeks industry feedback on frameworks for a fully collateralised reinsurer class (Collateralised Insurers), an innovation class for digital-asset-based insurance business (Class IIGB), and regulation of InsurTech insurance market places, along with associated three-year phased fee schedules.

• Collateralised Insurers: A new Limited Purpose Insurer class allowing transactions with unrated non-affiliate cedants, broader collateral sources, permanent regulatory capital (higher of $250K floor or risk-based operational risk charge), head office requirements under Section 8C, public filing of financial statements and Declaration of Compliance, and annual filing of E&O insurance policy and stress test if claiming the E&O capital credit.
• Class IIGB: A non-sandbox innovation class primarily for insurers incorporating digital assets, requiring a risk-based capital requirement resembling BSCR-SME at 99% TVaR, head office requirements, public filing of financial statements, and generally requiring premiums and claims to be settled in the same digital asset as the contract.
• Insurance Market Places: Proposed to be regulated as insurance intermediaries, with emphasis on fit and proper requirements for controllers/officers, governance, risk management, and operational/technology/cyber risk controls; market places providing clearing services may require an insurer license.
• Fees: Proposed registration and annual fees for Collateralised Insurers, Class IIGB insurers, and insurance market places are phased over a three-year transitional period (2019-2021), based on collateral assets, gross premiums written, or transaction volume respectively.

The paper invites comments from the insurance industry and other interested persons on all proposals, to be submitted to the Authority by a stated deadline. No rules are yet final; the framework described is proposed and subject to change following consultation.

Key obligations

• Interested persons must submit comments on the proposals to innovate@bma.bm no later than Wednesday, 12 June 2019
• If licensed as a Collateralised Insurer claiming the E&O indemnity capital credit, the insurer must file annually with the Authority a copy of its E&O insurance policy(ies) and a stress test demonstrating how the insurance would respond to relevant operational risk
• Proposed Collateralised Insurers and Class IIGB insurers would be required to meet head office requirements under Section 8C of the Insurance Act 1978, in accordance with proportionality
• Proposed Collateralised Insurers and Class IIGB insurers would be required to publicly file audited financial statements (US GAAP, IFRS, or other recognised GAAP) and a Declaration of Compliance
• Where a Class IIGB insurer's contract allows claims to be settled in a digital asset, the Authority would generally require premiums to be paid in that same digital asset

Applies to

Special Purpose Insurers (SPIs), Collateralised Insurers, Class 3 insurers, Segregated Account Companies, Class IIGB insurers, insurance intermediaries, insurance market places, insurers writing Long-Term or General Business

Deadlines

• Wednesday, 12 June 2019: Deadline for submitting comments on the consultation paper's proposals to innovate@bma.bm