Consultation Paper - Proposed Prudential Rules and Technical Standards for Class IILT Insurers, Enhancements for Class IIGB Insurers, Insurance Accounts Regulations 1980 and Insurance Returns and Solvency Regulations 1980 (2024-12-31)

Summary

This is a Bermuda Monetary Authority consultation paper proposing a new prudential and technical rules framework for Class IILT (innovative long-term) insurers, along with housekeeping enhancements to the Class IIGB (innovative general business) regime and to the Insurance Accounts Regulations 1980 and Insurance Returns and Solvency Regulations 1980. It is a draft proposal, not yet in force, and the BMA is inviting industry comments before finalising the rules.

• Class IILT framework: Formalises regulatory requirements for Class IILT insurers (innovative long-term insurers using digital assets), including accounting standards, digital asset valuation rules, appointment of an approved actuary, head office requirements, a BSCR-SME-based risk capital model, annual and quarterly filings, a Solvency Self-Assessment, and AML/sanctions obligations.
• Digital asset specific rules: Where claims are settled in a digital asset, premiums and additional capital generally must be collected in the same digital asset; capital charges apply for mismatches, third-party custody, self-custody, and other digital asset risks (volatility, liquidity, counterparty, operational, technological, regulatory).
• Class IIGB enhancements: Proposed amendments align Class IIGB definitions and reporting with Class IILT and commercial classes, distinguish custodied vs self-held digital asset risk, revise the stablecoin definition, add a new Schedule IIG for custodian counterparty risk, and require more information on ring-fenced digital assets and liabilities.
• Regulations housekeeping: Amendments to the Insurance Returns and Solvency Regulations 1980 and Insurance Accounts Regulations 1980 align them with the current Electronic Statutory Financial Return (ESFR) System and remove outdated references to innovative insurers; the BMA states these changes impose no new filing requirements for existing ESFR users.
• Dual licensing: Class IILT insurers also conducting activities licensable under the Digital Asset Business Act 2018 or Digital Asset Issuance Act 2020 must obtain the relevant additional licence, and will be subject to consolidated supervision by the BMA.

Interested parties, including the insurance industry, are invited to submit comments on the proposals to the BMA by 28 February 2025. No rules have yet taken effect; this document only signals the BMA's intended direction and seeks feedback.

Key obligations

• Interested persons must submit comments on the proposed Class IILT framework and related housekeeping amendments to RiskAnalytics@bma.bm no later than 28 February 2025.
• Class IILT insurers engaging in DABA or DAIA-licensable digital asset activities will be required to obtain the appropriate additional licence alongside their insurance licence.
• Class IILT insurers will be required to appoint an approved actuary to opine annually on the adequacy of long-term insurance reserves.
• Class IILT insurers will be required to submit annual filings including a Solvency Self-Assessment report and qualitative disclosures (underwriting/investment strategy, asset-liability matching, risk registers, digital asset custody policy, AI governance policies, stress and scenario testing).
• Class IILT insurers will be required to submit quarterly financial reports to the BMA in addition to annual filings.
• Class IILT insurers must generally collect premiums and additional capital in the same digital asset used to settle claims under a contract.

Applies to

Class IILT insurers, Class IIGB insurers, insurers using the Electronic Statutory Financial Return (ESFR) System, long-term insurers, digital asset business licensees under DABA and DAIA

Deadlines

• 28 February 2025: Deadline for industry and interested persons to submit comments on the consultation paper to RiskAnalytics@bma.bm.