Consultation Paper - Guidance Notes for Recovery Planning Requirements (2025-04-11)

Summary

This is a Bermuda Monetary Authority consultation paper setting out draft Guidance Notes that explain how the Authority expects insurers to comply with the Insurance (Prudential Standards) (Recovery Plan) Rules 2024. It is not yet final guidance; it is being circulated for industry comment and describes the Authority's expectations on the structure, content, governance and maintenance of Recovery Plans.

• Scope: Applies to insurers (including reinsurers and insurance groups for which BMA is group supervisor) assessed as economically important, systemically significant, or whose failure could threaten Bermuda's financial stability, based on criteria such as domestic business, three-year rolling average assets of at least $10 billion, gross written premiums of at least $5 billion, enhanced supervisory monitoring, or BMA being group-wide supervisor.
• Recovery Plan content: In-scope insurers must produce a Recovery Plan containing, at minimum, an executive summary, description of the insurer, governance arrangements, trigger frameworks, recovery options, escalation and activation processes, and a communication plan.
• Proportionality: The Authority may allow phased development, alignment with existing ERM tools, or less formal recovery planning measures depending on the insurer's scale and complexity.
• Group plans: Insurers may apply in writing to rely on a group Recovery Plan filed with a group-wide supervisor instead of preparing a standalone plan, subject to BMA approval and continued BMA access to relevant group plan sections.
• Governance and accountability: Senior management and the board remain accountable for the Recovery Plan even where its development is outsourced; outsourcing policies must be satisfied and oversight demonstrated.
• Maintenance and testing: The Recovery Plan must be periodically tested and reviewed, and updated at least every three years or sooner following material changes, with more frequent updates possible if the Authority requires them in writing.
• Notification to BMA: Insurers are expected to notify the Authority in anticipation of a likely trigger breach, immediately upon an actual breach, when the plan is activated, periodically during activation, and upon successful recovery.

Because this is a consultation paper, the requirements described reflect the Authority's proposed expectations for interpreting the 2024 Rules and may change before finalisation; insurers in scope will be formally notified by the Authority of the requirement to prepare a Recovery Plan.

Key obligations

• In-scope insurers must prepare a formal Recovery Plan covering the minimum content areas set out in the guidance (executive summary, insurer description, governance, trigger framework, recovery options, escalation and communication plan)
• Insurers relying on a group Recovery Plan must submit a written application to BMA, accompanied by the group plan and a rationale, and obtain BMA approval before adopting it in place of a standalone plan
• Senior management and the board must retain accountability for the Recovery Plan even where its development is outsourced, and must ensure outsourcing policies are satisfied
• Insurers must review and update the Recovery Plan at least once every three years, or sooner upon material change in financial position, strategy, business or risk profile, or more frequently if BMA requires in writing
• Insurers must notify BMA in anticipation of a likely breach of a recovery trigger, immediately upon an actual breach, when the plan is activated, periodically during activation, and upon successful recovery and exit from the recovery zone
• Insurers with individual entity Recovery Plans must ensure recovery options, indicator frameworks and governance structures align with the group-level plan
• Where individual entity plan details are documented only by cross-reference to a group plan, the insurer must provide BMA access to the relevant group plan sections upon request within a reasonable time

Applies to

insurers, reinsurers, insurance groups for which BMA is the group supervisor, commercial insurers

Deadlines

• at least once every three years: Recovery Plan should be reviewed and updated at least once every three years, or sooner if there is a material change in financial position, strategy, business or risk profile