Guidance Notes - Assessment of Shareholder Controllers and Controllers (September 2014)

Summary

This is Bermuda Monetary Authority guidance explaining how it assesses shareholder controllers and controllers of registered insurers under the Insurance Act 1978, and what notifications and documentation are required under Sections 30D, 30E and 30J. It applies to insurers and reinsurers registered under the Act and to shareholders (existing or prospective) who reach or change control thresholds of 10%, 20%, 33% or 50%.

• Section 30D (private companies): A person must notify the Authority in writing before becoming a 10%, 20%, 33% or 50% shareholder controller of an insurer whose shares (or its parent's) are not publicly traded; the Authority has 45 days to object or the period lapses without objection.
• Section 30E (public companies): A person who becomes a 10%, 20%, 33% or 50% shareholder controller of an insurer whose shares (or its parent's) are traded on a recognised stock exchange must notify the Authority within 45 days after becoming such a controller.
• Exchange Control Act requirements: Transfers of equity securities to or from non-residents in a Bermuda Exempted Company require prior Authority approval as Controller of Foreign Exchange, with specified transfer details and a personal declaration form for holders of 10% or more.
• Section 30J (controller changes): Registered insurers must notify the Authority of changes to controllers; commercial insurers (Class 3A, 3B, 4, C, D, E) must notify within 45 days of becoming aware of the change, while Class 1, 2, 3, A, B and Special Purpose Insurers must file changes together with their annual financial statements.
• Notification content: Notifications must include an executive summary of ownership structure, support documentation depending on whether the controller is a person, entity, trust or partnership, details of any effect on the insurer's class of registration, a completed personal declaration form, and the applicable application fee.
• Fitness and propriety assessment: The Authority assesses shareholder controllers and controllers against the Minimum Criteria for Registration and the Insurance Act Statement of Principles, including personal conduct, criminal history, prior regulatory sanctions and overall risk to the jurisdiction.
• Enforcement powers: The Authority can object to a person becoming or remaining a controller (Sections 30G and 30H), restrict share transfers and voting or payment rights (Section 30I), direct an insurer to remove a controller (Section 32), impose fines for failure to notify (Section 32D), and seek injunctions (Section 32L).

The guidance is not exhaustive and the Authority may revise it from time to time, with material changes published as a new version.

Key obligations

• A prospective shareholder controller of a privately held insurer must notify the Authority in writing before becoming a 10%, 20%, 33% or 50% controller and await the 45 day non-objection period.
• A person becoming a 10%, 20%, 33% or 50% shareholder controller of a publicly traded insurer must notify the Authority within 45 days after becoming such a controller.
• Commercial insurers (Class 3A, 3B, 4, C, D, E) must notify the Authority within 45 days of becoming aware that a person has become or ceased to be a controller.
• Class 1, Class 2, Class 3, Class A, Class B and Special Purpose Insurers must file any controller changes at the same time as their annual financial statements filed under Section 17.
• Transfers of equity securities to or from non-residents of a Bermuda Exempted Company require prior Exchange Control approval from the Authority.
• Notifications under Sections 30D, 30E and 30J must include specified supporting documentation, including a completed personal declaration form for individual controllers.
• Failure to notify or to comply with a Notice of Objection under Section 30G or 30H may result in fines, imprisonment or civil penalty.

Applies to

insurers, reinsurers, shareholder controllers, controllers, registered persons under the Insurance Act 1978

Deadlines

• 45 days: Authority's period to object (or lapse without objection) to a person becoming a shareholder controller under Section 30D for private companies.
• not later than 45 days after becoming a controller: Deadline for a shareholder to notify the Authority under Section 30E once they become a 10%, 20%, 33% or 50% controller of a publicly traded insurer.
• 28 days: Period allowed for an insurer or controller to make written representation after receiving the Authority's preliminary notice of objection.
• no later than 45 days after becoming aware: Deadline for commercial insurers (Class 3A, 3B, 4, C, D, E) to notify the Authority of controller changes under Section 30J.
• at the same time as annual financial statements: Deadline for Class 1, Class 2, Class 3, Class A, Class B and Special Purpose Insurers to file controller changes.