Notice - Insurance - Long-Term - Prior Approval of New Long-Term Block Reinsurance Transactions (2025-04-02)

Summary

This BMA Notice updates an earlier 8 April 2024 Notice on prior approval of long term block reinsurance transactions. It clarifies which transactions fall within the prior approval requirement and provides guidance on reconciling differences between a ceding company's Total Asset Requirement (TAR) and the Bermuda Economic Balance Sheet (EBS) TAR.

• Who it applies to: Long term (life) commercial (re)insurers in Classes C, D and E (referred to as relevant insurers).
• What is in scope: New block reinsurance transactions and modifications to existing block transactions, including flow (future premium) and in-force business such as pension risk transfer, fixed and fixed index annuities, variable annuities, and whole life or universal life policies.
• What is out of scope: Traditional mortality/morbidity solutions such as yearly renewable term reinsurance, longevity swaps and stop loss coverage for biometric risks.
• Prior approval requirement: Relevant insurers must seek BMA prior approval for all in scope block transactions, in addition to existing 'material change' approval requirements under the Insurance Act 1978.
• Information to be submitted: Documentation used internally by the insurer for underwriting, risk assessment and governance review, covering strategic rationale, transaction economics, underwriting/investment strategy, reinsurance/collateral/investment agreements, solvency and stress testing impact, TAR under both Bermuda and cedant regulatory bases, and governance/risk management including asset liability management.
• TAR reconciliation detail: Insurers must explain and reconcile material differences between the cedant's TAR and the Bermuda EBS TAR at a granular level, including capital requirement drivers, target solvency ratios, excess capital/surplus, and best estimate liabilities and risk margin, supported by a detailed attribution analysis (set out in the Appendix).
• Engagement expectations: BMA encourages early notification and pre-application discussions (including a 'deal pipeline' approach) with supervisory teams; where engagement is proactive and documentation complete, BMA expects to reach a decision within two to four weeks, though incomplete submissions may take longer.

The Notice states that this process is not intended to create new documentation requirements beyond what the Insurance Code of Conduct already requires for oversight, risk management and internal controls; insurers should submit the same materials used in their own internal decision making, supplemented where helpful by a cover sheet.

Key obligations

• Long term (life) commercial insurers in Classes C, D and E must obtain BMA prior approval before entering into new long term block reinsurance transactions.
• Relevant insurers must obtain BMA prior approval for modifications to existing block reinsurance transactions.
• Insurers must submit to the BMA the same internal documentation used in underwriting, risk assessment and governance review of the transaction, covering strategic rationale, economics, strategy, agreements, solvency impact, TAR, and governance/risk management.
• Insurers must provide an explanation and reconciliation of material differences between the cedant's TAR and the Bermuda EBS TAR at a granular level, including a detailed attribution analysis as described in the Appendix.
• Insurers are encouraged to notify BMA supervisory contacts of envisaged block transactions as early as possible, including through pre-application or deal pipeline discussions.

Applies to

long-term (life) commercial insurers (Classes C, D and E), long-term (life) commercial reinsurers

Related documents

• This document replaces Notice - Prior Approval of New Long-Term Block Reinsurance Transactions (2024-04-08)