Notice
Notice - Prior Approval of New Long-Term Block Reinsurance Transactions (2024-04-08)
Issued 2024-04-08View on BMA's website Source document
Summary
This BMA notice clarifies the Authority's existing requirement, in place since January 2023, that all new long-term block reinsurance transactions entered into by relevant commercial life (re)insurers must receive the BMA's prior written approval before closing. It also confirms that this prior approval requirement extends to modifications of existing block transactions, and explains what information and documentation the BMA expects to review as part of its approval process.
- Who is covered: Long-term (life) commercial (re)insurers in Classes C, D and E ('relevant insurers'), including transactions such as pension risk transfer and both flow and nonflow block business.
- Prior approval scope: Applies to all new block transactions and to modifications of existing block transactions, in addition to (not instead of) approval requirements for 'material changes' under the Insurance Act 1978.
- Documentation expected: Insurers should submit the same information used internally in underwriting, risk assessment and governance review, covering strategic rationale, transaction economics, reinsurance/collateral/investment agreements, solvency and stress-testing impact, and total asset requirements (TAR) under both Bermuda and the cedant's regulatory basis.
- TAR detail: Submissions on total asset requirements should include capital requirement drivers, target solvency ratios tied to capital management policy, excess capital/surplus, best estimate liabilities and risk margin, and a reconciliation of material differences between the cedant's and Bermuda's TAR.
- Appendix checklist: A detailed appendix lists further items insurers may consider providing, including counterparty background, funding, fee arrangements, liability and asset profiles, governance minutes, actuarial commentary, and confirmation of whether the cedant needs its own regulatory approval.
- Engagement expectations: The BMA encourages preapplication or 'deal pipeline' discussions and early notification of envisaged transactions; where engagement is proactive and documentation complete, the Authority generally expects to decide within two to four weeks, though incomplete requests 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 and risk management, but rather to formalise how existing information should be presented to the BMA to support its case-by-case, risk-based review and cross-border regulatory coordination.
Key obligations
- Relevant long-term commercial (re)insurers (Classes C, D and E) must request and receive the BMA's prior written approval before entering into any new long-term block reinsurance transaction.
- Relevant insurers must also obtain the BMA's prior approval for modifications to existing block transactions.
- Requests for prior approval must be submitted to the BMA in a timely manner before the transaction's proposed closing date.
- Insurers must provide documentation to the BMA consistent with that used internally in underwriting, risk assessment and governance review, including strategic rationale, economics, agreements, solvency/stress-testing impact and total asset requirement analysis (with the minimum items and attribution steps described in the Appendix).
Applies to
long-term (life) commercial (re)insurers (Class C), long-term (life) commercial (re)insurers (Class D), long-term (life) commercial (re)insurers (Class E)
Deadlines
- before the transaction's proposed closing date: Insurers must submit requests for BMA prior approval of block transactions in a timely manner before the proposed closing date.
- two to four weeks: Expected BMA decision timeframe where requests are supported by proactive engagement and complete documentation.