Stakeholder Letter - Feedback on New Class of Insurers - Parametric Special Purpose Insurer (2026-09-16)

Summary

This is a stakeholder feedback letter from the Bermuda Monetary Authority responding to industry comments on its consultation for a proposed new insurer class, the Parametric Special Purpose Insurer (PSPI). It summarises the main issues raised by respondents and sets out the Authority's current thinking on each, ahead of finalising the regulatory framework.

• Continuity: Insurers currently writing parametric risk under other licence classes may keep doing so without needing to re-license into a PSPI.
• Reclassification: Existing Special Purpose Insurers (SPIs) may apply to reclassify as PSPIs, and the Authority is considering whether fee waivers for new PSPIs would extend to such reclassifications.
• Mixed business: SPIs wanting to write both indemnity and parametric business may be permitted to do so case-by-case, but must demonstrate adequate prudential, operational and governance frameworks for both lines.
• Scope: The PSPI regime will focus on the substance of risk transfer rather than contractual form, covering reinsurance, derivative or swap structures, provided insurance risk transfer characteristics, governance, transparent triggers and collateralisation are demonstrated. The PSPI is distinct from the Innovative Insurer General Business (IIGB) regime used for Digital Asset Business Act activity.
• Eligible participants: The Authority will issue guidance defining terms such as sophisticated participants.
• Collateral: Eligible collateral currently means cash, cash equivalents and Letters of Credit; the Authority is reviewing possible limited expansion to other asset types.
• Third-party validation: Applicants must show trigger methodology is well designed, data sources are independent and reliable, and settlement mechanics are transparent; further guidance on validator criteria will follow.
• Transaction approval: Transactions within an approved Business Plan will not require further pre-approval, but proposed transactions outside those approved parameters will require prior engagement with the Authority.

The Authority is drafting an amendment to the Insurance Act 1978 to implement the PSPI class, targeted for Q4 2026, alongside comprehensive supporting guidance. The framework remains under development, so requirements described here are the Authority's current intended approach rather than final binding rules.

Key obligations

• Insurers writing parametric risk under other licence classes may continue without re-licensing into a PSPI (no new obligation created).
• SPIs seeking to write both indemnity and parametric business must demonstrate adequate prudential, operational and governance frameworks for both lines to obtain case-by-case approval.
• PSPI applicants must demonstrate that parametric contracts have insurance risk transfer characteristics, appropriate governance, transparent triggers and collateralisation arrangements.
• PSPI applicants must show that trigger methodology is appropriately designed, data sources are independent and reliable, and settlement mechanics are transparent.
• PSPIs must obtain prior engagement with the Authority for any proposed transactions falling outside their approved Business Plan parameters.

Applies to

Special Purpose Insurers (SPIs), prospective Parametric Special Purpose Insurers (PSPIs), insurers writing parametric business, Innovative Insurer General Business (IIGB) licensees

Deadlines

• Q4 2026: Authority intends to complete drafting of an amendment to the Insurance Act 1978 to implement the PSPI class and to publish comprehensive supporting guidance.