Insurance laws Bermuda (BOT)
Insurance laws Bermuda (BOT)
Bermuda's insurance industry is a cornerstone of its economy and is a world-renowned center for reinsurance and captive insurance. As a British Overseas Territory, its legal framework is based on English common law, but it has developed a highly sophisticated and independent regulatory regime.
Regulatory Authority
The Bermuda Monetary Authority (BMA) is the integrated regulator for the financial services sector in Bermuda, including insurance. Its primary role is to supervise, regulate, and inspect financial institutions to ensure their solvency and stability. Key responsibilities include:
Licensing and registration of insurance companies, brokers, agents, and managers.
Monitoring financial returns and conducting on-site visits and inspections.
Enforcing compliance with the Insurance Act 1978 and related regulations.
Key Legislation
The foundation of Bermuda's insurance regulation is the Insurance Act 1978, along with its numerous regulations, rules, and guidance notes. This act applies to any person carrying on insurance business in or from within Bermuda. The legislation has been continuously updated to align with international standards, such as the EU's Solvency II Directive, for which Bermuda has been recognized as a fully equivalent jurisdiction.
Categories of Insurance Licences
The Insurance Act 1978 created a detailed classification system for insurers, with different regulatory requirements for each class. These categories are crucial to Bermuda's role as a major hub for captive and commercial insurance.
Class 1, 2, 3, 3A, and 3B Insurers: These are generally captive insurers, which are companies created to self-insure the risks of their parent company or a specific group. The distinctions between these classes relate to the percentage of "unrelated business" they write and the size of their premiums. They have lower capital requirements and are subject to less rigorous oversight than commercial insurers.
Class 4 Insurers: This class is for large, commercial insurers, particularly those involved in excess liability and property catastrophe reinsurance. They face the most stringent regulatory and solvency requirements.
Class A and B Insurers (Long-Term): These are for life and annuity business, with Class A for captives and Class B for commercial insurers.
Special Purpose Insurers (SPIs): These are typically used for insurance-linked securities and catastrophe bonds. They are fully collateralized and have a specific legal and regulatory framework.
Mandatory Insurance
Bermuda law mandates several types of insurance for its residents and businesses:
Health Insurance: Under the Health Insurance Act 1970, employers are legally required to provide health insurance coverage for their employees and their employees' non-employed spouses.
Motor Third-Party Liability: This is a compulsory insurance for all vehicles operating on public roads, covering damages for bodily injury and property damage to third parties.
Other Key Regulations
Solvency Requirements: All commercial insurers are required to meet capital adequacy standards based on the Bermuda Solvency Capital Requirement (BSCR) model or an internal model approved by the BMA.
Non-Admitted Insurance: The Insurance Act generally prohibits the conduct of insurance business in Bermuda unless the person carrying out such activities is registered under the Act.
Consumer Protection: The BMA also has a market conduct regime to ensure that insurance providers act with integrity and in the best interests of their customers.
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