BMA targets Q4 2026 launch for parametric insurer class

The Bermuda Monetary Authority (BMA) has confirmed plans to introduce its new Parametric Special Purpose Insurer (PSPI) class in the fourth quarter of 2026 as it finalises the regulatory framework following industry consultation.

In a stakeholder letter published on September 16, the regulator said it is drafting an amendment to the Insurance Act 1978 to implement the new regime, with comprehensive guidance on the final requirements expected to be published at the same time.

The BMA has also provided greater clarity over the scope of the regime, confirming that qualifying parametric risk-transfer arrangements may include contracts structured as reinsurance, derivatives or swaps, provided they meet applicable statutory and regulatory requirements.

“The Authority will prioritise the substance of the risk transfer over the contractual form,” it said.

Separately, all parametric contracts written by a PSPI will be required to demonstrate insurance risk-transfer characteristics and be supported by appropriate governance, transparent triggers and collateralisation arrangements.

The BMA also confirmed that the new class will complement rather than replace existing insurance classes.

Insurers already writing parametric risks under other licence classes will be able to continue doing so without re-licensing or re-domiciling that business into a PSPI.

Existing Special Purpose Insurers (SPIs) will meanwhile be able to apply to reclassify as PSPIs. The regulator is still considering whether introductory fee waivers for new PSPIs should also apply to those conversions.

The BMA has also left the door open for SPIs to write both indemnity and parametric business. Such arrangements may be permitted on a case-by-case basis, taking into account the nature, scale and complexity of the activities and the adequacy of the insurer’s prudential, operational and governance arrangements.

On transaction approvals, the regulator said its preliminary view is that transactions falling within a PSPI’s approved business plan would not require further pre-approval. Transactions falling outside those parameters would require prior engagement with the BMA.

Collateral requirements are also still being refined. The BMA said eligible collateral should be sufficiently high quality, readily realisable and enforceable, with cash, cash equivalents and letters of credit among the acceptable forms.

However, it is reviewing whether a limited expansion to other assets may be appropriate after stakeholders asked whether reinsurance and guarantees could also qualify.

Further guidance will address areas including the definition of “sophisticated participants”, expectations around third-party validators and governance and product suitability.

The BMA said it would continue considering stakeholder feedback as it finalises the framework.

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