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23 January 2025News

BMA to propose more transparency over life reinsurers’ investments

The Bermuda Monetary Authority will propose enhanced public disclosure requirements on investments for long-term commercial insurers, according to the regulator’s 2025 business plan.

The BMA will also provide further guidance on the application of the prudent person regime for investment management, the annual document said.

And it will also consider enhancing its treatment of structured products and loans.

The changes, which are mainly directed at Bermuda’s burgeoning long-term re/insurance sector, come after concerns were raised about the owners of companies in the sector investing in illiquid assets and in affiliated businesses.

They also follow the launch of two consultation papers by the BMA in early December.

The consultations appeared to be designed to improve regulation of life re/insurance groups and to clarify who should regulate insurers which are either headquartered in Bermuda or which are part of a larger group which has business outside of the insurance industry.

Both areas have come under increased scrutiny in the wake of the 777 Re crisis, which underscored the concerns of regulators about the risks embedded in offshore reinsurers’ investment strategies.

777 Re was plunged into crisis after taking on significant exposure to assets connected to Josh Wander’s eponymous Miami-based investment firm, from football clubs to budget airlines. US insurers that had ceded billions of dollars in assets to the group were caught up in the fallout.

In its 2025 business plan, the BMA also said it would undertake a review of the Insurance Code of Conduct and the Operational Cybersecurity Code of Conduct to consider adding specific guidelines on the use of Artificial intelligence.

It said it would also continue to ensure its regulatory framework meet changing standards while ensuring they remain “pragmatic and appropriate” for the unique nature of the island’s financial markets.

The BMA also said it would continue to develop and reinforce its relationship with other regulators and continue to participate actively in the work of international standard-setting bodies to establish regulatory best practices.

“A core objective in 2025 is to keep in step with international climate risk and sustainability developments to ensure that the BMA has an appropriate regulatory response to the risks faced by commercial insurers in both areas,” the report said.

“The BMA will continue engaging and participating in supervisory colleges, on-site examinations and thought leadership panels to ensure that regulatory standards remain robust and contribute to the strength of Bermuda’s financial services sector.”

The BMA said it planned to transpose and embed the common framework for internationally active insurance groups and the holistic framework for systemic risk into the Bermuda commercial regulatory regime and continued participation in the International Association of Insurance Supervisors Targeted Jurisdiction Assessment of the Holistic Framework.

It said it would further integrate climate and sustainability  into the regulatory and supervisory frameworks, focusing on climate change and protection gaps.

“We will consult with the commercial sector on a framework for climate risk financial disclosures,” the BMA said. “In 2025, the Authority will assess the need to conduct an additional climate risk assessment survey for the commercial insurance sector.”

BMA chief executive officer Craig Swan said of the business plan: “The BMA is prepared to transform challenges into opportunities on the road to continued success, embracing the famous quote: ‘Success is a journey, not a destination.’“

The BMA also said it would continue to strengthen the insurance group supervision regime.

It also plans to build on the “foundational work” in the insurance sector and will streamline and enhance the Innovation Hub framework for financial technology.

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