Senior executives at insurers may have to spend more time, or possibly live, on Bermuda, following more stringent rules.
The Bermuda Monetary Authority (BMA) has published a consultation paper outlining proposed changes to the country’s insurance regulatory regime.
According to the changes, commercial insurers incorporated in Bermuda will need to establish their head office in Bermuda.
The BMA has said it will take into account a number of factors when deciding this, including the location where management meets to effect policy decisions of the commercial insurer, the residence of the senior officers and directors and where board meetings take place.
Bill Bailey, EY partner and Bermuda tax leader, said: “The head office requirements and outsourcing limitations will impact some smaller re/insurers, but many will not need to change. However, any re/insurers that replace professional outsourced providers by sharing staff across a wider international insurance group will need to be cognisant of unintended tax consequences.
“This is another reason why decisions relating to the Bermuda re/insurer should be made on island. Bermuda could well see more insurance executives living or spending more time here because of this.”
The rules, which come in response to the European Insurance and Occupational Pension Authority’s (EIOPA) final report on Bermuda’s full Solvency II equivalence, also include more public disclosures similar to Europe’s solvency and financial condition report.
Andrew Smith, EY executive director, said: “The proposed changes are significant in that they clearly align to the caveats noted by EIOPA in its assessment, and strongly suggest that the BMA intends to have all commercial insurance classes be judged as equivalent with Solvency II.
“Bermuda’s current regulations have different requirements or implementation timelines for different classes of insurers. Under the BMA’s proposals, some smaller re/insurers may find regulatory harmonisation challenging, and some long-term (life) companies could find the revised timelines difficult to meet. However, in the long run, increased international recognition should benefit this jurisdiction’s market as a whole.”
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