BMA to integrate ESG into insurance regulation

18-01-2022

BMA to integrate ESG into insurance regulation

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The Bermuda Monetary Authority is to integrate environmental, social and governance considerations into its regulation of the insurance industry, its 2022 business plan reveals. 

The BMA will provide the insurance sector with “comprehensive guidance on the governance aspects of climate change”, including expectations for boards, risk management, insurer self-solvency assessments considering climate-related risks such as the transition to a low carbon environment and physical risks. It will also assess the insurance and investment fund sectors’ frameworks for opportunities and respective adjustment needed in the context of “green finance”.

The plan, outlining its objectives and initiatives for the year ahead, also states that it will be transposing the Common Framework for Internationally Active Insurance Groups (IAIG) and Holistic Framework for Systemic Risk into the Bermuda commercial regulatory regime.

“Regarding the latter, the authority will continue its work on recovery and resolution for insurers (particularly for IAIGs, large domestic insurers and insurance groups). This work will continue to be guided by international developments, including work done at the International Association of Insurance Supervisors (IAIS) level,” it states.

Other initiatives include identifying the impact of recent insurance accounting developments on its reporting framework; implementing the market conduct supervision framework to enhance policyholder protection; completing the European Insurance and Occupational Pensions Authority (EIOPA) Equivalence Monitoring Exercise; and analysing Solvency II proposals and potential implications for the Bermuda framework.

The authority also announced plans for several thematic thought leadership materials to be published during the year. They include reports on alternative capital, captives, catastrophe risk and cyber (one each for both operational resilience and underwriting). It also plans a discussion paper on the use of artificial intelligence in the insurance sector. 

Elsewhere in the document, the BMA outlines plans for other sectors and across industries: further roll-out of its anti-money laundering/terrorist financing service provider training course; opening up of the innovation hub and sandbox across financial services sectors; joint regulatory technology pilots with industry; and the modernisation of specific legislation within the investment business and banks and deposit companies regimes.

Craig Swan, BMA Chief Executive Officer, said, “While the past two years have humbled many forecasters, the BMA is optimistic about the year ahead and what we can accomplish. We know there will be challenges. This is a given for a forward-looking regulator—there is no ‘rinse and repeat’ cycle for financial services regulations.

“Yet, adversity sharpens creativity, opportunities can be borne out of threats, and small islands can transform challenges into solutions for the world.”

insurance, framework, risk, self-solvency, environmental, investment, insurers, North America

Bermuda Re