Under the Insurance Act 1978, as amended, long-term business means insurance business of any of the following kinds:
- effecting and carrying out contracts of insurance on human life or contracts to pay annuities on human life;
- effecting and carrying out contracts of insurance risks of the persons insured sustaining injury as the result of an accident or of an accident of a specified class or dying as the result of an accident or of an accident of a specified class or becoming incapacitated or dying in consequence of disease or disease of a specific class; and
- effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or endowment certificates or otherwise, whereby in return for one or more premiums paid to the insurer a sum or a series of sums is to be payable to the persons insured in the future.
So, long term re/insurance includes, but is not limited to, life insurance and annuity products, pensions and a vast array of other products, many of which have at their root, estate management, retirement planning, tax savings, wealth creation or financial security aims.
Any person seeking to carry out long-term re/insurance business from Bermuda is required to be registered under the Insurance Act, which stratifies such business into several classes – A, B, C, D, E, and ILT.
Classes A and B are known as “captives”, which means that the risks are related in nature. Class A insurers are wholly owned by one person and intend to carry on long-term business consisting only of insuring the risks of that person.
Class B insurers are wholly owned by two or more unrelated persons and intend to carry on long-term business where not less than 80 per cent of the premiums and other considerations written will be written for the purpose of insuring the risks of any of those persons.
Classes C, D and E are known as “commercial insurers” and are differentiated by total assets.
Class C insurers have total assets of less than $250 million. Class D insurers have total assets of $250 million to $500 million. Class E insurers have total assets of more than $500 million.
A Class ILT insurer carries on long-term re/insurance business in an innovative or experimental manner. The classification allows companies to experiment with new technologies and/or provide innovative products to a limited number of policyholders for a limited period of time.
This allows innovative insurers to provide insurance products and services to clients in a controlled risk space, with the BMA determining what legal and regulatory aspects of existing legislation apply.
Once the insurer successfully demonstrates the feasibility of their business model, it may apply to be registered as an insurer under one of the traditional classifications.
Bermuda is a growing long-term re/insurance center because it has access to relevant skills and expertise, has an established infrastructure — and enjoys easy access to the United States and Europe.
The island has a robust reputation as an able and powerful financial centre and has emerged as a domicile of choice for the re/insurance industry.
Additionally, there is a close working relationship between the Bermuda Government, the BMA and industry professionals.
It is noteworthy that the Bermuda International Long-Term Insurers and Reinsurers industry body has 66 members.
By the end of 2021, Biltir reported, members had contributed nearly $500 million to Bermuda’s economy through indirect and direct expenditure and members employ more than 600 people on the island, with 60 per cent being Bermudian.
The BMA is considered a world-leading regulatory outfit by the National Association of Insurance Commissioners, the esteemed US body of senior regulators.
NAIC has reaffirmed Bermuda as a qualified jurisdiction, ensuring continued efficacy in cross-border operations of Bermuda re/insurers in the US market.
On the regulatory side, every insurer that writes long-term business is required to make anti-money laundering filings.
The Proceeds of Crime Act 1997 and the Anti-Terrorism (Financial and Other Measures) Act 2004 establish a suspicious activity reporting regime providing for the disclosure, to the Financial Intelligence Agency, of a knowledge or suspicion of money laundering or terrorist financing.
Insurers are required to provide the BMA with the data required to determine the extent of an insurer’s exposure or potential exposure to money laundering and terrorist financing risks.
Insurers are also required to provide the insurer’s corporate governance framework, including but not limited to, employee training, knowledge, integrity and compliance with established AML policies and procedures.
The stage certainly seems set for the continued growth of Bermuda’s long-term re/insurance sector, an eventuality for which the island, regulator and industry professionals are now well-prepared.