Navigating Bermuda’s New Recovery Planning Requirements: A Roadmap for Commercial Insurers
On 20 March 2026, the Bermuda Monetary Authority (BMA) issued an updated Guidance Note for Recovery Planning Requirements (Guidance Note). The Guidance Note assists Bermuda commercial insurers’ compliance with the obligations set out in the Insurance (Prudential Standards) (Recovery Plan) Rules 2024 (Rules), which became operative on 1 May 2025.
Along with the Guidance Note, BMA also released a Stakeholder Letter (Letter) which contains the BMA’s responses to industry feedback on the prior iteration of the Guidance Note (released on 10 April 2025).
The Guidance Note and Letter make it clear that recovery planning is not a regulatory compliance exercise, it is a core prudential requirement. The BMA views recovery planning as an essential pillar of its prudential framework, designed to ensure that insurers can act in an orderly and timely manner under severe stress. Any entity that is in scope of the Rules and receives a formal notice from the BMA (Notice) must adopt a Recovery Plan (RP).
Recovery Planning and the Recovery Plan
The Guidance Note makes it clear that recovery planning extends beyond the production of the RP. Recovery planning requires:
- active engagement from senior management and the board;
- ongoing challenging and validation of recovery options;
- integration with governance, risk, and operational processes; and
- regular testing through simulations and scenario analysis.
This indicates the BMA’s position that recovery planning is a critical management and supervisory risk mitigation tool, with the RP providing a remediation framework for a scenario where those risks materialise.
The emphasis on recovery planning as a process rather than an output signals a supervisory shift. The BMA is likely to focus on both the content of RPs and on whether boards and senior management can demonstrate ownership and readiness.
Who is in scope?
The Rules apply to insurers licensed by the BMA within specified classes[1]. The Letter confirms that this includes any overseas branches that form part of the Bermuda-licensed entity.
Importantly, not all insurers are automatically in scope. The BMA will determine applicability based on factors such as:
- nature, scale, and complexity of operations;
- total assets and gross written premiums;
- whether the insurer is subject to enhanced supervisory monitoring; and
- the potential impact of failure on Bermuda’s financial stability.
In scope insurers will receive a Notice which will specify the deadline for submission of the RP.
What are the key dates?
- The Rules: already operative as of 1 May 2025.
- The Guidance Note: effective immediately upon its 20 March 2026 release.
- Filing Deadlines: insurers in scope will receive a Notice containing deadline by which the RP must be filed.
- Review Cycle: Once established, the RP must be updated at least once every three years, or sooner if there is a material change in the insurer’s financial position, strategy, or risk profile.
Key Components of the Recovery Plan
The BMA expects the RP to be a “living document” that is integrated into the insurer’s Enterprise Risk Management (ERM) framework. The RP must include:
- Executive Summary: a high-level overview of triggers, recovery options, and implementation plans.
- Description of the Insurer: a concise overview of structure, critical functions (like claims settlement or IT), and dependencies material to the insurer’s viability.
- Trigger Framework: quantitative (solvency/liquidity) and qualitative (cyber-attacks/macroeconomic) metrics that alert the board to emerging stress. See the Letter and the Rules for more details.
- Governance: detailed roles for the board and senior management, including clear escalation procedures for when a trigger is met.
- Recovery Options: a diverse menu of “credible and feasible” actions that can be executed during a crisis, such as raising capital, increasing liquidity, or restricting dividends.
- Scenario Analysis and Testing: the RP must be tested against “severe but plausible” idiosyncratic and systemic scenarios (e.g., market crashes or major operational failures) to prove its effectiveness.
- Communication Plan: strategies for notifying internal and external stakeholders, including a requirement to notify the BMA immediately upon the activation of the RP or the breach of a trigger.
Compliance Strategies for Management
- Leverage Proportionality: the BMA applies the principle of proportionality. The level of detail should be commensurate with the insurer’s nature, scale, and complexity. For some, the BMA may permit a phased approach, starting with a high-level draft.
- Evaluate Group Recovery Plans: if the Bermuda entity is part of a wider group that already files a RP with a group-wide supervisor, you may apply to the BMA to adopt that group document rather than creating a standalone Bermuda version. This is subject to BMA approval and an assessment of whether the group plan adequately reflects the Bermuda entity.
- Integration with ERM and CISSA: recovery planning should not be “siloed”. Use existing ERM tools, risk appetites, and Commercial Insurer’s Solvency Self-Assessment (CISSA) reports as starting points. However, note that while CISSA focuses on forward-looking solvency assessment and risk management, the RP assumes severe stress conditions and sets out actions to restore viability.
- Focus on Operational Testing: the BMA emphasises “dry runs” and simulation exercises. These are essential to ensure that governance and escalation procedures are well-understood by the board and senior management before a real crisis occurs.
What should insurers do?
Recovery planning is a critical tool for policyholder protection and financial stability. Insurers should begin reviewing their internal management information systems immediately to ensure they can produce the necessary data for monitoring triggers and executing recovery options on a timely basis.
We recommend a proactive review of current ERM frameworks against the new Guidance Note to identify gaps before the BMA’s formal Notice is received.
The Guidance Note can be found here and the Letter can be found here.
Conclusion
The BMA’s updated Guidance Note represents a significant step in strengthening Bermuda’s prudential regime and aligning with global regulatory standards. It highlights that recovery planning is not merely a regulatory requirement, but a critical tool for safeguarding policyholders and maintaining financial stability.
Insurers should act now to embed recovery planning within their governance and risk frameworks, ensuring they are prepared to respond decisively in periods of severe stress.
For further information or assistance in assessing your organisation’s readiness, please contact a member of the Appleby team.
[1] Class 3A, Class 3B, Class 4, Class C, Class D, or Class E insurer or an insurance group
