Offshore Services- Bermuda The success and international prominence of the Bermuda insurance industry has attracted the attention of a plethora of international standard setters and watchdog agencies over the years. Bermudian regulators and supervisors play critical roles in a number of these bodies, and there is a desire for Bermuda to be seen to be keeping pace with, if not leading the way in, the emergence of global standards for prudent and sensible industry regulation and supervision.
Two pieces of legislation, the Insurance Amendment Act (2006/1) and the Insurance Amendment Act (2006/2), will modify the regulatory landscape in Bermuda and for Bermudian insurers. The new acts are the latest in a series of amendments to Bermuda's regulatory framework designed to maintain Bermuda's standing among the international regulatory and supervisory community as a prudent, credible regulator of the insurance industry.
In brief, the new legislation:
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establishes minimum criteria for registered insurers and their key officers, allowing for greater scope for the regulator, the Bermuda Monetary Authority, to assess the quality of insurers' business teams on an ongoing basis;
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formalizes the supervisory functions of the authority;
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enhances investigative/intervention powers of the authority;
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establishes a notification/approval process for changes of controller; and
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establishes an appeals tribunals process for the initial formal review of certain authority decisions.
Implementation of this legislation is the paramount challenge (on the legal side) facing the industry in 2007. The new acts, together with the vamping up of the risk-based supervisory process which has been established and has seen the commencement of prudential oversight visits to certain firms, places considerable resource strains on the insurance division of the authority (which comprises both the regulatory and licensing and the supervisory functions of the authority's oversight mandate for the insurance industry). The authority has expanded its personnel resources considerably in 2006 and will continue this trend in 2007.
The new legislation is a product of consultation with all affected players, from insurers to intermediaries, managers, service providers and clients. Further regulatory initiatives which are currently on the drafting table are likewise undergoing a wide consultative process. Arguably, this is a significant strength of the current environment and its continuation in the future will be welcome.
The most significant area where improvement is needed is the area of regulatory independence or, perhaps, the perception of certain outsiders that there is an over-dependency by the regulators on industry participation for certain key aspects of industry oversight. In the past Bermuda has used various ad hoc or established committees consisting of industry participants which advised the regulator on various aspects of the discharge of its regulatory or supervisory functions. In the current global environment, such a mode of carrying out the oversight of an industry as large as the Bermuda insurance industry does not find favour. Thus, a move away from - in both form and substance - any hint of self-regulation would improve the standing of the Bermuda regulatory process in the international community. This process has begun with the adoption of the new legislation and its antecedents, and will continue going forward.
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