Transcript The Bermuda Market in 2005

Bermuda Captive Breakfast Seminar
Sheraton Station Square
Pittsburgh
May 12, 2010
Moderator
Rochelle Simons
Why companies form captives Scott Gemmell
Latest ideas in captive use
Peter Willitts
How to form a Bermuda captive
Charles Collis
Captive Tax Update
Bill Bailey
Bermuda’s captive regulation
Leslie Robinson
Why Companies Form
Captives
Scott Gemmell
Senior Vice President
Marsh
What is a Captive
• An insurance vehicle formed by an organization, not
otherwise generally involved in insurance, to participate in
its insurance arrangements
• Ultimately a self-funding mechanism for retained risk
• Not a quick fix and should be part of a long term risk
financing strategy
“a captive insurance company is a bona fide insurance or
reinsurance company owned by a non-insurance company
and which insurers or reinsures the risks of its parent or
affiliated companies”
Why form a captive?
• To reduce the parent’s cost of risk
• To gain a strategic advantage
• To capture profits from “related” activities
What are the advantages?
Financial Benefits
• Can reduce insurance costs - by retaining the premium for
expected losses
• Can improve the parent’s negotiating position with the insurance
and reinsurance markets
• Direct access to reinsurance markets
• Can generate underwriting & investment profits
• Can match revenue and expense - by reserving from current
funds for future claim payments
• Can provide a source of additional revenue - by offering
insurance to third parties
• Rewards good risk management practice
What are the advantages?
Insurance/Strategic Benefits
• Can provide coverage for risks not usually insurable
• Can reduce the dependence for commercial insurance
• Can create flexibility in program design and broader,
simpler insurance contracts
• Can create a more effective and efficient risk management
program, through
– designing cost allocation and claims handling systems
– generating actuarial information
– coordinating risk management activity
What are the disadvantages?
• Capital commitment - the captive’s capital is not available
for use in the parent’s business
• Adverse results - the captive’s capital can be eroded by
adverse results under the insurance program
• Operating costs - a captive does incur operating costs and
demands a time commitment from senior management
Captive Structures
–
–
–
–
Reinsure When.....
You need admitted insurance
policies
Need to Meet Proof of Financial
Responsibility Laws (Property Landlords, Products Liability Retailers)
Security Issues (A.M. Best Rating)
Providing Insurance to Unrelated
Parties
Reinsurance Captive
Owner / Insured
Admitted insurer issues policies and
arranges claims handling service
Fronting
Insurer
Reinsurance cessions to captive. Captive
retains risk at agreed level
Captive
Captive retrocedes risk in excess of its
desired retention
Reinsurer
Captive Structures
–
–
–
Direct Write When.....
Insurance Policies Needed
Admitted Coverage Not Needed
Need Formalized Funding Vehicle to
Allocate and Track Insurance
Expenses
Direct Writing Captive
Owner / Insured
Captive insurer issues policies and arranges
claims handling service and retains risk at
agreed level
Captive
Captive reinsures in excess of its desired
retention
Reinsurer
Captive Structures
• A Segregated Account Company
(SAC) is a single legal entity with
one Board of Directors.
PCC
owner
Cell
H
Cell
G
• The company is divided into a
number of Cells and a Core
• The assets of an individual cell – are
legally protected from the claims of
creditors, other than the creditors of
that particular cell.
Cell
F
Cell
A
Cell
B
Core
Cell
E
Non-voting shares
• The assets of the Core are available
to meet the claims of creditors of any
cell that is insolvent, unless excluded
under the terms of the cell
agreement.
Control
Cell
owner
Cell
C
Cell
D
How a Typical Captive Operates
• Control of the captive will be by an appointed board of directors,
usually a mix of local professionals and parent company workers
• The board then appoints local companies for services like banking,
auditing etc
• Management company carries out all operational functions on behalf
of the captive and provides insurance and other expertise that is
required by the captive
Parent Corporation Or Association
Captive Board
Management Company
Auditors
Lawyers
Regulators
Investment
Managers
Bankers
Latest ideas on Captive use
Peter Willitts
President
Liberty Mutual Management (Bermuda) Ltd.
Current Environment
•Softening Market
•Interest Rates are Low
•Cash is Short
•Profits are Squeezed
State of the Captive Market
• Incorporations Continue
• Regulations are Getting Stricter
• Diverse Reasons for Forming a Captive
• Economic Situation Requires more Strategic
use of Captives
• Fronting ???
Where is the business coming from?
The Parent Company
Assets
Income
Liabilities and
Capital
Expenses
Expenses
Employee Benefits
• Retiree’s Medical
• Health Insurance
o Group Life – COLI
 Pension
 Long Term Disability
 Short Term Disability
Income
• Product Contamination / Product Recall
• Owner Operator – Occ Acc
• Cell Phones
Assets
• Cyber Risk
• Reputational Risk
• Residual Value
Liabilities
• Expanding list of warranties
• Turf coverage
• Cell phones
• Computer Screens in Taxi cab
• Bailee Coverage / Storage Facilities
• Products Liability / Efficacy Combined
Investments
•Factoring on Receivables
•Mortgages
•Ownership of Corporate Assets
•Investment in Commercial Paper
Latest Ideas on Captive Use
Insurance Class
Underwritten by Captive
Example Risk Management
Initiatives
Property Damage
•Property Risk Evaluation
•Fire protection Systems Installations
Business Interruption
•Business Continuity Planning
•Business Impact Analysis
Workers Compensation
•Health and Safety Training
•Behavioral Risk Improvement
Auto liability / Auto Damage
•Driver Safety Programs
•Fleet Risk Management Technologies
Key Issues
• Understand the Capacity and Appetite to Assume
More Risk
• Determine Future Expected Losses
• Gauge Market Response
Consider the Total Cost of Risk
Conclusion
Captives as a strategic risk financing tool are
continuing to evolve and deliver benefits to the
parent company in many areas, not just insurance
and tax.
How to Form a Captive
Charles G. R. Collis
Director
Conyers Dill & Pearman
The Incorporation Process
Steps to Licensing
• Select Service Providers
• Application to Incorporate
• Application to Licence
• Incorporation, Organization and Capitalization
• Registration as an Insurer
The Incorporation Process
STEP 1 – Choosing Service Providers
• Insurance Manager / Principal Representative
• Auditors
• Actuary (if required)
• Legal / Corporate Secretarial
The Incorporation Process
STEP 2 – Application to Incorporate
• Bermuda Monetary Authority
– Ownership
The Incorporation Process
Insurance Application
to Bermuda Monetary Authority
• Pre-Incorporation Form
• Business Plan
• 5 Year Pro Forma Financial Statements
(Balance Sheet and Income Statement)
• Other Supporting Documentation (if necessary)
The Incorporation Process
Business Plan
• Description of Shareholder
• Description of Insurance Business
– Lines of business to be written
– Layers to be written
– Fronting arrangements
– Retention levels
• Reinsurance Program
• Investment Strategy
• Directors
• Service Providers
The Incorporation Process
STEP 3
• Incorporation
– Receipt and filing of consent
• Organization
– Directors and Shareholders Meetings to:
• Issue shares
• Approve bye-laws
• Appoint auditors
• Appoint insurance managers
• Other formalities
• Capitalization
The Incorporation Process
STEP 4 – Registration as an Insurer
File formal application with the Bermuda Monetary
Authority
The formal application should be the same as, or
substantially similar to, the pre-incorporation application
The Incorporation Process
Timing
• Submit application on Monday
• Application considered by Committee on Friday (4 days
later)
• Formal registration may occur on the day consent is
received or at the shareholders convenience
• Commence business
Captive Tax Update
Bill Bailey
Sr. Manager & Tax Leader of Bermuda
Ernst & Young
Current Environment
►
CFOs are constantly looking for ways to improve cash
flow, to reduce expenses and to maximize the use of
capital.
►
CFOs and Risk Managers are seeking to maximize
coverage options while reducing the overall cost of risk.
►
Tax Directors of inbound organizations are exploring
methods to move funds within the global organization in a
tax efficient manner.
Potential Benefits of a
Captive Insurance Arrangement
A properly structured captive insurance arrangement may
provide the following benefits:
►
Expense reduction leading to improved cash flow
►
Minimizing capital to fund certain risk exposures by pooling risks
►
Centralized management of risk within an organization
►
A vehicle to move funds within a global organization in a tax efficient
manner
►
A profit center for accepting profitable third-party insurance business
How is this accomplished?
►
Reserves for retained risks are not deductible for U.S. Federal income
tax purposes.
►
Insurance premiums paid to a properly structured captive insurance
company to fund retained risk should be deductible.
►
A captive insurance company can set up deductible insurance reserves.
►
A pool of risks is less volatile than a single risk, so less capital is needed
to support risk exposures.
►
Certain third-party insurance business, e.g., extended warranty
insurance, may be profitable business thereby creating a profit center.
►
Insurance premiums can generally be paid across borders to fund risk
exposures.
Definition of Insurance for
U.S. Federal Income Tax Purposes
►
“Insurance” is neither defined in the statute nor the Treasury
regulations.
►
Judicial precedent provides the following framework for evaluating
whether a scenario is an insurance arrangement (LeGierse):
►
►
►
►
►
Presence of insurance risk
Risk shifting
Risk distribution
Commonly accepted notions of insurance
Three Common Structures
►
►
►
Parent/Subsidiary (Carnation, Clougherty Packing)
Brother/Sister (Humana, Kidde, Malone)
Third-party risk (AMERCO, Harper, Sears)
Definition of Insurance for
U.S. Federal Income Tax Purposes
Parent/Subsidiary
Parent
Premiums
Captive
Parent has not shifted its risk to Captive.
 Balance sheet approach
Premiums paid from Parent to Captive are not deductible.
Captive is not considered an insurance company.
Definition of Insurance for
U.S. Federal Income Tax Purposes
Brother/Sister
Parent
Subs
Subs
Parent has not shifted its risk to Captive.


Captive
Premiums
Parent

Premiums
Balance Sheet approach
Premiums paid from Parent to Captive are not deductible.
Subs

Subs generally shift risk to captive.

Premiums paid from Subs to Captive are generally deductible provided certain bona fides are
satisfied: premiums are arm’s length, the Captive is adequately capitalized, and the Captive is not
propped up.
Captive

Generally treated as an insurance company.
Definition of Insurance for
U.S. Federal Income Tax Purposes
Third-Party Risk
Third-party
Risk Premiums
Parent
Subs
Subs
Premiums
Captive
Premiums
Parent
Parent generally shifts its risk to Captive, provided sufficient third-party risk is present.

Third-party risk benchmark > 30% of total premium
Premiums paid from Parent to Captive are generally deductible, provided bona fides are satisfied.
Subs
Subs generally shift risk to Captive.
Premiums paid from Subs to Captive generally deductible, provided bona fides are satisfied.
Captive
Generally treated as an insurance company.
Examples
Foreign
Parent
SubsSubs
U.S.
Captive
Non US Domicile
* Premiums
* Note: U.S. federal
excise tax likely to apply.
Summary
Scenario should qualify as a brother/sister insurance arrangement provided the bona fides are present.
Premiums paid from U.S. Subs to Captive should be deductible.
Captive should be treated as an insurance company for U.S. federal tax purposes.
Primary Benefits
Capital is minimized by pooling risks.
Management of risk is centralized.
U.S. federal and state tax deductions should be accelerated creating increased cash flow.
Investment earnings not subject to U.S. federal or state taxation.
Funds are moved from the U.S. to a tax efficient jurisdiction of the Foreign Parent.
Examples
Foreign
Parent
SubsSubs
U.S.
Fronting
Company
Captive
Non U.S. Domicile
*Premiums
Customers’
Premium
Third-party reinsurance premiums
30% of total premium in Captive
*Note: U.S. federal excise tax likely
to apply
Summary

Scenario should qualify as a Third-Party risk arrangement provided the bonafides are present.

Premiums paid from U.S. Subs to Captive should be deductible.

Captive should qualify as an insurance company for U.S. federal income for purposes.
Primary Benefits

Captive acts as a profit center for profitable third-party insurance risks, e.g. extended warranty.

Capital is minimized by pooling risks.

Management of risk is centralized.

U.S. federal and state tax deductions should be accelerated creating increased cash flow.

Investment earnings not subject to U.S. federal or state taxation.

Funds are moved from the U.S. to a tax efficient jurisdiction of the Foreign Parent.
Tax Update
RECENT
CHANGES
Uncertain Tax Position Disclosure
• The IRS announced on January 26, 2010 a proposal that
would require certain businesses to provide information
about their uncertain tax positions identified in their
accounting statements; e.g. FIN 48 (primarily codified in
ASC 740-10).
• The Service intends the new schedule to be filed by a
business taxpayer with total assets in excess of $10 million
if the taxpayer has one or more uncertain tax positions.
• Schedule will be filed with Form 1120, U.S. Corporation
Income Tax Return, or other business tax returns.
Uncertain Tax Position Disclosure
• The Schedule will require
- A concise description of each uncertain tax position for
which the taxpayer or a related entity has recorded a
reserve
- The maximum amount of potential federal tax liability
attributable to each position (determined without regard
to the taxpayer’s risk analysis of its likelihood of
prevailing on the merits).
• “Concise” and “Maximum tax liability” are further
embellished.
• Comments are due by June 1, 2010
Uncertain Tax Position Disclosure
• Announcement 2010-30
– IRS unveils draft Schedule UTP, Uncertain Tax Position
Statement, and instructions
– For each identified uncertainty, calculation of the MTA
(Maximum Tax Adjustment) will be required on an annual
basis:
• The draft instructions provide a detailed description of how to
calculate the MTA
• For transfer pricing and valuation positions, can use a
“ranking” approach
– A response on the question of penalties is outstanding,
however one option is to seek legislation from Congress
to impose new penalties for failure to file the form or to
make adequate disclosures.
United States v. Textron Inc.
• First case to test the new aggressive position the IRS is
taking regarding the request for tax accrual workpapers.
• The First Circuit vacated the district court’s determination
that a public corporation’s tax accrual workpapers were
protected from IRS summons by the work-product doctrine.
• The First Circuit held that the work-product privilege was not
implicated with regards to the taxpayer’s tax accrual
workpapers, because it found that the work papers were not
prepared “for” litigation and were thus required to be
produced pursuant to an IRS administrative summons.
• Next Step: Currently before Supreme Court on a petition for
certiorari
Excise Tax – Cascading Theory
• Section 4371 of the Code imposes an excise tax on each
policy of insurance, indemnity bond, annuity contract, or
policy of reinsurance issued by any foreign insurer or
reinsurer
• Revenue Ruling 2008-15 describes the insurance excise tax
consequences of insurance premiums paid by one foreign
(re)insurer to another
• Conclusion: The reinsurance excise tax on reinsurance
policies covering contracts under IRC Section 4371
applies to reinsurance premiums paid by one foreign
(re)insurer to another, unless the payee issuing the
policies was itself exempt per treaty
Codification of
Economic Substance
• The “economic substance” doctrine (IRC 7701(o))
• Revisited as part of the Health Care and Education
Affordability Reconciliation Act of 2010 (H.R. 4872)
• States that “in the case of any transaction to which the
economic substance is relevant, such transaction shall
be treated as having economic substance only if:
• (a) the transaction changes in a meaningful way (apart
from Federal income tax effects) the taxpayer’s
economic position, and
• (b) the taxpayer has a substantial purpose (apart from
federal income tax effects) for entering into such
transaction.”
Risk Shifting & Risk Distribution
• Revenue Ruling 2009-26: Illustrates applying insurance
principles to reinsurance arrangements
• 2 situations:
– (a) Company A reinsures multiple policies with Company
B (Company B writes no other business)
– (b) Company A reinsures 1 policy with Company B
(Company B writes additional policies with other
companies)
• Conclusion: Company B qualified as an insurance
company per IRC Section 831 and both situations are
considered to be insurance arrangements in the
conventional sense as there was appropriate risk shifting
and risk distribution.
Bermuda’s Captive
Regulation
Leslie Robinson
Assistant Director
Insurance Licensing & Authorisation
Bermuda Monetary Authority
Bermuda’s Captive Regulation
Outline
• Legislation
• Other Guidance
• Class Structure
• Ratios & Margins
• Annual Business Fess
• Bermuda Markets
• Supervisory Model & Risk-Based Framework
• Regulatory Approach
• International Update
• Proposed Enhancements
• Statistics
Bermuda’s Captive Regulation
• Insurance Act 1978
• Insurance Accounts Regulations 1980
• Insurance Returns & Solvency Regulations 1980
• Non-Resident Insurance Undertaking Act 1967
• Segregated Accounts Companies Act 2000
Bermuda’s Captive Regulation
Guidance Notes:
20 separate Guidance Notes issued to date:
• Role of service providers
• Market Conduct
• Corporate Governance
• Risk Management and Internal Controls
• Investment Activity
• Investments in Affiliates
• Enhanced Capital
• Special Purpose Insurers
Bermuda’s Captive Regulation
Code of Conduct
• Establishes duties, requirements and standards to be complied
with by insurers including the procedures and sound principles
to be observed;
• Application will take into account the insurer’s nature, scale
and complexity
• Captive insurers should be mindful of the proportionality
principle in establishing a sound corporate governance, risk
management and internal controls framework.
Bermuda’s Captive Regulation
CLASS 1
A body corporate is registrable as a Class 1 insurer where that
body corporate:a) is wholly owned by one person and intends to carry on
insurance business consisting only of insuring the risks
of that person; or
b) is an affiliate of a group and intends to carry on insurance
business consisting only of insuring the risks of any other
affiliates of that group or its own shareholders
Bermuda’s Captive Regulation
CLASS 2
A body corporate is registrable as a Class 2 insurer where that
body corporate is wholly owned by two or more unrelated
persons and intends to carry on insurance business not less
than 80% of the net premiums written in respect of which will
be written for the purpose of:a) insuring the risks of any of persons or of any affiliates of
any of those persons; or
b) Insuring risks which, in the opinion of the Authority, arise
out of the business or operations of those persons or any
affiliates of any of those persons.
Bermuda’s Captive Regulation
CLASS 2
A body corporate is registrable as a Class 2 insurer where that
body corporate would be registrable as a Class 1 insurer but
for the fact that:a) not all of the business which it intends to carry on, but at
least 80% of the net premiums written, will consist of the
business described in (a) or (b) above; or
b) it intends to carry on insurance business not less than 80% of
the net premiums written in respect of which will, in the
opinion of the Authority, arise out of the business or
operations of the person by whom it is owned or any of the
affiliates of that person.
Bermuda’s Captive Regulation
CLASS 3
A body corporate is registrable as a Class 3 insurer where that
body corporate is not registrable as Class 1, Class 2, Class
3A, Class 3B, Class 4 insurer or Special Purpose Insurer
CLASS 3A
A body corporate that intends to carry on insurance business in
circumstances where (a) 50% or more of the net premiums
written; or (b) 50% or more of the loss and loss expense
provisions represent unrelated business
A body corporate to which this section applies is registrable as
a Class 3A insurer if its total net premiums written from
unrelated business are less than $50 million.
Bermuda’s Captive Regulation
CLASS 3B
A body corporate that intends to carry on insurance business in
circumstances where (a) 50% or more of the net premiums
written; or (b) 50% or more of the loss and loss expense
provisions represent unrelated business.
A body corporate to which this section applies is registrable as
a Class 3A insurer if its total net premiums written from
unrelated business are $50 million or more.
Bermuda’s Captive Regulation
CLASS 4
A body corporate is registrable as a Class 4 insurer where –
a) it has at the time of its application for registration, or will
have before it carries on insurance business, a total
statutory capital and surplus of not less then $100 million;
and
b) it intends to carry on insurance business including excess
liability business or property catastrophe reinsurance
business
Where a body corporate is registrable as a Class 4 insurer it
shall not be so registered if it is also registrable as a Class 1
or Class 2 insurer.
Bermuda’s Captive Regulation
Special Purpose Insurers
• Any insurer that carries on “special purpose business”
• “Special purpose business” means insurance business under
which an insurer fully funds its liabilities to the persons
insured through
a) the proceeds of any one or more of the following –
i. a debit issuance where the repayment rights of the
providers of such debt are subordinated to the rights of
the person insured; or
ii. some other financing mechanism approved by the
Authority
b) cash; and
c) time deposits.
Bermuda’s Captive Regulation
Long-Term Business
Insurance business of any of the following kinds, namely, a) Effecting and carrying out contracts of insurance on human life or
contracts to pay annuities on human life;
b) Effecting and carrying out contracts of insurance against risks of the
persons insured sustaining injury as a 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 specified class, being
contracts that are expressed to be in effect for a period of not less
than five years or without limit of time and either not expressed to be
terminable by the insurer before the expiration of five years from the
taking effect thereof or are expressed to be so terminable before the
expiration of that period only in special circumstances therein
mentioned, but does not include excepted long-term business;
Bermuda’s Captive Regulation
Long-Term Business
c) 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
become payable to the persons insured in the future, not
being contracts such as fall within either paragraph (a) or (b),
but does not include excepted long-term business or special
purpose business.
Bermuda’s Captive Regulation
Class 1
• Related party business only
• General Business Solvency Margin = $120,000
• Minimum Solvency Margin Test
– Net Premiums – 20% of first $6 million, 10% on balance
– Loss Reserves – 10%
• Minimum Liquidity Ratio – Value of “relevant assets” shall not
be less than 75% of “relevant liabilities”
• No requirement to file the opinion of an Approved Loss
Reserve Specialist.
Bermuda’s Captive Regulation
Class 2
• Not less than 80% related party business
• General Business Solvency Margin = $250,000
• Minimum Solvency Margin Test
– Net Premiums – 20% of first $6 million, 10% on balance
– Loss Reserves – 10%
• Minimum Liquidity Ratio – Value of “relevant assets” shall
not be less than 75% of “relevant liabilities”
• Must file the opinion of an Approved Loss Reserve Specialist
every third year.
Bermuda’s Captive Regulation
Class 3
• Not less than 51% related party business
• General Business Solvency Margin = $1,000,000
• Minimum Solvency Margin Test
– Net Premiums – 20% of first $6 million, 15% on balance
– Loss Reserves – 15%
• Minimum Liquidity Ratio – Value of “relevant assets” shall
not be less than 75% of “relevant liabilities”
• Must file the opinion of an Approved Loss Reserve Specialist
annually.
Bermuda’s Captive Regulation
Annual Business Fees:
Class 1:
$971.00
Class 2:
$1,737.00
Class 3:
$10,500.00
Other Regulatory Requests: $210.00 to $525.00.
Bermuda’s Captive Regulation
• Captive vs. Commercial
• Risk-Based Approach
• Statutory Financial Returns
• Role of Principal Representative and Insurance Manager
• Captive Manager On-sites
• Segregated Accounts Companies (Rent-a-Captives).
Bermuda’s Captive Regulation
Supervisory Model & Risk-Based Framework
• Supervisory Model allows us to respond to the increasingly
complex and diverse insurance marketplace
• Focusing our resources to areas where there is an increased
likelihood of a risk occurring
• A critical element of the Supervisory Model is our Risk-Based
Framework.
Bermuda’s Captive Regulation
Risk-Based Framework
• Looks at risk-based on two dimensions – Impact and Likelihood
• Impact – “what would happen if a risk crystallized”
• Likelihood – “what are the chances of a risk crystallizing”
• Our Framework encompasses an “impact hierarchy” and a
“likelihood filter”.
Bermuda’s Captive Regulation
Risk-Based Framework – Objectives
• Carry out legislative responsibilities;
• Observe and adhere to international standards;
• Allocate resources to where risk is most pertinent;
• Detect problems at an early stage and take regulatory
action on a timely basis; and
• If an insurer fails, to either return insurer to compliance
or effect a timely and effective exit from the market.
Bermuda’s Captive Regulation
Pragmatic Approach to Regulation
• “The World’s Risk Capital”
• Creativity and Innovation
• Section 56 Directions
– Modifying accounting regulations
– Approving “relevant assets”
– Admitting assets
– Modifying filing requirements
• Regulations consistent with International Standards but
applied appropriately for Bermuda Market.
Bermuda’s Captive Regulation
International Initiatives:
• Monitoring and Actively Contributing to International Regulatory
Developments
• International Association of Insurance Supervisors (“IAIS”)
– Member of IAIS Executive Committee
– Chair the Reinsurance Transparency Group
– Authority staff are on a total of 13 IAIS Committees
• Solvency II
– Capital Adequacy, Group Supervision, Disclosure & Transparency
– Bermuda seeking Solvency II equivalence
• Captive regime is already in accordance with international standards,
however, we continue to monitor any global developments relevant to
captives.
Bermuda’s Captive Regulation
Enhancements:
• Bermuda Solvency Capital Requirement (“BSCR”) – standard
capital model
• Internal Model Review
• Group-Wide Supervisory Regime
• Commercial Insurer Solvency Assessment (“CISA”) – which
reflects Solvency II Own Risk and Solvency Assessment
(“ORSA”)
• Eligible Capital
• Proportionality Principle.
Bermuda’s Captive Regulation
Class
Gross
Premium
Written
Assets
Statutory
Capital
Class 1
$3,277,232,857
$15,603,815,853
$10,135,083,342
Class 2
$7,858,056,496
$38,517,761,793
$15,134,032,557
Class 3
$18,357,875,391
$69,874,966,928
$24,279,833,021
Questions
Bermuda Market Solutions
www.bermuda-insurance.org
Bermuda Captive Owners Association
www.bcoa.bm/documents.asp