On 23 December 2024, the Bermuda Monetary Authority (BMA) released a Consultation Paper - Proposed Enhancements to Public Disclosure Regime: Public Disclosure of Assets and Liabilities for Commercial Long-term Insurers (CP). Commercial long-term insurers comprise insurers registered as Class C, Class D and Class E insurers under Section 4 of the Insurance Act 1978. The proposed disclosure requirements will include both assets and liabilities on the basis that a long-term insurer’s investment strategy is developed with consideration of its liability profile. The proposed enhancements are intended to become effective on 31 December 2025.
The BMA considers that public disclosure of assets and liabilities is necessary to respond to the broader global trend and structural shifts in the life and annuity sector, which has seen an increased appetite for illiquid, hard-to-value assets that are non-publicly traded and can be more complex than liquid traded assets. The disclosure requirements will therefore facilitate more informed decision-making by policyholders and other relevant stakeholders by providing insights into the composition and risk profile of insurers' investment portfolios.
In the CP, the BMA noted that the Prudent Person Principle (PPP), as outlined in the Insurance Code of Conduct, plays a critical role. The PPP requires an insurer to only assume investment risk that it understands and can properly identify, measure, respond to, monitor, control and report on while also taking into consideration its capital requirements and adequacy, short-term and long-term liquidity requirements and policyholder obligations. The BMA published a Consultation Paper – Proposed Instructions and Guidance on the Application of the Prudent Person Principle on 4 December. Our bulletin on this consultation paper can be found here.
In addition to disclosure of assets and liabilities, the BMA proposed that insurers in scope also provide additional asset liability management disclosures. This would include disclosures that offer insights into the appropriateness of their investment strategies, liquidity adequacy, investment risk management practices and an assessment of how market conditions will impact their portfolios.
Practically speaking, long-term insurers will be required to submit the disclosures outlined in the CP on an annual basis as part of the Capital and Solvency Return. A proposed standardised reporting template was attached to the CP, which will ensure consistency and allow comparisons of the data.
Overall, the proposals in the CP represent a significant step forward in enhancing the BMA’s public disclosure regime while also aligning Bermuda’s regulatory framework with leading international standards. Comments regarding this CP are due by 28 February 2025. Consultations on draft rules which will govern the disclosure requirements will commence in the first quarter of 2025. Readers are welcome to contact their usually Kennedys contact or Nick Miles if the want further information or want to submit comments.