Supervision and Regulation of PE Insurers in Bermuda

By Bermuda Monetary Authority · 2023 · CP341-113-25

Study guide: Exam CP-341

A paper dated 18 December 2023 in which the Bermuda Monetary Authority shares examples of approaches that regulators could take when confronted with private equity and alternative asset manager-owned and/or supported insurers. It outlines the risks such insurers present, including opacity and complex structures, conflicts of interest, higher proportions of illiquid assets, and misalignment of time horizons, and the supervisory and regulatory tools the Authority applies. It is for educational purposes only and not a promotion of such structures.

On the syllabus

• Exam CP-341 — Outcomes 3e; the whole paper.

Executive Summary/Foreword

• A key ingredient is ensuring that transparency exists between the cedent regulator and the BMA, and the BMA applies several supervisory and regulatory tools when gaps are identified by either.

Introduction

Growth of PE Insurers in the Provision of Retirement Protection

Managing the Two-edged Sword

Bermuda Regulatory and Supervisory Regime

Supervision of PE Insurers

• 1. Licensing
• 2. Supervisory collaboration
• 3. Intensified supervisory engagement
• 4. Recovery and resolution
• 5. Tailored asset reporting
• 6. Range of powers of intervention and supervisory measures
• 7. Supervisory enhancements (in place since January 2023)

Challenges and Supervisory Response

• #1 Structure of cross-border transactions
• #2 Arm's length transaction/conflicts of interest
• #3 Illiquid assets, prudent person principle
• #4 Lapse risk
• #5 Valuation of technical provisions and regulatory differences

Foundational Elements of a Long-term Insurer's Balance Sheet and Use of the SBA

Cross-border Reinsurance to Explore Regulatory Differences Between Jurisdictions

Conclusion

Related readings

• CP341-114-25: The Bermuda Monetary Authority's Approach to Private Equity-Owned (Re)insurers — a law-firm article assigned with it for the same outcome, 3e, on the BMA's approach to such insurers

Sources

• Supervision and Regulation of PE Insurers in Bermuda (Bermuda Monetary Authority, 18 December 2023) — the document: title page (an image), table of contents, and the executive summary/foreword; the text of the later sections was not read; the SOA's copy of the study note is not published, so the identification of "CP341-113-25" with this paper is by title
• CP 341 Syllabus, Mar 2027/Jul 2027 (SOA) — the citation as study note CP341-113-25 and the learning outcome it is assigned to