The Bermuda Monetary Authority (BMA) has published a consultation paper proposing a dedicated regulatory framework for a new Parametric Special Purpose Insurance (PSPI) class. The new class is designed to support Bermuda alternative capital (re)insurers that plan to adopt parametric business models. It will provide an additional pathway for prospective registrants without requiring existing registrants that offer parametric covers to reclassify. The Authority says the development of a parametric insurance market will enhance policyholders' resilience in today's "rapidly changing risk landscape." It notes that the financial impact of protection gaps from non-insured losses continues to grow. By leveraging a recognised PSPI framework, the BMA plans to intensify its efforts to close the gaps associated with climate change and emerging risks. According to the regulator, this evolution "aligns with the BMA's role in providing a credible and transparent regulatory environment that supports the continued innovation and resilience of Bermuda's insurance sector." Bermuda's Insurance-Linked Securities (ILS) sector currently accounts for more than 85 per cent of global insurance alternative capital capacity, and the BMA aims to leverage its established Special Purpose Insurer (SPI) framework to facilitate this new growth area. Under the proposed PSPI framework, the class is defined as an SPI that writes fully collateralised (re)insurance business and transfers risk via a parametric cover. To ensure security, PSPIs must be fully collateralised to an aggregate limit consistent with current SPI classes, with assets held in cash, cash equivalents or Letters of Credit from recognised financial institutions. The framework also broadens requirements to allow transactions with sophisticated cedants. This includes regional and national corporates, as well as entities with mature risk functions. Furthermore, the class allows swap and derivative forms of executing parametric covers on a case-by-case basis, subject to BMA approval. The BMA notes that while parametric products are already being written in the Bermuda market, the dedicated class will offer "a fit-for-purpose PSPI framework that will be instrumental in growing a robust parametric insurance market." The Authority invites industry feedback on the proposals, with comments to be received by 27 February 2026.
