Regulatory reforms recently enacted by the Bermuda Monetary Authority (BMA) are likely a positive for insurer credit profiles, Fitch Ratings says in its latest report. The agency emphasises that the reforms bolster capital requirements, supervision, and the granularity of risk assessment, all of which should strengthen market stability and transparency. The recently enacted changes were first introduced in a 2023 consultation paper and have led to material increases in pricing, fees and higher required capital. Fitch anticipates that while the majority of insurers will remain in Bermuda, some on the margin may prefer other regulatory regimes with less strict capital standards. Notable updates to the regulatory regime include increased reserve discount rates, assumed default rates and lapse rates, more restrictive asset selection, and more granular governance and risk management. The BMA will also require more transparency around transactions as part of its approval process. Additionally, in 2023, the 15 per cent Bermuda Corporate Income Tax Act became law and will be implemented in 2025, though it remains lower than the US rate and is not expected to have a material effect on insurers. The updates ensure that the BMA's insurance regulations remain sufficiently transparent and fit for purpose while maintaining their Solvency II equivalence and reciprocal jurisdiction status with the National Association of Insurance Commissioners. The BMA also expects Bermuda insurers to primarily fund long-term liabilities with unaffiliated investments.
