The Bermuda Monetary Authority issued an updated notice on the prior approval regime for long-term block reinsurance transactions involving long-term (life) commercial (re)insurers in Classes C, D and E, updating its 8 April 2024 guidance. The notice clarifies the scope of transactions captured by the prior approval process and sets out information expectations, including a more granular reconciliation of differences between the ceding company’s Total Asset Requirement (TAR) and the Bermuda Economic Balance Sheet (EBS) TAR. Block transactions are defined as cessions of a defined group of in-force policies that effectively divest liabilities and associated assets and transfer most of the risks to a reinsurer, and the scope includes both in-force business and transactions covering future premiums (flow transactions). Examples in scope include asset-intensive transactions such as pension risk transfer and the ceding of fixed, fixed index and variable annuities, and whole life or universal life policies, while traditional mortality and morbidity solutions such as yearly renewable term reinsurance, longevity swaps and stop-loss biometric cover are excluded. Modifications to existing block transactions also require prior approval, in addition to any “material change” approvals under the Insurance Act 1978. The review is typically structured around documentation review and targeted management discussions, with regulator-to-regulator engagement generally initiated by the BMA; submissions are expected to mirror the insurer’s internal underwriting, risk assessment and governance materials and to include, among other items, transaction economics and agreements, solvency and stress impacts, and a detailed breakdown and reconciliation of cedant versus Bermuda TAR. The BMA encourages early pre-application engagement, including deal pipeline discussions with supervisory teams. Where engagement is proactive and documentation is complete, the BMA expects to reach a decision within two to four weeks, with longer timelines where additional information is needed.
Bermuda Monetary Authority 2025-04-02
Bermuda Monetary Authority clarifies which long-term block reinsurance deals require prior approval and how TAR differences should be reconciled
The Bermuda Monetary Authority updated its notice on the prior approval regime for long-term block reinsurance transactions involving life commercial (re)insurers in Classes C, D, and E. The notice clarifies transaction scope, information expectations, and requires prior approval for modifications to existing block transactions. The BMA encourages early engagement and aims for a decision within two to four weeks if documentation is complete.