US Insurance Regulator Grants Bermuda Reciprocal Jurisdiction Status
Jason Gorringe, Tax-News.com, London
31 December, 2019
Bermuda has been granted Reciprocal Jurisdiction status effective January 1, 2020, and has had its status as a Qualified Jurisdiction extended by the National Association of Insurance Commissioners (NAIC), after a five-year evaluation.
The NAIC is the US standard-setting and regulatory support organization created and governed by the country's chief insurance regulators from the 50 US states, the District of Columbia, and five US territories.
Effective January 1, 2015, Bermuda was placed on the NAIC's first List of Qualified Jurisdictions, alongside France, Germany, Ireland, Japan, Switzerland, and the United Kingdom. Since 2015, Bermuda has maintained its status on the list.
The Bermuda Monetary Authority said the renewed Qualified Jurisdiction status maintains Bermuda-domiciled (re)insurer eligibility for reduced (re)insurance collateral requirements under the NAIC's Credit for Reinsurance Model Law and Regulations.
Bermuda's Qualified Jurisdiction status is applicable to (re)insurers licensed as Class 3A, Class 3B, and Class 4, and Long-Term insurers of Class C, Class D, and Class E. To be re-approved as a Qualified Jurisdiction, the BMA was required to maintain a regime that meets the standards of and achieves similar supervisory outcomes of the US regulatory system for (re)insurers.
The BMA said: "The Qualified Jurisdiction status has solidified Bermuda's well-established relevance to the United States as a major (re)insurance trading partner. Over the last two decades, Bermuda insurers and (re)insurers have paid in excess of USD200bn to settle US losses, consistently offering valuable capacity provisioning for catastrophic events. As one of only seven jurisdictions with the Qualified Jurisdiction status, 23 of the 32 certified (re)insurers are Bermudian. These (re)insurers' ability to passport into 39 states further underscores the Bermuda market's relevance to the United States. Renewal of Bermuda's status as a Qualified Jurisdiction will allow continued efficiencies in the cross-border operations of Bermuda (re)insurers in the US insurance market."
This year, the NAIC created a new status to expand these benefits: Reciprocal Jurisdiction status. This is an elevated status, which in the case of non-European Union jurisdictions can only be achieved by first gaining the pre-requisite Qualified Jurisdiction status and recognizing the US state regulatory system for group supervision and group capital.
In becoming a Reciprocal Jurisdiction, Bermuda's (re)insurers will be eligible for zero collateral relief, thereby operating under equal conditions as its counterparts from the EU and UK.
Craig Swan, Managing Director, Supervision said: "We are grateful that the United States decided in 2019 to introduce the Reciprocal Jurisdiction process to ensure a level playing field with the benefits arising from the United States/European Union and United States/United Kingdom Covered Agreements. Bermuda's approval as a Reciprocal Jurisdiction further cements the close economic relationship between our jurisdictions as Bermuda (re)insurers continue to play a vital role in supporting the US economy by providing the financial protection and support needed when there is a loss. We welcome this initiative and would like to thank the NAIC for approving Bermuda as a Reciprocal Jurisdiction."