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Bermuda: Offshore Business Sectors


This page was last updated on 6 August 2019.

See Offshore Business Review – Insurance for a more general treatment of captive insurance companies.

Bermuda is a significant player in the global insurance market with over 1,200 registered insurance companies (2010), of which 845 are captives. The predominant portion of premium writings is through Bermuda’s commercial reinsurance market, which also writes some direct business on behalf of large U.S. corporations. Bermuda is the world's third largest insurance centre after London and New York.

Bermudian insurance is regulated by the Minister of Finance and registrar of companies under the Insurance Act 1978, the Insurance Amendment Act 1996 and the Companies Act 1981. The legislation provides greater flexibility than most other jurisdictions, with the industry shouldering a considerable amount of self-regulation; this partly accounts for Bermuda's success as an insurance centre. An annual audit is required, together with a solvency certificate.

Under the Insurance Act most captives are registered as a 'Class 1' or a 'Class 2' general business insurer. Class 1 insurers are single parent captives which are not permitted to write any unrelated business, and Class 2 insurers are multi-parent or association captives which are permitted to write up to 20% unrelated business.
There are, however, four classes under which insurers can register:

  • Class 1: Single-parent captives which do not write external business. Minimum capital and surplus is US$120,000.
  • Class 2: Multi-owner captives underwriting the risks of their owners, or single-parent or multi-owner captives writing not more than 20% of external business. Minimum capital and surplus is $250,000.
  • Class 3: Insurers and reinsurers not included in the other three classes, including reinsurers writing 3rd party business, finite reinsurers, etc. Minimum paid-up share capital is $1,000,000.
  • Class 4: insurers and reinsurers writing direct excess liability and/or property catastrophe reinsurance risks. Minimum capital and surplus is $1,000,000.

There are additional rules dealing with minimum levels of statutory and authorised capital, distinguishing between general and long-term (life) business. Insurers must file annual financial statements and statutory returns with the registrar of companies, audited by an approved auditor. They are subject to various other reporting and fiduciary requirements.

There are no income, corporation or withholding taxes in Bermuda. Annual licence fees in early 2008 vary between USD925 for a class 1 insurer carrying on general business and USD200,000 for a class 4 insurer carrying on general business; the initial costs of setting up an insurance company are likely to be about USD10,000.

Bermudian legislation provides for both rent-a-captives and for protected cell companies.

Rent-a-captive programmes allow unrelated parties to participate in the underwriting profits generated by the risks insured by the captive, and even to place extraneous risks through the captive. This securitisation of risk is analogous to the securitisation of debt. Protected cell companies allow a company (in this context, a rent-a-captive) to have separate divisions (cells) which are independent of one another in liquidation situations. Evidently, the combination of rent-a-captives with protected cell legislation offers powerful benefits, and Bermudian legislation is quite flexible in this regard.

On December 31, 2012, an updated set of regulatory requirements for insurance firms in the EU will come into force. While Solvency II will primarily impact insurance companies operating in the EU, the requirements of Solvency II will also impact on EU subsidiaries of Bermuda insurers. The Bermuda Monetary Authority published 'The Roadmap to Regulatory Equivalence' in September 2010, with a view to enhancing Bermuda's framework for insurance regulation to ensure equivalence with EU regulations under Solvency II.

An assessment of Bermuda's readiness for Solvency II by the EU regulatory body is expected to be carried out during 2011.



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