Bermuda has been awarded reciprocal jurisdiction status by the United States’ National Association of Insurance Commissioners.
As a result, Bermuda’s re/insurers will be eligible for zero collateral relief, thereby operating under equal conditions as its counterparts from the European Union and United Kingdom. Reciprocal jurisdiction status takes effect on January 1, 2020.
Additionally, the NAIC has completed its five-year re-evaluation of Bermuda and it has approved Bermuda as a qualified jurisdiction.
The NAIC is the US standard-setting and regulatory support organisation 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 UK. Since 2015, Bermuda has maintained its status on the list.
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 qualified jurisdiction status has solidified Bermuda’s relevance to the US as a major re/insurance trading partner. Over the last two decades, Bermuda insurers and re/insurers have paid in excess of $200 billion to settle US losses, consistently offering valuable capacity provisioning for catastrophic events, the BMA said.
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 US.
“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,” the BMA added.
This year, the NAIC, in their revisions to the Credit for Reinsurance Model Law and Regulations, created a new status to expand these benefits — reciprocal jurisdiction. This is an elevated status, which in the case of non-European Union jurisdictions can only be achieved by first gaining the prerequisite qualified jurisdiction status and recognising the US state regulatory system for group supervision and group capital. The goal of these revisions was to create consistency between the Model Law and Regulations, and the provisions contained in the covered agreements the US have with the EU and the 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 US/EU and US/UK 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.”