Regulation can be a careful balancing act. Too strict and it stifles and drives away business. Too lax and it allows systemic risk to build, eventually exposing customers and taxpayers to considerable cost. Bermuda:Re+ILS asked readers to share their thoughts about the current regulatory environment in Bermuda, and specifically what rules are creating the greatest compliance challenges.
“The regulator is seen to have found an enviable balance between prudent oversight and open-minded approachability.”
When talking to re/insurance executives and service providers about the business case for operating in Bermuda, the question of regulation comes up time and again, with the Bermuda Monetary Authority (BMA) cited as a major draw to the Island.
The regulator is seen to have found an enviable balance between prudent oversight and open-minded approachability. It is known for its can-do attitude and willingness to work with businesses to help them innovate and develop new products.
How important is regulation in explaining Bermuda’s success as a re/insurance domicile?
Respondents clearly concurred with this assessment, with nearly six out of 10 of them describing regulation as quite important to Bermuda’s success, while more than a quarter said it was vital (Figure 1). Together, 84 percent of respondents thought it was quite or very important, compared with only 14 percent who thought it was of little importance.
Which regulatory issues have caused you the most concern in the last 12 months?*
*Respondents could choose more than one option
No respondents have been worried about COVID-19 safety compliance, or at least not to the extent that it has crowded other regulatory concerns (Figure 2). The biggest concerns were the EU tax havens blacklist—from which Bermuda was removed in 2019 but which evidently still looms large as a concern—and economic substance rules, with 86 percent and 71 percent mentioning them, respectively.
Solvency II equivalence was way down the list at 29 percent, while the OECD Digital Tax was cited as another concern.
Asked what big regulatory issues respondents see coming up in the next 12 to 24 months that they fear will create challenges for their companies, most pointed to ongoing compliance challenges continuing into the future, rather than new items coming onto the agenda.
Solvency II equivalence was mentioned repeatedly. The Personal Information Protection Act, Bermuda’s answer to Europe’s General Data Protection Regulation, was also highlighted, as was the OECD Digital Tax.
One respondent mentioned the BMA’s approach more generally. “BMA is trying to import regulations from different jurisdictions that do not fit the Bermuda model, and is proposing changes that will substantially increase the cost of doing business in Bermuda,” the respondent said.
Another called for more harmonisation among authorities in Bermuda, citing the “lack of coordination among financial institutions, BMA and the Registrar of Companies in Bermuda on a central data collection entity.”