The Bermuda Monetary Authority (BMA) has published its response to feedback received on its December 2024 consultation on the Prudent Person Principle (PPP), confirming consequential amendments to the Code and the Insurance (Group Supervision) Rules 2011.
The principle requires that an insurer assume only investment risks it can properly identify, measure, monitor, control and report on, taking account of its capital, liquidity and policyholder obligations. The Authority said the enhancements respond to a rise in non-publicly traded, illiquid, less transparent, structured and related party-originated assets across the sector, particularly among long-term insurers. It confirmed that reliance on Generally Accepted Accounting Principles (GAAP) alone would not demonstrate compliance with the PPP, which it says goes beyond the scope of GAAP.
Responding to industry calls for proportionality, the BMA said compliance with the principle continues to be assessed on a case-by-case basis relative to an insurer's nature, scale and complexity. It declined to introduce a separate regime for the property and casualty sector, noting the principle does not distinguish between industry sectors.
The package also advances enhancements to the group supervision framework, with consequential amendments to the group rules and group solvency rules set out in illustrative draft form.
