Design and formation
Built for Life and Non-Life Commercial Insurance Companies in Bermuda
The Bermuda Monetary Authority (BMA) is responsible for regulating and supervising the island’s robust commercial insurance industry, overseeing the establishment, operation, and compliance of both life and non-life insurers. The BMA offers a range of licences tailored to different types of insurance companies, each with distinct capital requirements and regulatory responsibilities.
IML brings over 40 years of expertise in commercial insurance design and formation, supporting clients through every stage of the licensing process—from feasibility and structuring to regulatory approval and long-term management. Our team has deep experience with the formation and administration of Bermuda’s key classes, including non-life insurance (Class 3A, 3B, and 4) and life insurance (Class C, D, and E). By combining strategic insight with a clear understanding of BMA regulations, IML ensures that each commercial insurance company is efficiently structured, compliant, and positioned for lasting success.
IML specialises in the design and formation of both life and non-life commercial insurance companies in Bermuda.
STEP ONE
Feasibility Study
IML will guide you through the feasibility process for commercial insurance formation, connecting you with industry experts and providing specialised support in assessing regulatory requirements, financial projections, capitalisation and funding, and risk management.
A feasibility study is a crucial initial step in determining the viability and potential success of establishing a commercial insurance company. It involves a comprehensive assessment of various factors, including market analysis, regulatory requirements, financial projections, and operational considerations. Below is an outline of key components to consider when conducting a feasibility study for setting up a commercial insurance company:
COMMERCIAL INSURANCE DESIGN & FORMATION
Market Analysis
- Market Size and Growth: Evaluate the size and growth trends of the insurance market, including segments such as life, health, property, casualty, and specialty lines.
- Competitive Landscape: Analyse existing competitors, their market share, product offerings, distribution channels, and pricing strategies.
- Market Needs and Opportunities: Identify unmet needs, underserved segments, and emerging trends in the insurance market that present opportunities for a new entrant.
COMMERCIAL INSURANCE DESIGN & FORMATION
Regulatory Requirements
Licensing and Compliance: Research the regulatory framework governing insurance companies in your target jurisdiction(s). Determine the licensing requirements, capitalization standards, and ongoing compliance obligations.
Legal Structure: Evaluate the legal structure options for the insurance company, such as a corporation, mutual company, or captive insurer, based on regulatory considerations and strategic objectives.
COMMERCIAL INSURANCE DESIGN & FORMATION
Product Development
Product Portfolio: Define the types of insurance products and coverage options to offer, considering market demand, competitive positioning, and regulatory compliance.
Underwriting Guidelines: Develop underwriting guidelines and risk acceptance criteria to ensure sound risk management practices and profitability.
COMMERCIAL INSURANCE DESIGN & FORMATION
Financial Projections
Revenue Projections: Estimate revenue streams from insurance premiums, investment income, and other sources.
Expense Projections: Forecast operating expenses, including underwriting costs, administrative expenses, and claims management costs.
Profitability Analysis: Conduct sensitivity analysis and scenario planning to assess the potential profitability of the insurance company under various market conditions.
COMMERCIAL INSURANCE DESIGN & FORMATION
Capitalization and Funding
Capital Requirements: Determine the initial capitalization requirements based on regulatory standards, business objectives, and risk appetite.
Sources of Funding: Identify potential sources of funding, including equity investment, debt financing, and reinsurance arrangements.
COMMERCIAL INSURANCE DESIGN & FORMATION
Operational Considerations:
Distribution Channels: Define distribution channels for selling insurance products, such as agents, brokers, online platforms, and strategic partnerships.
Technology Infrastructure: Assess the technology infrastructure needed to support underwriting, policy administration, claims processing, and customer service operations.
Human Resources: Determine staffing needs, hiring requirements, and talent acquisition strategies to build a skilled and experienced team.
COMMERCIAL INSURANCE DESIGN & FORMATION
Risk Management
Risk Assessment: Conduct a comprehensive risk assessment to identify and mitigate potential risks, including underwriting risks, investment risks, regulatory risks, and operational risks.
Reinsurance Strategy: Develop a reinsurance strategy to manage risk exposure and enhance the company’s capacity to underwrite insurance policies.
COMMERCIAL INSURANCE DESIGN & FORMATION
Marketing and Branding
Brand Identity: Define the brand identity, positioning, and value proposition of the insurance company to differentiate it from competitors and attract customers.
Marketing Plan: Develop a marketing plan outlining promotional strategies, advertising campaigns, and customer acquisition initiatives.
COMMERCIAL INSURANCE DESIGN & FORMATION
Exit Strategy
Exit Options: Consider potential exit options, such as mergers and acquisitions, strategic partnerships, or IPOs, to provide liquidity for investors and shareholders.
COMMERCIAL INSURANCE DESIGN & FORMATION
CONCLUSION
A thorough feasibility study is essential for assessing the viability, risks, and opportunities associated with establishing an insurance company. By conducting a comprehensive analysis of market dynamics, regulatory requirements, financial projections, operational considerations, and risk management strategies, businesses can make informed decisions and develop a strategic roadmap for success in the insurance industry.
STEP TWO
Business Plan
A comprehensive business plan is required by the regulator as part of the commercial insurance application process. IML has extensive knowledge in the preparation and submission of business plans for commercial insurance companies and will guide you through each step with precision and expertise.
The business plan plays a crucial role in guiding the overall strategy and operations of the commercial insurance company. It provides a roadmap for success and helps outline the organisation’s goals, objectives, and financial projections, ensuring alignment with regulatory expectations.
The feasibility study forms a large part of the business plan and includes pro forma income statements and balance sheets on a five-year basis, demonstrating the viability of the plan and confirming that the applicable Minimum Solvency Margin (MSM) and Liquidity Ratio (LR) under the Act will be maintained at all times. For a commercial insurance company, Bermuda Solvency Capital Requirement (BSCR) projection models for the first and fifth year are prepared in accordance with the applicable reporting form to demonstrate that the Enhanced Capital Requirement (ECR) prescribed by the Act and related Rules will also be maintained at all times.
STEP THREE
Insurer Application Process
IML will then proceed with the incorporation and registration of the insurance company which involves the following steps:
Over the years IML has developed strong relationships and works well with industry partners, we are well positioned to advise on selecting professional service providers (including lawyers, auditors, insurance managers, bankers and actuaries, if necessary)
Application will be sent to the Registrar of Companies to reserve the preferred name of the new company (if approved, the name will be reserved for three months)
Bermuda Monetary Authority (BMA)
Application will be sent to the BMA to incorporate the new company and simultaneously we will submit:
(a) the pre-incorporation form for registration as an insurer (including details of ownership, proposed business plan, five -year pro-forma financial projections and company administration); and
(b) an insurance licensing application to the BMA’s Assessment and Licensing Committee
Registrar of Companies (RoC)
Additionally, we will submit an application for registration of a company to the RoC (including the proposed Memorandum of Association, name reservation and applicable annual government fee).
The RoC will proceed with the registration after receiving notice from the BMA that it has consented to the incorporation of the new company.
Once the incorporation and licensing applications are approved, incorporate and capitalise the new company and convene the initial organisational meetings
File final approved licensing documents with the BMA’s Licensing and Authorisations Department for registration and issue of the licence
The BMA issues the new company’s insurance licence
Company commences insurance operations