Recovery Planning

Regulatory considerations

The Bermuda Monetary Authority (BMA) set out the rules governing recovery planning, which is an additional regulatory prudential tool aimed at enhancing the resilience of Bermuda's commercial insurance sector.

The BMA also has authority to require insurers to take recovery-planning measures as necessary without implementing a formal plan.

Who is in scope?

In principle, commercial insurers that can pose a systematic risk:

• Insurance groups for which the BMA is the group wide supervisor,
• Insurers carrying on domestic business,
• Medium sized insurers, i.e. a three-year rolling average total assets of at least $10 billion
• Growing insurers, i.e.  on a three-year rolling average total gross written premiums of at least $5 billion;
• An insurer under enhanced monitoring by the BMA or any relevant supervisory authority.

The rules are operational from 1st of May 2025. Recovery planning is an ERM framework tool.

Process overview

Resource efficiency

There is a risk of inefficient use of resources leading to a duplication of tasks across teams. There is a need to identify overlaps in the recovery plan process and existing tools within ERM frameworks, such as the Commercial Insurer's Solvency Self-Assessment (CISSA), and to streamline processes to avoid unnecessary costs and wasted time.

Alignment with ERM frameworks

Drafting recovery plans that align seamlessly with existing ERM frameworks poses a challenge. Insurers are unsure about the integration of recovery planning into the overall risk management strategies.

Degree of readiness

Uncertainty about how to effectively draft a recovery plan, or the absence of sample recovery plans leave insurers vulnerable to severe stress scenarios, hindering their ability to respond effectively during crises.

Uncertainty in implementation

Implementation considerations include articulating suitable triggers for plan activation, establishing the frequency and depth of plan updates, obtaining clarity on governance requirements.

Increased operational risks

Without recovery plans, companies face increased operational risks during times of stress, potentially affecting financial stability.

Disclosure process

A recovery plan is required to include information on the various recovery methods, stress scenarios, and stakeholder communication strategies. A recovery plan shall be reviewed and updated:

• At least once every three years or;
• When there is a material change in the financial position, strategy, business and risk profile of the insurer.

An updated recovery plan is to be submitted to the BMA within 30 days of being updated.

Regulatory compliance

Leveraging on existing recovery plans, performing comprehensive gap analyses to assess regulatory compliance are development stages in improving an existing recovery plan to meet BMA requirements.

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