Regulatory environment - Bermuda

As Bermuda became host to international companies, insurance companies in the early years were essentially self-regulating. However, in 1978 the government passed the Insurance Act. This Act formed the basis for today's government supervision of both domestic and international insurance companies. Administered by the Registrar of Companies assisted by an advisory committee of personnel from within the insurance industry, the Act was later modified by Insurance Amendment Acts of 1983 and 1985.

Although the Act requires certain levels of minimum and paid-up capital for companies conducting long-term business, there is no need for them to publicly disclose their accounts. However, annual statutory financial statements must be submitted to the Registrar of Companies. Flexible and effective legislation accommodates an innovative industry that has developed structures, concepts and approaches to maximize profits.

The regulation of international companies encompasses two stages. During a company's application for incorporation in Bermuda, government authorities work closely with private sector professionals to screen applicants. Excellent financial references are crucial before the company can proceed through the regulatory process. The Insurers Admissions Committee must be satisfied with the company's capital base and the reputation and competence of key personnel.

The second stage, through the Companies Act, gives the Finance Minister authority to appoint an inspector to investigate the affairs of any exempted company registered in Bermuda. The use of the term ‘exempt' derives from Bermuda's laws. Translated, this means that such companies are exempt from local laws that require limited companies in Bermuda to have a minimum 60% Bermudian ownership. And, unlike local companies, they are exempt from Exchange Control regulations and liability for stamp duties on executed documents.

However, companies in the exempt category can transact business from Bermuda, but not in Bermuda. They are limited to using the Island solely as a base for their overseas business. Quite often these corporations are subsidiaries of companies based in countries like the United States, Canada, Hong Kong and the United Kingdom.

Bermuda's clean image is undeniably one of its greatest assets. To allay suspicions or considerations that Bermuda may be among those countries with dubious regulatory practices, the local government has embarked on a review of OECD, European Union, and Tax Treaty positions, and legal counsel has been engaged to represent Bermuda in the UK and Europe. Bermuda already has significant and effective regulations in place to combat money laundering and the government emphasis is on showing that the Island remains a safe and reputable financial jurisdiction for the future.