The Bermuda Monetary Authority (“BMA”) has taken the dramatic and competitive action of reducing its annual registration fees for Special Purpose Insurers (“SPI”) by almost 50% from $11,600 to $6,000.  Click here for the BMA’s press release.

An SPI is a vehicle used to assume insurance or reinsurance risks and fully funds the liabilities of all risks assumed.  Thus, there is little risk of insolvency or an inability to pay since all liabilities are fully funded.  As a result, the BMA supervision of the SPI is considerable less than exercised for non-SPI companies and the formation of the SPI is considerably faster and easier than say for a Class 4 commercial insurer.  The main issue in the formation of an SPI is establishing that the participants in the SPI are sophisticated, understand the risks when dealing with reinsurance and that all liabilities are fully funded.

This action by the BMA is in recognition of the reduced amount of supervision necessary for an SPI and is an effort to increase the number of SPI’s formed in Bermuda.