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Navigating the BMA’s New Recovery Planning Rules: Key Insights and Industry Implications
On 25 April 2024, the Bermuda Monetary Authority (BMA) issued the Insurance (Prudential Standards) (Recovery Plan) Rules 20241 (the “Rules” or “Recovery Rules”), a landmark regulatory framework designed to strengthen the resilience of Bermuda's (re)insurance sector. Coming into force on 1 May 2025, the Rules mark a significant development in the Authority’s efforts to bolster financial stability, policyholder protection, and systemic preparedness. Bermuda’s insurers – especially those deemed systemically significant – will need to re-think both their strategic policy and operational readiness to ensure compliance.
This article unpacks the essential elements of the new Recovery Rules, explores how they compare with the EU's equivalent under the Solvency II regime (Insurance Recovery & Resolution Directive) and outlines how insurers can address their evolving regulatory expectations. Note that the use of the term “insurers” throughout this article refers to both insurance and reinsurance Bermuda-regulated entities, both of which are subject to the new recovery guidelines.
Scope & Applicability
The BMA’s Recovery Rules reflect a risk-based and proportionate approach to regulatory oversight. At their core, the Rules require economically important and systemically significant insurers to develop and maintain detailed recovery plans. These plans are designed to restore an insurer’s financial position following a severe stress scenario and should not be treated merely as a “tick-the-box” compliance exercise.
The Rules apply primarily to Class 3A, 3B, 4, C, D, and E insurers and insurance groups . Class 3A, 3B and 4 represent commercial (non-life) insurers of varying degrees of size and complexity, while class C, D and E represent long-term (life) insurers2. Determinations are based on criteria such as asset size, gross written premiums, business complexity, systemic interconnectedness, and the extent of cross-border activities. The BMA retains discretion to mandate recovery planning on a case-by-case basis.
Specifically, the Authority will consider the following factors in determining whether an insurer should prepare a recovery plan under Section 6G of the Insurance Act3:
- whether the insurer conducts domestic business;
- whether the insurer has a three-year rolling average total assets of at least $10 billion;
- whether the insurer has a three-year rolling average total gross written premiums of at least $5 billion;
- whether the insurer is subject to enhanced supervisory monitoring by the BMA or any relevant supervisory authority.
Insurers that fall within the scope of the Rules will receive a formal notification from the BMA.
Core Components
Per both the stakeholder letter4 issued by the BMA in November 2024 and the aforementioned Rules, a compliant recovery plan must include:
- Executive Summary: High-level overview of triggers, options, and governance.
- Company Profile: Legal structure, business model, and operational context.
- Trigger Framework: Tiered, forward-looking indicators for plan activation.
- Governance and Responsibilities: Clear roles for management, crisis teams, and communication protocols.
- Recovery Options: A suite of feasible and stress-tested capital, liquidity, and operational measures.
- Scenario Analysis: Severe but plausible scenarios including idiosyncratic and systemic events.
- Operational Testing: Simulation or dry-run exercises to validate plan efficacy.
- Update Mechanism: Periodic review every three years or following material changes.
The BMA emphasises that the recovery plan must be a living document, integrated within the insurer’s broader ERM (Enterprise Risk Management) framework, including alignment with tools such as CISSA (Commercial Insurer’s Solvency Self-Assessment), capital management policies, and contingency plans.
The Rules stress that while third-party consultants may assist in plan development, the board and senior management retain ultimate accountability. Recovery plans must reflect an insurer's actual governance and reporting structures to ensure operational viability under crisis conditions.
Implementation Challenges
The BMA has outlined several typical pitfalls observed from entities in jurisdictions with similar recovery plan guidelines in place:
Lack of focus on practicality
The recovery plan should be designed so that it can be executed by the entity, and any assumptions made about its ability to execute it should be realistic, plausible and clear to the users.
Disproportionate focus on scenarios
While the scenarios should be credible and account for a range of circumstances, they should not be the core focus of the recovery plan. Insurers should not give them disproportionate focus at the expense of other areas of the recovery plan, particularly the selection of recovery options.
Inadequate option analysis
Recovery options outlined in a recovery plan should be practical and realistic in the event of a severe stress scenario. Insurers should consider the speed at which options can be exercised and the financial impact of the options in different scenarios to ensure both are sufficient to enable recovery.
Optimistic approach to obstacles
Insurers should take account of any potential obstacles, e.g. regulators, market conditions or availability, that could exist in a stress scenario that may prevent them from exercising their recovery options and include prudent assumptions to allow for these obstacles.
Inappropriate trigger calibration
Triggers are metrics that indicate when a financial stress is reached or forecast. Triggers are less useful if they are frequently activated in business-as-usual circumstances, as they may not effectively indicate actual financial stress. Conversely, if the triggers are not calibrated to activate in a particular scenario, the insurer may not become aware of the potential financial stress and the need to execute recovery actions in a timely manner.
Insurers are therefore advised to treat recovery planning not as a compliance burden but as a business-critical resilience exercise. Early engagement from cross-functional teams – risk, finance, operations, and governance – is essential to producing robust, credible plans.
Comparison with IRRD
The EU’s Insurance Recovery & Resolution Directive (IRRD)5, a key output from the Solvency II Review, was published in the Official Journal in January and is expected to be implemented from 2027. It shares the same foundational goal as the BMA's framework: preventing insurer failure and minimising systemic risk. However, there are several nuanced differences in execution and scope:
Aspect | BMA Recovery Plan Rules | IRRD Rules |
|---|---|---|
Applicability / Scope | BMA determines applicability of insurers based on financial thresholds and systemic relevance. | Broader applicability, mandatory for all insurers deemed significant. A minimum percentage of the insurance market must be covered. |
Ownership | Board and senior management responsible, outsourcing allowed with oversight. | Similar approach but with stricter internal control standards. |
Trigger Framework | Emphasis on tiered and forward-looking indicators e.g. liquidity, capital and profitability. | More prescriptive early warning indicators tied to Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR) breaches. |
Scenario Analysis | Tailored to Bermuda market, includes operational (e.g. cyber) and mixed scenarios. | Aligned with Solvency II stress testing, focuses more on macro-prudential stress scenarios. |
Resolution | No distinct resolution plan required. | Resolution plan required (in addition to recovery plan) for certain insurers, based on similar eligibility criteria. |
Update Frequency | Once every three years or following a material change. | Once every two years or following a material change. |
While both frameworks stress proportionality, the BMA’s approach arguably provides more flexibility for bespoke implementation, particularly for internationally active insurers with complex business models.
Next Steps
A detailed guidance note on the BMA's expectations and guidelines in relation to recovery planning will be consulted and published in 2025. With the Rules taking effect on 1 May 2025, insurers within scope should now be focused on laying the groundwork for compliance. Which takes us on to the next section.
How Finalyse Can Help
Gap Analysis and Scoping Assessment
We can conduct an initial gap analysis to assess your company's readiness relative to the BMA’s expectations. This includes evaluating your ERM framework, governance structures, and existing contingency plans.
Benchmarking against Existing Regimes
We have supported insurers in the Irish market following the introduction of the Central Bank of Ireland’s Pre-Emptive Recovery Planning Requirements in 2021. Drawing on this experience, we can adapt existing templates to align with the BMA Rules and apply insights gained from previous recovery planning exercises.
End-to-End Recovery Plan Development
Working closely with your internal teams, we help draft and document recovery plans tailored to your risk profile and business model. Our methodology ensures compliance with the new Recovery Rules.
Scenario Design and Testing Frameworks
We design stress scenarios aligned to Bermuda-specific and globally systemic risks. Our consultants can also facilitate operational testing workshops to validate escalation and crisis response procedures.
Regulatory Engagement and Group Plan Harmonisation
Where relevant, we assist in preparing submissions for the adoption of group-wide recovery plans and coordinate with the BMA to ensure timely approvals.
Ongoing Plan Maintenance and Governance Review
We offer periodic review services to update your recovery plan in line with business changes, market conditions, or evolving regulatory guidance. We can also support internal training for board and executive leadership on plan activation and oversight.
Please reach out to one of our insurance experts at insurance@finalyse.com to learn more!
References
- https://cdn.bma.bm/documents/2024-05-03-12-00-06-Insurance-Prudential-Standards-Recovery-Plan-Rules-2024.pdf
- https://www.bma.bm/insurance-licensing
- https://www.bma.bm/viewPDF/documents/2019-03-27-09-23-29-Insurance-Act-1978.pdf
- https://www.bma.bm/viewPDF/documents/2024-11-25-16-39-37-Recovery-Planning---Expectations-and-Guidelines---Insurance-Prudential-Standards-Recovery-Plan-Rules-2024.pdf
- https://eur-lex.europa.eu/eli/dir/2025/1/oj/eng
Frequently Asked Questions
The BMA’s 2024 Recovery Planning Rules require Bermuda (re)insurers to develop detailed recovery plans outlining how they would restore financial stability following severe stress events. Class 3A, 3B, 4, C, D, and E insurers may be required to comply based on factors such as size and systemic importance. The BMA will formally notify entities that fall within scope.
A compliant recovery plan must cover a company profile, a trigger framework, governance, recovery options, scenario analysis, testing protocols, and an update mechanism integrated into the company’s Enterprise Risk Management (ERM) framework.
Both aim to reduce systemic risk, but the BMA’s Rules allow more flexibility. The IRRD is broader in scope and includes additional resolution planning requirements. The minimum update frequency of the recovery plan is also longer under the BMA Rules (once every three years) compared to the IRRD (once every two years).