Bermuda speeds up cat bond SPI registration to just three days

Catastrophe bond sponsors looking to locate their issuance structures in Bermuda can now benefit from much faster licensing and registration of new cat bond vehicles, with the process streamlined to take just three working days by the regulator.

The Bermuda Monetary Authority (BMA) said today that a new faster catastrophe bond issuance vehicle registration process has been designed to meet the needs of the insurance-linked securities (ILS) market as it continues to evolve.

The BMA said that this is a “significant enhancement” to its regulatory regime for insurance-linked securities (ILS) such as catastrophe bonds.

Adding that this “aligns with the evolving needs of the ILS market.”

It means that those seeking to access insurance and reinsurance capital via the issuance of fully securitized 144A catastrophe bond notes can achieve that even faster than before, with Bermuda’s cat bond SPI registration process now the fastest in the world by quite a margin.

This process can take weeks in some parts of the world and while Bermuda had got this down to just two weeks, or less in some cases we understand, this new three working day process promises to be extremely beneficial to sponsors.

As sponsors’ use of ILS and the capital markets, for insurance, reinsurance and retrocession, becomes increasingly sophisticated, the need to be able to set up issuers and get transactions out into the market with speed, has become greater.

Seeking reinsurance capital from a range of sources, sponsors now need to be able to swiftly decide whether they should look to traditional capital, or ILS, fully securitized as catastrophe bonds, or perhaps use another collateralized reinsurance structure.

The BMA’s move means that Bermuda can offer and facilitate the choice of a catastrophe bond much more quickly, which will be very positive for sponsors when the market is moving fast and the dynamic changes swiftly with capacity changes and availability of balance-sheet capital, as it has done around recent renewals.

The BMA’s regulatory process enhancements have been made to the licensing and registration process for Restricted Special Purpose Insurers (R-SPI) and were effective as of 13th August 2021.

Any applicants looking to be licensed and registered as an R-SPI, with a business model to issue bonds, be that catastrophe bonds or mortgage bonds (mortgage insurance-linked securities), can now be registered by the BMA within three business days, the Authority explained.

This consolidates the licensing and registration processes in Bermuda for catastrophe bond or mortgage ILS issuers, resulting in a “single, efficient process for registrants that can be initiated on any business day by submitting an application prior to 5 pm,” the BMA said.

Applications have to be made electronically and registration fees are due on application. An application checklist has to be completed, while all other supporting documents are still required.

Any errors, omissions or problems with an application will delay the process until rectified, the BMA said.

This move by Bermuda is clearly designed to keep its ILS related regulatory processes ahead of a growing range of competitors.

Nobody else, in terms of domicile, can come close to this pace of registering the catastrophe bond issuer. However, this move is likely to result in others looking to speed up their own processes in response.

Bermuda has so much experience as a catastrophe bond and ILS domicile though, that it will always be hard for others to compete in terms of speed, until their regulatory regimes for ILS and cat bonds become more mature and the regulators establish processes that can support faster issuance decisions to be made.