Insurance and Reinsurance Panel Bermuda Financial Services Conference New York September 30 th 2008

Bermuda Monetary Authority Update Shanna Lespere, Director, Insurance Bermuda Monetary Authority

Agenda BMA overview Insurance Regulation Enhancements AML work Sub-prime Summary

The Bermuda Monetary Authority Independent, single regulator of all markets within Bermuda’s financial services sector; licensing, supervisory, enforcement powers for:  Banking, Trust and Investment, (BT&I)  Insurance Promotes overall financial stability and soundness of financial institutions Assists relevant authorities with detection and prevention of financial crime Has pivotal role in maintaining Bermuda’s reputation as a high-quality international financial centre Committed to providing effective, risk-based, practical regulatory frameworks, consistent with international standards

Insurance Regulation Enhancements Our goal: mutual recognition – Solvency II –Tangible benefits to firms, Bermuda Insurance Act Amendments BSCR – enhanced risk-based solvency regime Internal Models GAAP Disclosure – transparency Group Supervision Focus on commercial market – captive regime unchanged

Insurance Regulation Enhancements Class 3 re-classification –Risk-based re-categorisation of Class 3 entities established –Re-registration process imminent –Consultation on resourcing underway –Goal: Issue certificates of registration by March 31 st, 2009

AML work Revamp of Bermuda’s POCA provisions –Underpinned by revised / new legislation –Legislation facilitates a more coordinated and transparent effort by the jurisdiction BMA Responsibilities –Focused, dedicated resources –Practical, risk-based regime

Sub-prime Continue to monitor impact on BDA market Insurance –Proactive approach –BMA surveys re investment portfolios and underwriting exposures –Stress tests - solvency / liquidity positions –Enhanced monitoring of affected entities – financial guaranty firms

Current Health of Insurance Market Jonathan Reiss, Insurance Sector Leader, Ernst & Young

Summary Regulatory Priority –Achieve equivalence / mutual recognition (EU/US) Enhanced operational capability Continued sub-prime impact monitoring Ongoing risk-based supervisory approach

Bermuda (Re)insurance Market - Current State Center of Excellence - Underwriting discipline Track Record Strong Balance Sheets - Access to capital - Hard market Hurricanes Gustav & Ike Global Credit Crisis

Regulations Michael G. Frith, Associate, Conyers, Dill & Pearman

2008 – Current Matters HR 6969 – Proposed Insurance Tax Legislation (Neal 9/18/08) Revenue Ruling – Cascading Theory for FET U.S. Presidential Election Bermuda Infrastructure

Bermuda Regulation of Insurers/Reinsurers Regulated by the Bermuda Monetary Authority (“BMA”) Long term Business and General Business General Business divided into Classes Class 1 – pure captives Class 2 – association captives; <20% 3 rd party Class 3 – everything else… Class 4 – highly capitalised reinsurers Regulatory “Spectrum” Class 1Class 2Class 4 Class 3

Bermuda Regulation of Insurers/Reinsurers Insurance Amendment Act 2008 New Classes, subdividing the old Class 3 Class 3 – more than 20% but less than 50% 3 rd party business Class 3A – 50%+ 3 rd party; less than $50m premium written Class 3B – 50%+ 3 rd party; more than $50m premium written Special Purpose Insurers Fully-funded $1 minimum share capital Regulatory “Spectrum” Class 1Class 2Class 4 Class 3Class 3AClass 3B