Bermuda Solvency Capital Requirement (BSCR)
The capital regime for Bermuda's commercial insurers and reinsurers, recognized as equivalent to Solvency II by the EU in 2016, which sets the enhanced capital requirement and a higher target level.
Bermuda is one of the world's main centers for reinsurance and insurance-linked securities. To keep Bermudian reinsurers' access to European markets, the Bermuda Monetary Authority built a risk-based solvency regime whose centerpiece is the Bermuda Solvency Capital Requirement formula. For commercial insurers, it calculates an enhanced capital requirement from underwriting, catastrophe, market, credit and operational risks, using either the standard formula or an approved internal model. The authority expects insurers to hold capital above a target level set above this requirement, and intervenes in graduated fashion below it. In 2016, the European Union recognized the Bermudian regime as fully equivalent to Solvency II for commercial insurers, which lets European cedants treat Bermudian reinsurance like that of a European reinsurer when calculating their capital. Bermuda also hosts captives and securitization vehicles, subject to lighter regimes. The regime was tightened from 2024 on the valuation of life liabilities, amid the growth of asset-intensive reinsurance, which several supervisors viewed with concern.
Hypothetical case: a Bermudian reinsurer calculates an enhanced capital requirement of 2 billion dollars and holds 3 billion of available capital. This 150 percent ratio exceeds the target level; a French cedant placing a catastrophe treaty with it treats it like a reinsurer subject to Solvency II, because the European Commission recognized the full equivalence of the Bermudian regime in November 2015.
BSCR, Bermuda Solvency Capital Requirement, ECR, enhanced capital requirement
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