Bermuda is a leading international financial centre with a long history of providing pragmatic financial and professional services to international businesses.
The Island is renowned for its strong (re)insurance, investment fund, asset management and trust sectors which are supported by a world-class advisory and financial services infrastructure, including a sophisticated legal system, a robust regulatory framework, speed-to-market capability, a business-friendly government, simple tax regime, a highly-skilled work force, close proximity to the US and direct flights to the US, UK and Canada.
In 2018 Bermuda introduced new legal and regulatory frameworks designed to govern and regulate initial coin offerings, digital asset business and insuretech. The new legislation sets out expected standards of disclosure for initial coin offerings, a dual licensing system (including sandbox) for anyone seeking to provide digital asset business services to the sector and both a sandbox regime and innovation hub for those in insuretech.
The insuretech sandbox allows companies to test new technologies and offer innovative products, services and delivery mechanisms to a limited number of clients in a controlled environment and for a limited period of time. The insuretech innovation hub has been designed as an incubator for entrepreneurs to conceptualise and collaborate on new ideas prior to seeking sandbox entry.
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1. Who is responsible for regulating fintech companies?
Financial technology, or fintech, refers to the introduction of technologies to deliver financial services in new and innovative ways.
Digital asset business, insurance and funds are regulated by the Bermuda Monetary Authority. In addition, digital asset issuances (DAIs) are a restricted business activity that must have the consent of the Bermuda Monetary Authority in order to launch.
2. Are there any “sandbox” or other regulatory neutral zones?
The Bermuda Government, through the Bermuda Monetary Authority (BMA), has created regulatory sandboxes for both the digital asset business and insuretech sectors. The Digital Asset Business Act (DABA) introduced a three class licensing system that includes a class T licence which allows for a proof-of-concept stage in order to test new products, services and technologies. Applicant must develop success criterion and targets for the duration of the class T licence. In the insuretech sector the BMA has also launched two parallel insurance innovation tracks comprising an insurance regulatory sandbox and an Innovation Hub, both initially targeted at insurance technology.
3. Is there a Digital “incubator” or hub?
Yes there is. The Bermuda Government in partnership with the private sector has created InnoFund (Innofund.bm), a local company aimed at building a world class incubator providing companies and entrepreneurs with the tools to stimulate innovation, grow and thrive within the technology sector in Bermuda.
4. Are there any barriers to entry for foreign companies?
There are no significant barriers to entry for those who wish to establish corporate vehicles in Bermuda. However, any person seeking to conduct business locally must either comply with certain levels of local ownership and participation or apply for an exemption.
5. Have traditional institutions embraced fintech?
Bermuda’s relatively small size provides a unique eco-system in which new technology can be tried, tested and adopted before being introduced elsewhere around the world in larger economies. The Government has made a commitment to completely digitise its activities and services within five (5) years. As part of this commitment Bermuda has launched an electronic identification project that intends to provide for the complete digitisation of identification of all individuals residing in Bermuda across all sectors from government to industry.
6. What forms of legal entity are available for technology companies?
As a mature and flexible jurisdiction the full range of modern corporate vehicles is available for use and can be tailored to suit almost any requirements. These include companies limited by share capital, limited liability companies, companies limited by guarantee, partnerships, limited partnerships and segregated accounts companies.
Companies incorporated in Bermuda fall into two principal categories: local companies formed to trade primarily in Bermuda, and exempted companies incorporated for the purpose of conducting business outside Bermuda. Fintech companies seeking to carry on business within the local Bermuda market will be required to have certain levels of local ownership and participation, or an exemption from such requirements.
Exempted Partnerships are registered to carry on business outside Bermuda, from a place of business within Bermuda and must have at least one non-Bermudian partner and may be general or limited. Bermuda partnerships have the benefit of being able to have their own legal personality if members so choose.
The Segregated Accounts Companies Act 2000 establishes a registration regime whereby a Bermudian company may register as a segregated accounts company, thereby establishing, operating and maintaining a company with segregated accounts. The segregated account is an account containing assets and liabilities that are legally separated from the assets and liabilities of the company’s ordinary account.
Limited liability companies are new and increasingly popular for their commercial flexibility. The legislation provides only the basic requirements for such entities, and the parties are largely free to operate their business in accordance with a contract agreed between them.
7. Are electronic signatures valid?
The use of electronic signatures is widely accepted in Bermuda and is expressly provided for in Bermuda law where a reliable and appropriate method is utilised that identifies the signatory. There still exist some bodies and legislation that require certain formalities in relation to the signing of documents or deeds including the delivery of “wet ink” signatures on certain documents to be filed with the Registrar of Companies or the Bermuda Monetary Authority.
The Electronic Transactions Act 1999 (ETA) was established to promote public confidence in the validity, integrity and reliability of conducting transactions electronically, and recognises electronic records as records created, stored, generated, received or communicated by electronic means. It also specifies information to include data, text, images, sounds, codes, computer programs, software and databases. The ETA generally puts electronic signatures on equal footing with “wet ink” signatures in Bermuda.
1. What legislation regulates digital asset business?
DABA regulates all digital asset business carried on in or from within Bermuda and provides that a person cannot carry on digital asset business unless they are licensed or fall within an exempt category.
2. What activities are covered by Digital Asset Business?
“Digital Asset Business” is defined as the business of providing any or all of the following activities to the general public:
(i) issuing, selling or redeeming virtual coins, tokens or any other form of digital asset;
(ii) operating as a payment service provider business utilising digital assets which includes the provision of services for the transfer of funds;
(iii) operating as a digital asset exchange;
(iv) carrying on digital asset trust services;
(v) providing custodial wallet services;
(vi) operating as a digital asset derivative exchange provider; and
(vii) operating as a digital asset services vendor.
“Digital Assets” are defined as anything that exists in binary format and comes with the right to use it and includes a digital representation of value that:
(i) is used as a medium of exchange, unit of account, or store of value and is not legal tender, whether or not denominated in legal tender;
(ii) is intended to represent assets such as debt or equity in the promoter;
(iii) is otherwise intended to represent any assets or rights associated with such assets; or
(iv) is intended to provide access to an application or service or product by means of a distributed ledger technology;
but excludes:
(v) a transaction in which a person grants value as part of an affinity or rewards program, which value cannot be taken from or exchanged with the person for legal tender, bank credit or any digital asset; or
(vi) a digital representation of value issue by or on behalf of a publisher and used within an online game, game platform.
3. Who is responsible for regulating DABA companies & types of licenses?
The BMA regulates Digital Asset Business through a three class licensing regime. There are currently three classes of Digital Asset Business licence that may be applied for under DABA. These are:
(i) class F licence, under which the applicant shall be licensed to provide any or all of the DAB Activities;
(ii) class M licence, under which the applicant shall be licensed to provide any or all of the DAB
and
(iii) Class T licence, under which the applicant shall be licensed to test a business model, product or service or pilot.
Activities for a defined period determined by the BMA which may be extended upon application to the BMA.
As noted above, the class T licence is the form of regulatory sandbox under DABA.
4. What is the process for licencing an entity under DABA?
Application for a Digital Asset Business licence is made to the BMA. The application shall be accompanied by, inter alia, the following:
(i) copies of the constitutional documents;
(ii) a business plan including, but not limited to, information on ownership, board of directors, business purposes and environment including business strategy and risk appetites, business to be conducted, products and services, protections for customers, insurance, financial assessment and projected staffing requirements;
(iii) particulars of the applicant’s arrangements for the management of the business;
(iv) policies and procedures to be adopted by the applicant to meet the obligations of DABA and the applicable AML/ATF requirements set out in the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008;
(v) any proposed cybersecurity programme;
(vi) address of head office;
(vii) such other information and documents as the BMA may reasonably require for the purpose of determining the application; and
(viii) an application fee.
A licence issued under DABA may be subject to such limitations on the scope of the DAB Activity or the manner of operating the Digital Asset Business as the BMA may determine to be appropriate having regard to the nature and scale of the proposed business. The BMA shall publish on its website a list of every licensed undertaking and the class of licence issued to it.
5. What are the Minimum Criteria for Licensing?
The BMA shall not grant a licence unless it is satisfied that the minimum criteria are fulfilled in respect of the application. This includes:
(i) having controllers and officers who are fit and proper persons;
(ii) having policies and procedures including in relation to AML/ATF, sanctions and any codes of practice under DABA;
(iii) maintaining minimum net assets of $100,000 or such amounts as the BMA may determine taking into consideration, the nature, size and complexity of the licensed undertaking;
(iv) maintaining adequate accounting or other records and adequate systems of control of its business and records;
(v) having insurance to cover the risks inherent in the operations of its business of an amount commensurate with the nature and scale of its digital asset business or has implemented such other risk mitigation measures as the BMA may agree;
(vi) have effective corporate governance polices and processes as the BMA considers appropriate given the nature, size, complexity and risk profile of the licensed company; and
(vii) being effectively directed by at least two persons and under the oversight of a Board of Directors with such number of non-executive directors as the BMA considers appropriate given the nature, size, complexity and risk profile of the licensed company.
Statements of principles will be issued by the BMA to provide guidance to interpreting the minimum licensing criteria.
DABA also imposes a number of other continuing obligations including annual prudential filings and fees.
6. Is there a Head Office Requirement?
A licensed undertaking is required to maintain a head office in Bermuda from which the Digital Asset Business of the licensed undertaking must be directed and managed. In determining whether a licensed undertaking complies with this requirement the BMA shall consider, amongst others, the following factors:
(i) where the strategy, risk management and operational decision making of the licensed entity occurs;
(ii) whether the senior executives who are responsible for, and involved in, the decision-making related to Digital Asset Business of the licensed entity are located in Bermuda; and
(iii) where meetings of the board of directors of the licensed undertaking occur.
7. What AML/ATF requirements apply to Digital Asset Business in Bermuda?
Anti-money laundering and anti-terrorist financing (AML/ATF) legislation and regulation in Bermuda is based on the recommendations promulgated by the Financial Action Task Force (FATF).
Any company conducting Digital Asset Business must comply with applicable AML/ATF requirements. Adoption of a comprehensive AML/ATF framework is integral to the conduct of DAB Activities in Bermuda and these AML/ATF policies and procedures must be evidenced to the BMA in order to be licensed under the DABA. The long-standing obligations for regulated financial institutions to maintain effective procedures to prevent and detect money laundering and terrorism financing are equally applicable to businesses intending to carry on DAB Activities in or from within Bermuda. The BMA has also published Digital Asset Business sector-specific guidance notes for AML/ATF purposes.
1. How are Digital Asset Issuances’ regulated?
DAIs are regulated under the Digital Assets Issuance Act 2020 (DAI Act). The DAI Act became operative on 6 May 2020 and strikes a balance between market integrity and consumer protection. Under the DAI Act, a DAI is regulated by the Bermuda Monetary Authority (Authority). Other key provisions of the DAI Act include:
- application process;
- establishing minimum requirements for all DAIs (including a Code of Conduct); and
- setting out publication and content requirements of DAI white papers.
2. Who does this affect?
The DAI Act regulates persons who are creating, promoting, investing in and conducting DAIs and digital assets as well as companies who are seeking to raise capital through DAIs.
However, the DAI Act and related regulations (collectively referred to as the DAI Regime) do not seek to regulate persons or companies who are concerned solely with private sales or whose ordinary business involves the acquisition, disposal or holding of digital assets.
3. Application of the DAI Acts
Under the DAI Act only a company, limited liability company, or partnerships who has the consent of the Authority and the minister of Finance (Minister) is permitted to conduct a digital asset offering in or from Bermuda.
5. Digital Asset Issuance Offer Document
Under the DAI Act, the colloquially used term ‘white paper’ is defined as Digital Asset Issuance Document (Issuance Document). Once consent is received a company must publish its Issuance Document in electronic form. Subject to specific statutory exemptions (including but not limited to whether the digital assets are listed on an appointed stock exchange or appointed digital asset exchange), a company is required to file such document with the Authority.
In addition to the requirements, which may be prescribed by the Authority, the Codes of Conduct or any regulations ancillary to the DAI Act, the Issuance Document must contain the following minimum details:
- information on the promoter;
- information on the officers of the promoter (if a corporate body);
- the business or proposed business;
- a description of the project and the proposed timeline for the project including any proposed project phases and milestones;
- the amount of money equivalent (in Bermuda dollars) that the DAI is intended to raise;
- disclosure as to the allocation of the amounts intended to be raised amongst the classes of any issuance (i.e. pre-sale or post-digital asset issuance);
- the rights or restrictions on the digital assets that are being offered;
- cooling off rights
- the date and time of the opening and closing of the offering of digital assets;
- the DAI risk warning; and
- a statement as to how personal information will be used.
The particulars listed above must be kept accurate during the offer period of the digital asset concerned. Failure to do so could lead to the responsible persons (including directors and officers of the issuer and promoters of the DAI) being liable to civil penalties. Please note that under the DAI Act, the Authority may make such rules and regulations requiring additional information to be included in the Issuance Document.
A risk warning statement must appear in the Issuance Document and on the platform in which the DAI will be launched (DAI Platform). The DAI Platform shall include an electronic public forum that the promotor or the company shall maintain once the offer is open such that relevant parties to the DAI have an opportunity to enquire more about the DAI. The DAI Platform should also specify how a participant in a DAI may withdraw its application; as such application can be withdrawn by the participant for up to three business days after an application is made.
All undertakings authorised to launch a DAI must also have appropriate procedures in place to ensure that they verify the identity of the participants in the DAI and also ensure that all confidentiality, disclosure of information and connected matters are complied with by the issuer under Bermuda laws.
6. Are Digital Asset Issuances subject to the local AML/ATF regime?
Yes. Companies conducting a DAI must establish procedures to comply with local AML/ATF requirements. The applicable regulations require companies to have in place appropriate measures for identifying and verifying the identity of persons participating in the DAI..
7. Is a physical presence required in Bermuda to issue a digital asset?
Under the DAI Act all undertakings authorised to launch a DAI in or from Bermuda will be required to appoint a local representative. The local representative will need to be appointed from the beginning of the offering via the DAI until 120 days after the end of the offering. The local representative will need to be approved by the Authority, and as such, the local representative shall be identified in the DAI Application. Furthermore, the local representative will be required to:
- maintain an office in Bermuda;
- maintain records of all complaints received from digital asset acquirers for a period of 5 years after the end of the offering; and
- notify the Authority without delay if the company becomes insolvent or has reason to believe that the company has or may become insolvent.
There are no additional physical presence requirements placed upon companies conducting DAIs.
8. Can a crypto exchange be established?
Yes, provided the company seeking to operate the exchange has been issued a Digital Asset Business licence by the Authority or the Minister issues an exemption order for that person conducting the business.
9. Can a crypto-to-fiat exchange be established?
Yes, provided the company seeking to operate the exchange has been issued a Digital Asset Business licence by the Authority or the Minister issues an exemption order for that person conducting the business.
10. Is a money services licence required for crypto-to-fiat conversion through an OTC desk?
If the conversion of digital assets into fiat currency is facilitated as part of a money transmission service then a licence may be required under the Money Services Business Act 2016. Otherwise, a money services licence is not required for the provision of services converting digital assets to fiat currency through an OTC desk. Notwithstanding this, if the activity and specific circumstances met the definition of digital asset services vendor then a Digital Asset Business licence would be required.
11. Can a digital asset issuance project establish a local bank account?
Whilst the financial institutions that are licensed to provide banking and deposit services in Bermuda remain cautious towards businesses operating in the fintech sector, none have implemented a blanket prohibition and most would consider legitimate business on a case by case basis. Notwithstanding this, the Bermuda Government created a new class of banking licence specifically for persons looking to establish a Bermuda company to provide banking and related services to any persons conducting or servicing those conducting Digital Asset Business.
12. Are gambling platforms permitted?
No. Except as otherwise authorised by law, the operation of lotteries or gambling facilities, including the operation thereof through the internet is prohibited. Legislation does exist for the operation of lotteries or casinos locally, but these do not provide for gambling platforms.
13. Are any legal or regulatory changes expected?
There is the potential for the Authority to issue guidance notes or ancillary documents in connection with the DAI Act recently coming into force. However, there are no changes anticipated at this time.
1. Are tokenised funds regulated in Bermuda?
In a tokenised fund, an investor’s interest is represented by a cryptographic token, as opposed to shares or other interests or units offered to investors in a more traditional fund structure.
The Investment Funds Act 2006 (IFA) governs the exclusion, exemption and authorisation of investment funds and contains certain requirements for the formation of investment funds, their operation and the offering of shares, units or interests of investment funds. Investment funds are prohibited from being operated in or from Bermuda unless they are authorised or exempted under the IFA.
In order for there to be an “investment fund” for the purposes of the IFA, there must be arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.
For a fund to be within scope of the IFA and therefore regulated in Bermuda the arrangement must be such that (i) the persons who are to participate do not have day-to-day control over the management of the property (whether or not they have the right to be consulted or to give directions); =and (ii) must have one or both of the following characteristics: (a) the contributions of the Participants and the profits or income out of which payments are to be made to them are pooled; (b) the property is managed as a whole by or on behalf of the operator of the fund. There are certain arrangements which are specifically considered to be outside of scope but they must be considered on a case by case basis but we would expect most arrangements that one would consider to be a fund to be within scope.
For this purpose a ‘unit’ means the rights or interests (however described) of the Participants in a fund. Accordingly, this would include “tokens” issued by a fund.
The fact that a fund may be open-ended (i.e. redeemable at the option of investors) or closed-ended (i.e. not redeemable at the option of investors), does not impact whether a tokenised fund would be regulated in Bermuda.
In addition to fund regulation, consideration should be given as to whether the offering constitutes a DAI, in which case the information set out in section C of this guide would be applicable in addition to any fund regulation that may apply.
2. What service providers are required for a tokenised fund?
Assuming that a fund constitutes an investment fund and is regulated or to be regulated under the IFA, specific service providers’ requirements are mandated by the type of fund classification that the fund falls within.
Where certain service providers are prima facie mandated, exemptions from having to appoint them may be available. For further details see the Appleby Guide to Investment Funds in Bermuda.
3. What AML/KYC is required for token holders?
A tokenised fund is required to adopt and maintain a robust and compliant AML/ATF programme, and investors will be required to provide reliable evidence to verify their source of funds in addition to their identity, residential address, date and place of birth and nationality if an individual.
If the subscriber is a legal entity or arrangement (except where they may be listed on appointed stock exchange) such as a group of directors, trustees, or beneficial owners the fund will need to identify not only the legal structure of that entity or arrangement but also the individuals who comprise that entity or relationship; specifically understand the control or ownership structure, identify beneficial owners and, using a risk based approach, verify directors and other persons exercising control over the management of the entity or arrangement.
Where permitted, and subject to certain conditions, the fund may also delegate the maintenance of its AML/ATF procedures (including the acquisition of due diligence information) to a suitable person (such as the administrator). However, the fund retains ultimate responsibility for ensuring that AML/ATF procedures and law are being adhered to.
4. Is there a minimum investment amount?
Minimum investment amounts may apply but they would be due to the fact that the fund is within the scope of the IFA and not because it is “tokenised”. Of course, in addition to Bermuda legally mandated minimums, minimums may be implemented because of the laws of another jurisdiction or the commercial terms of the offering.
In terms of requirements imposed under the IFA, “Institutional Funds” must only be open to Qualified Participants (as defined below) or require that each participant invest a minimum of $100,000.
Funds that operate as “Administered Funds” must require their participants to invest a minimum of $50,000 in the investment fund or be listed on a stock exchange which is recognised by the BMA.
There are no minimum investment requirements for Private Funds, Professional Class A Funds, Professional Class B Funds, Professional Closed Funds nor Standard Funds. Professional Class A Funds and Professional Class B Funds are only opened to Qualified Participants.
A Qualified Participant is:
(a) an individual who has had a personal income in excess of $200,000 in each of the two years preceding the current year or has a joint income with that person’s spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same level of income in the current year (meaning the year in which he purchases an investment);
(b) an individual whose net worth or joint net worth with that person’s spouse in the year in which he purchases an investment exceeds $1,000,000;
(c) an individual who has such knowledge of, and experience in, financial and business matters as would enable him to properly evaluate the merits and risks of a prospective purchase of investments;
(d) a body corporate which has total assets of not less than $5 million held either solely by the body corporate or partly by the body corporate and partly by one or more members of the same group of which it is a member;
(e) an unincorporated association, partnership or trust, each of which has total assets of not less than $5 million held either solely by such association, partnership or trust or partly by it and partly by one or more members of the same group of which it is a member;
(f) a body corporate whose shareholders fall within one or more of paragraphs (a) to (h);
(g) a partnership whose members fall within one or more of paragraphs (a) to (h); and
(h) a trust whose beneficiaries fall within one or more of paragraphs (a) to (h).
5. Can token holders redeem their tokens or transfer the tokens they hold?
Subject to ensuring compliance with AML/ATF laws and regulations, the commercial terms of the offering will dictate whether and in what circumstances a Participant can redeem tokens.
INSURTECH
Bermuda has long been at the forefront of providing innovative solutions in the insurance industry and boasts the largest ILS and captive sectors in the world. Leveraging Bermuda’s reputation as a centre of excellence for innovation in a sound regulatory environment, the BMA has launched two parallel innovation tracks: the insurance regulatory sandbox (IR Sandbox) and an Innovation Hub, both initially targeted at insurance technology (InsurTech) companies.
1. IR Sandbox
The IR Sandbox is a regulated environment established by the Bermuda Monetary Authority (BMA) in which companies can test new technologies and offer innovative products and services to a limited number of customers in a controlled environment and for a limited period of time.
The benefits of the Sandbox include:
- providing a safe and transparent environment for companies to test their innovations and/or clarify regulatory requirements before seeking formal authorisation and going to market;
- giving the BMA the opportunity to work together with the company to ensure that appropriate safeguards are incorporated in new products, services and delivery mechanisms before they are released to market;
- increasing efficiency by reducing the amount of time and cost it takes for innovative products, services and delivery mechanisms to reach market; and
- increasing innovators’ access to or improving the terms of, external funding by eliminating or reducing the cost of regulatory uncertainty for start-ups.
The Sandbox is available for entities registered, or proposing to become registered under section 4 (insurer) or section 10 (insurance intermediaries) of the Insurance Act 1978, as amended (Insurance Act).
An application is made to the BMA which must include, among other content (i) a cover letter highlighting how the minimum licensing criteria (per the Insurance Act for the relevant category of business) would be satisfied, (ii) constitutional documents, (iii) a business plan including details of any current or past participation in a regulatory sandbox (or similar) in any other jurisdiction/country, a description of the proposed product/service including how the Sandbox’s eligibility criteria (see below) are met and how the product/service or technology differs from those already existing in the market, legal and regulatory requirements that the company requests to be modified for the duration of the Sandbox (see below), and if writing long-term business, a copy of the company’s Anti-Money Laundering and Anti-Terrorism Financing policies and procedures must be provided and (iv) net worth statements.
The BMA will use the following eligibility criteria in evaluating the suitability of the company for entry into the Sandbox:
- The proposed product, service or business model should be new or use existing technology in a different way. The company should demonstrate that the solution it is offering is innovative or significantly different from existing solutions already in the market (i.e. unique).
- The company should have conducted research and due diligence on the proposed product or service, understand the applicable regulations and have the appropriate risk mitigation plans in place. Through the research already conducted, the company should be able to demonstrate clear benefits of the proposed product or service to the policyholder or industry.
- The company should clearly define its objective for testing the expected outcomes of the Sandbox proof-of-concept stage, and be committed to report to the BMA as agreed for the duration of the testing.
- The company should demonstrate its understanding and assessment of associated risks and their mitigation. Of paramount importance is ensuring that policyholders and counterparties of companies involved in the testing phase are adequately protected against loss. The company should have a well-defined exit or transition strategy in case the testing is unsuccessful or discontinued.
- The company should have the intention, ability and resources to deploy the proposed product, service or distribution channel upon successful testing and exit from the Sandbox. This should include demonstrating the ability to meet the applicable legal and regulatory requirements which will come into effect once the company exits the Sandbox.
Upon approval of concept, the company will be assigned a temporary licence and will be allowed to operate within the Sandbox. The Company will be assigned a Principal Contact (BMA staff member) to assist throughout the duration of the Sandbox which typically lasts six to twelve months, although this period can be extended or terminated early with the approval of the BMA. The licences complement the current licencing regime whereby long-term insurers carry out business regarding insurance on human life, injuries sustained from accidents, etc. and general business insurers carry out business regarding which is not long-term or special purpose business and includes accident and disability policies in effect for less than 5 years.
The licences available are ILT, IGB, IM, IA and IB for long term insurers, general business insurers, insurance managers, agents and brokers, respectively. On successful graduation from the Sandbox, the company will be re-licenced under an existing class of insurer or insurance intermediary (Class 1, 2, 3, 3A, 3B or 4 (if a general business insurer), Class A, B, C, D or E (if a long-term insurer), special purpose insurer, insurance manager, broker, agent or salesman).
A company must notify its clients that the products, services and delivery mechanism are operating in the Sandbox and disclose the associated key risks. The company is required to obtain a written acknowledgment from its clients that they have read and understood the risks associated with doing business with the company. The company should also maintain a client complaints log which must be made available to the BMA on request
Upon completion of the proof-of-concept phase, the company must submit a final report to the BMA on the outcomes of the testing. After review of the report and approval for the company to commence operations outside of the Sandbox by the BMA, the company will then decide whether it will offer the new solution outside the Sandbox. If the company’s business plan is approved by the BMA and the company wishes to commence business outside of the Sandbox, the company will be issued a licence in accordance with the company’s business model and existing insurance licence regime (as outlined above).
2. Innovation Hub
The Innovation Hub is a platform for exchanging ideas and information; it facilitates dialogue between the BMA and market participants. This space is intended for activities that are not directly regulated by the BMA or where a company is still developing its thoughts and ideas and not yet prepared for proof of concept and is therefore not ready to apply for entry into the Sandbox.
DATA PRIVACY AND DATA PROTECTION
The Personal Information Protection Act 2016 (PIPA) received Royal Assent in July 2016 and applies to all organisations that use personal information in Bermuda. The PIPA was drafted as a bespoke privacy framework designed to meet Bermuda’s unique requirements. PIPA’s provisions are drawn from privacy legislation in a number of jurisdictions but are drafted around a set of EU-style privacy principles.
The initial operative provisions of the PIPA came into force in December 2016 to enable the appointment of a Privacy Commissioner. The law is expected to become fully effective during the course of 2021, but notice of the actual effective date is still yet to be published by the Minister. This transition period is intended to allow for the preparation of necessary secondary legislation and for the Privacy Commissioner to draft guidance to help organisations achieve compliance.
INTELLECTUAL PROPERTY
Bermuda is a common law jurisdiction with a robust intellectual property (IP) protection regime to ensure the jurisdictional specific realm of IP encompasses Bermuda as well. Bermuda laws in this area are mostly based on the UK equivalents. The regime continues to develop to meet industry needs as demonstrated with the Draft Patent Act. The main intellectual property rights available are trade and service marks, designs, patents and domain names.
1. Copyright
Predominately based upon the Copyright, Designs and Patents Act 1988 of the United Kingdom, the protection of copyright in Bermuda is provided for by the Copyright and Designs Act 2004. Registration is not required as IP protection for copyrights is automatic in Bermuda. The principal IP right that protects software for example, is copyright – the right to prevent others from, among other things, copying the software. The Copyright and Designs Act 2004 expressly includes a computer program, preparatory design material for a computer program, and a database within the definition of “literary work.” For computer-generated work, the copyright expires at the end of the period of 50 years from the end of the calendar year in which the work was made.
2. Trade Marks
The Trade Marks Act 1974 provides IP protection to trade and service marks of which can carry one of two levels of protection, Part A or Part B. Trade and service marks can be registered and renewed repeatedly or unregistered. Unregistered trade mark rights are enforced through the law of passing off. Trade marks are registered locally at the Registrar General for a fee, the process of which generally takes 18 months.
3. Patents
Currently, patent protection in Bermuda is provided by the Patents and Designs Act 1930 (1930 Act). The 1930 Act is largely based on the United Kingdom Patents and Designs Act 1919. The Registry General offers three types of patent applications: a national patent, a provisional (national) patent, or a registration of a patent granted United Kingdom (UK) or European Patent with a UK designation to Bermuda. A patent granted in the UK or a European Patent that designates the UK can be registered in Bermuda within three years of its original grant and will be in force for as long as the original patent is in force. As with patents globally, patents are non-renewable.
1 AS EXTENDED BY THE TRADE MARKS (MODIFICATION AND AMENDMENT) ACT 1991 TO HAVE EFFECT WITH RESPECT TO SERVICE MARKS AS IT HAS EFFECT WITH RESPECT TO TRADEMARKS
Confidential information is protected either through a contractual agreement to keep certain information confidential, or through the common law obligation to keep information confidential, because of the nature of the relationship between the discloser and disclosee, the nature of the communication or the nature of the information itself.
TAX MATTERS
Exempted undertakings (companies, partnerships, unit trust schemes or LLCs) can apply to the Minister of Finance under the Exempted Undertakings Tax Protection Act 1966 (Tax Protection Act) for assurance that, in the event of there being enacted in Bermuda any legislation imposing tax computed on profits or income, or computed on any capital asset, gain or appreciation, then the imposition of any such tax shall not be applicable to such undertakings or to any of its operations. The tax assurance exemption is granted until 31 March 2035 under the Tax Protection Act.
There may be tax implications for beneficial owners in their own jurisdiction however.
1. Trade Licences
Bermuda does not have or apply any trade licence requirements other than as previously mentioned in this Guide. These would be the Digital Asset Business licensing regime, the DAI Regime and exemption from local ownership and participation rules if a foreign owned company wanted to conduct business in and to the local market.
2. Visas and Work Permits
Every non-Bermudian employee requires a work permit (unless they are a spouse of a Bermudian or holder of a permanent resident certificate). In support of Bermuda’s interest in fintech, “The Fintech Business Permit Policy” was introduced. Following vetting and approval of the Fintech business’ business plan by the FinTech Advisory Committee, the company will be able to apply for a Fintech Business Permit (Permit) using the relevant application form. A certificate of incorporation, and the date the company expects to commence operating in Bermuda, must be included with the Permit application. Additionally, the company must submit an immigration business plan which outlines plans for the hiring and training of Bermudians and plans for engaging local service providers.
Once the initial Permit has been approved, the company will receive automatic approval for 5 additional work permits. These must be applied for within the first 6 months of the initial Permit. Work permit terms can be granted for up to 5 years and regular statutory council referral rules apply. Jobs categorised as closed, restricted, or are entry level in nature, cannot be filled using the Permit.
Upon expiry of the initial Permit term, the entity will be obligated to apply for a Standard Work Permit if they desire the Permit holder to continue working in Bermuda. This permit will be granted subject to Bermuda’s regular advertising and recruitment requirements to ensure that no suitably qualified Bermudian, Permanent Residence Certificate (PRC) holder or spouse of a Bermudian are available for the position. Automatic advertisement waivers are available for C-suite positions such as Chief Executive Officer or Chief Operating Officer. Waivers can be requested and are granted at the Minister’s discretion; typically if the applicant has a specific skillset or is a senior executive.
Long term immigration permissions are available via the Incentive for Job Makers provisions. Companies that have at least 10 Bermudians on staff, employ Bermudians at all levels, have entry level positions that are filled by Bermudians and enforce sound employment practices will be eligible. Proof of significant contribution to the local economy and protection of local interests is also viewed favourably.
Benefits include work permit exemptions for eligible senior executives and the opportunity to apply for a PRC. At the moment, this is the only avenue available for work permit holders to be able to obtain this certificate.
3. Transportation Links
There are direct flights from Bermuda to the USA, UK and Canada including: Atlanta, Boston, Miami, New York, Philadelphia, London Gatwick and Toronto.
