Some class four insurance companies will have to pay $230,000 each under new legislation designed to cover the costs of raising supervisory standards.

Finance Minister Paula Cox yesterday said the Insurance Companies (Special Fees) Act — which introduces a one-off levy on 37 class four insurers — will raise half the extra cash needed to enhance Bermuda Monetary Authority. The Deputy Premier said the $230,000 fee would apply to companies with a gross premium of $1.2 billion or more in 2009; a sliding scale is then applied to the other firms, so those with a gross premium of less than $400 million pay $80,000. The fee is due by the end of September.

Ms Cox told the House of Assembly yesterday: "The insurers affected have been broadly consulted with respect to these fees and understand the importance of this revenue generating effort."

She said the Island's insurance market remains strong, with 1,240 active insurance companies boasting aggregate total assets of $472.9 billion in 2008, up from $441.3 billion the year before. The new fees will be used to ensure Bermuda's supervisory framework remains on par with leading jurisdictions in Europe and the United States, she said.

They will help meet regulations laid out in Bermuda's Insurance Solvency Framework, also known as the Solvency II Roadmap. She said progress in the past 12 months has included creating a framework to supervise Bermuda's largest reinsurers; setting up an applications and review process regarding insurers' internal capital models; and introducing an insurance code of conduct. "The fee schedule being proposed in this bill aims to assist in meeting the financial needs of these initiatives by allocating the 2010 incremental costs amongst the class four insurers," said Ms Cox.

Both opposition parties gave their support to the bill, although Shadow Finance Minister Bob Richards and Bermuda Democratic Alliance MP Shawn Crockwell both warned Bermuda could lose a competitive edge by increasing the burden on class four reinsurers. Shadow Works Minister Patricia Gordon-Pamplin said the pill would be easier to swallow for class four insurers if they knew other classes would take a hit on other occasions.

She also raised concerns at a ten percent fine for every month a company fails to pay its fees, describing it as extortionate and unfair. Ms Cox replied that much discussion had gone into setting the fine at ten percent.

Mr. Crockwell said reinsurance companies the BDA had spoken to backed the bill and believe Bermuda Monetary Authority is doing a good job.