Bermuda's new insurance regulations may silence outside critics of the Island's regulatory environment.

And they are redefining the relationship between the insurance industry and regulators, according to outgoing Registrar of Companies, Mr. Malcolm Butterfield.

Mr. Butterfield said: "The line between the role of private sector and the mechanisms of our regulations, which was once considered a thin line, is now much thicker and by all means, much clearer.'' It was that relationship that Bermuda's critics had pointed to as being too cozy in the past, although industry spokesman had often responded that it was the safest alternative, because industry competitors would keep each other honest.

But Mr. Butterfield used the recent address to the Bermuda Insurance Institute to predict a new future. Without recalling the suspicious looks he often received from US regulators, he tried to make it clear where the emphasis was shifting.

US regulators in particular, could point to the fact that the Insurance Advisory Committee, an important body in advising Government on Bermuda's insurance policy-making, was made up of knowledgeable executives from the industry itself. US regulators questioned the usefulness of that arrangement.

Mr. Butterfield said last week: "While the partnership between the private and public sector will remain a strong element in our insurance industry, the regulations, in the balance of the '90s, must be applied to all sectors of our market, fairly and firmly.

"The continued respect and integrity for Bermuda's reputation as a leading insurance domicile will only remain intact if the Island takes the regulations seriously.'' He said Bermuda can now be regarded as a strong regulatory environment with sound characters and clear definition, and no longer as "a self-policing domicile''.

Bermuda has gained a great deal of respect from the National Association of Insurance Regulators (NAIC), comprised of state regulators in the US.

Confidentiality remains an issue. And at the NAIC level, the Alien Reinsurance Bill could also be an issue. It deals with the rules for companies working in a non-US jurisdiction, that impact the status of US domestic insurers.

Mr. Butterfield said yesterday: "Bermuda has to be very mindful in the future of maintaining its credibility with state regulators (NAIC) and we can't ignore the direction that Federal regulations may go.

"Bermuda is very much an international market now and we have to be very mindful of our credibility and our security as an insurance industry. It is very critical.'' He also recounted to industry insiders how Bermuda avoided negative repercussions from the passage of the NAIC Model Act on Fronting.

He also recalled Bermuda's survival of the 1986 Tax Reform Act, and survival of an IRS threat to prevent deductibility of insurance premiums.

"Bermuda continues to rise above the unfounded and jealous criticisms by insurance buyers and sellers in other overseas jurisdictions,'' he said.

"Bermuda, on occasion, is referred to as unregulated. Even in the midst of this rumour, our industry continues to come out on top.''