When Bermuda enacted the Digital Asset Business Act in 2018, it became one of the first jurisdictions in the world to create a clear, dedicated regulatory framework for digital asset businesses. For the reinsurance and ILS market — already deeply entrenched in Bermuda — this was significant: it meant that the same regulator overseeing the world's most sophisticated cat bond market was also building the framework for the next generation of tokenised risk transfer.
What is DABA?
The Digital Asset Business Act 2018 (DABA) requires any company conducting digital asset business in or from Bermuda to obtain a licence from the BMA. Digital asset business is broadly defined and includes: - Issuing, selling, or redeeming digital assets (including tokens representing financial exposure) - Operating as a digital asset exchange - Providing digital asset custody services - Operating as a digital asset derivative exchange provider - Providing digital asset services as a principal (market-making, dealing) For reinsurance, the most relevant category is the first: issuing tokens that represent a share of a reinsurance risk pool or a claim on a collateral trust is, in the BMA's view, digital asset business subject to DABA licensing.
DABA licence classes
DABA licences are issued in classes reflecting the nature and scale of the digital asset activity:
- Class F (Full): For fully operational digital asset businesses at scale. Highest capital and compliance requirements.
- Class M (Modified): For businesses in development or with limited scope. Lower initial requirements with a pathway to Class F.
- Class T (Test): A time-limited sandbox licence allowing businesses to test services with real customers under supervisory oversight before full licensing.
Why DABA matters for tokenised ILS
Traditional ILS — cat bonds, collateralised reinsurance, sidecars — is already Bermuda-domiciled. The documentation, SPVs, collateral trusts, and investor relationships are governed by Bermuda law and supervised by the BMA. Tokenising that infrastructure — putting cat bond exposure on-chain, issuing ERC-20 tokens backed by collateral trusts — doesn't change the underlying reinsurance economics. But it does create digital asset business activity that triggers DABA. For a tokenised ILS fund manager: - Issuing reinsurance fund tokens to investors = DABA-regulated digital asset issuance - Managing a smart contract that distributes premium to token holders = potentially digital asset service provision - Running a secondary market for token transfers = potentially exchange activity MembersCap, which is BMA-authorised and uses tokenisation to provide access to reinsurance market returns, is operating under this dual framework. Its BMA authorisation covers both the investment management (insurance regulation) and the digital asset issuance (DABA regulation).
The BMA's dual-framework advantage
Most jurisdictions require a company like MembersCap to navigate two entirely separate regulators with no coordination: the financial markets authority for the securities/token issuance, and the insurance regulator for the underlying risk. These regulators typically have no joint framework, no shared definitions, and no coordination mechanism. Bermuda is different. The BMA is a single integrated regulator covering insurance, banking, investment funds, and digital assets. This means: - One regulatory relationship for a business combining insurance risk and digital asset issuance - Coordinated oversight with coherent requirements across both domains - A regulator that understands the underlying insurance economics, not just the token mechanics - Faster, more predictable licensing processes for dual-framework businesses This is a genuine structural advantage that other jurisdictions are trying to replicate but have not yet achieved.
DABA, admissible assets, and collateral
One nuance for reinsurance businesses is that Bermuda insurance regulations specify what counts as admissible assets — the assets that can be held as collateral backing reinsurance obligations. Traditional ILS collateral is held in US Treasury money market funds or similar instruments. For onchain reinsurance, the question of whether tokenised collateral (e.g. USDC in a smart contract) counts as admissible reinsurance collateral under Bermuda insurance regulations is a live regulatory question. The BMA's approach — engaging with novel business models rather than blocking them — means this is a question being actively worked through, with guidance likely to emerge as the market develops. Businesses navigating this intersection need both DABA compliance and clarity on the admissibility of their collateral under the Insurance Act 1978.
The competitive landscape
Bermuda is not the only jurisdiction developing digital asset insurance frameworks. The Cayman Islands, Luxembourg, and Singapore have each published guidance or sandbox programmes. But none has the combination of: - Deep existing reinsurance market infrastructure - Integrated single regulator with domain expertise in both insurance and digital assets - Established international regulatory equivalence (EU Solvency II, IAIS MMOU) - Proximity to major US cedants and capital markets For a business tokenising reinsurance risk at institutional scale, Bermuda remains the most credible domicile by a significant margin.