Bermuda Court Rules on Captive Insurance Manager's Duty of Care to Shareholders

The Supreme Court of Bermuda has ruled that a captive insurance manager did not owe a separate duty of care to shareholders of companies it managed, in a decision addressing the allocation of legal responsibilities within captive insurance structures.

In Aon Ins. Managers (Bermuda) Ltd. v. Asset Holding Grp. Ltd., [2026] SC (Bda) 89 Civ., the court refused to allow shareholders to pursue a proposed negligence counterclaim against Aon Insurance Managers (Bermuda) Ltd. The ruling, issued August 17, 2026, was examined in a legal analysis by Hogan Lovells Cadwalader.

The dispute involved two Bermuda holding companies, their wholly owned captive insurers, and Aon, which provided captive management services. Following a series of dividend payments diverted through fraudulent instructions, shareholders alleged that Aon had failed to identify warning signs that could have prevented the misdirected payments.

The court determined that Aon's contractual responsibilities extended to the companies that engaged its services, rather than directly to their individual shareholders. The management agreements expressly stated that the services were provided for the benefit of the client companies and not third parties.

The court also found that Aon's direct interactions with shareholders regarding dividend payments did not establish a separate duty of care. Although Aon administered the payments, those activities were performed under its contractual obligations to the companies.

According to the ruling, the shareholders retained the ability to pursue claims against the holding companies for unpaid dividends. The court declined to permit the proposed negligence counterclaim against Aon because it did not establish an arguable duty of care owed to the shareholders.

Implications for Captive Insurance Governance

In its analysis, Hogan Lovells Cadwalader noted that the decision illustrates the importance of clearly defined contractual and governance arrangements within captive insurance structures.

The firm explained that a captive manager's extensive operational involvement does not necessarily create legal obligations beyond those established through its contractual relationships.

The analysis also emphasized the importance of management agreements in defining responsibilities among captive owners, boards, managers, and service providers. As captive operations evolve, the firm suggested that governance documentation and delegated authority arrangements should remain aligned with the functions performed.

Although the decision arose under Bermuda law, Hogan Lovells Cadwalader noted that the court relied on established English common law principles concerning duties of care, assumption of responsibility, and economic loss.

The ruling underscores the significance of contractual relationships in determining the scope of a captive manager's legal responsibilities, particularly when claims arise from parties outside those agreements.