Insurance Amendment Act 2011 and Insurance Accounts Amendment Regulations 2011

Summary

This document is a draft Bermuda Insurance Amendment Act 2011, together with related draft Insurance Accounts Amendment Regulations 2011, both proposing amendments to the Insurance Act 1978 and the Insurance Accounts Regulations 1980. It has not been enacted (status: draft) and reflects proposals arising from industry consultation, extending certain existing requirements to Class 3A insurers and making a number of housekeeping changes.

• Class extensions: Requirements previously applying only to Class 3B and Class 4 insurers (additional GAAP financial statements, group supervisor rules, capital reduction restrictions) are extended to Class 3A insurers, and in some cases to Class E, C and D insurers.
• Asset limit reporting: Principal representatives of Class C insurers (asset limit under 250 million) and Class D insurers (asset limit under 500 million) must notify the Authority if those limits are exceeded, and the insurer may apply under section 56 for a direction to continue operating in that class despite the excess (a safe harbour similar to that for Class 3 insurers).
• Solvency failure reporting: The obligation to report a failure to meet the minimum margin of solvency within 30 days is extended to all classes of insurer, not just certain classes as before.
• Fees: Registration fees are prorated (remitted by 25 percent, 50 percent or 75 percent) depending on the quarter in which an insurer registers during the year, and the Authority's discretion to waive annual fees is reframed around diminution in the level of insurance business.
• Capital requirements: The paid up share capital requirement for Classes C, D and E insurers is reduced from 500,000 to 250,000 to align with solvency margin requirements.
• Financial statement forms: The Insurance Accounts Amendment Regulations 2011 revise Forms 1A to 8 and Schedules I to IV to insert Class 3A insurers into various reporting categories and add new disclosure items, including restricted assets and unsecured policyholder obligations for loss and long-term reserves.

As a bill and draft regulations, these provisions were proposed with an operative date of 31 December 2011 but readers should confirm current enactment status, since this source is a consultation draft rather than a document confirmed as in force.

Key obligations

• Principal representatives of Class C insurers must notify the Authority when total assets exceed the limit of 250 million imposed by section 4ED
• Principal representatives of Class D insurers must notify the Authority when total assets exceed the limit of 500 million imposed by section 4EE
• Class C or D insurers wishing to continue business despite exceeding asset limits must apply under section 56 for a direction that the relevant asset limit provision continue to apply
• Insurers failing to meet their minimum margin of solvency must file a report with the Authority within 30 days of becoming aware of the failure or having reason to believe it occurred
• Class 3A, Class 3B, Class 4 and Class E insurers must prepare additional financial statements in accordance with GAAP under section 17A, in addition to statutory financial statements under section 15
• Insurers must pay a prorated registration fee (25, 50 or 75 percent) depending on the quarter in which they register
• Class 3A, Class C and Class D insurers applying to reduce total statutory capital by 15 percent must meet the standards under section 31C(2)
• Insurers and Special Purpose Insurers must complete revised statutory return Forms 1A to 8 with additional disclosures on restricted assets and unsecured policyholder obligations

Applies to

Class 1 insurers, Class 2 insurers, Class 3 insurers, Class 3A insurers, Class 3B insurers, Class 4 insurers, Class A insurers, Class B insurers, Class C insurers, Class D insurers, Class E insurers, Special Purpose Insurers, registered insurers, insurance groups, principal representatives

Deadlines

• 31 December 2011: Proposed commencement date for the Insurance Amendment Act 2011
• within 30 days of becoming aware of a solvency failure: Insurers failing to meet the minimum margin of solvency must file a report with the Authority on the manner, time and circumstances of the failure
• within 3 months of filing dates: Threshold after which the Authority may appoint an inspector where an insurer fails to file statutory financial statements, GAAP statements, statutory returns or capital/solvency returns
• after 31 March and before 30 June in any year: Registration fee remitted by 25 percent for insurers registering in this period
• after 30 June and before 30 September in any year: Registration fee remitted by 50 percent for insurers registering in this period
• after 30 September in any year: Registration fee remitted by 75 percent for insurers registering in this period

Related documents

• This document amends Insurance Act 1978
• This document is made under Insurance Act 1978
• This document amends Insurance Accounts Regulations 1980