Catastrophe Risk Return (Cat Return) Guidelines for Consultation (July 2010)

Summary

This is a Bermuda Monetary Authority consultation paper setting out draft guidelines for a new annual Catastrophe Risk Return (Cat Return), intended to be embedded within the Bermuda Solvency Capital Requirement (BSCR) reporting process. It explains the proposed scope, purpose and technical content of the return, and invites industry comment before finalisation.

• Who would be caught: Under the proposal, all Class 4 and Class 3B insurers (and reinsurers) would file the Cat Return annually from 2010 year end; Class 3A insurers writing property catastrophe business and insurance groups would join from 2011 year end.
• Waivers: Insurers with no catastrophe exposure could apply for an exemption from filing or submit a Nil Return.
• Purpose: The return would help the Authority assess catastrophe risk charge inputs to regulatory capital, liquidity risk, vendor model reliance, and terrorism exposure, and would feed aggregated market-wide publication on catastrophe modelling practices.
• Content: The return comprises multiple sheets: company information, exceedance probability (EP) curves by peril and by insurance/reinsurance segment, accumulations overview, data analysis, reinsurance/retro disclosures, terrorism exposure (150m radius) sheets, reinsurance terrorism limits, assumed exchange rates, and catastrophe loss event analysis.
• Consultation deadline: Comments on the proposed guidelines were requested to be sent to policy@bma.bm no later than 31 August 2010.

As a consultation paper, this document does not itself impose binding requirements; it describes proposed obligations that would take effect only once the guidelines are finalised and adopted by the Authority.

Key obligations

• Class 4 and Class 3B insurers would be required to complete and submit the Cat Return annually from 2010 year end, unless granted a waiver
• Class 3A insurers writing property catastrophe business and insurance groups would be required to complete and submit the Cat Return from 2011 year end
• Insurers with no catastrophe exposure must apply for an exemption or submit a Nil Return rather than simply not filing
• Insurers would need to provide EP curve data by peril and by insurance/reinsurance segment, accumulations, data analysis, reinsurance/retro disclosures, and terrorism exposure information as specified in the return sheets
• Comments on the draft guidelines were to be submitted to policy@bma.bm by 31 August 2010

Applies to

Class 4 insurers, Class 3B insurers, Class 3A insurers writing property catastrophe business, insurance groups, reinsurers

Deadlines

• 31st August 2010: Deadline for industry comments on the consultation paper to be sent to policy@bma.bm
• 2010 year-end: Proposed commencement of annual Cat Return filing for Class 4 and Class 3B insurers
• 2011 year-end: Proposed commencement of annual Cat Return filing for Class 3A insurers writing property catastrophe business and insurance groups