Consultation on Insurance Amendment (No. 3) Act 2010

Summary

This is a Bermuda Monetary Authority consultation letter and draft Bill seeking industry comment on the Insurance Amendment (No. 3) Act 2010, which proposes wide ranging changes to the Insurance Act 1978. It covers reclassification of Long Term insurers, expanded group supervision powers, new material change notification requirements, and clarified shareholder controller notification rules. The Authority invited comments by 5th November 2010, and the Bill as drafted proposed a commencement date of 31st December 2010.

• Available statutory capital: Amends the definition of available statutory capital and surplus and introduces new powers for the Authority to prescribe eligible capital requirements for Class 3B and Class 4 insurers; proposes that all insurers maintain records in Bermuda.
• Group supervision: Gives the Authority power to include a specific entity within a group, on its own initiative or on application by the designated insurer, and extends requirements previously applicable only to Class 4 insurers to Class 3B insurers.
• Material change notification: Introduces new sections 30JA to 30JD requiring insurers and designated insurers to notify the Authority of intended material changes before taking effect, giving the Authority 14 days to object, with criminal penalties for contravention and an appeal mechanism.
• Long-Term insurer reclassification: Introduces a new solvency framework and classification system (Class A to Class E) for Long-Term insurers, with transitional provisions allowing qualifying insurers until September 2011 to re-classify under the new regime.
• Shareholder controller notifications: Clarifies and reorganises notification obligations for shareholder controllers of private and public companies (new sections 30D and 30E), and for changes of controllers and officers (revised section 30J), generally within a 45 day period.
• Capital reduction restrictions: Extends restrictions on reductions of capital (section 31C) to Class 3B insurers, requiring Authority approval before reducing total statutory capital by 15% or more.

As a consultation document, this text does not itself impose binding obligations; it sets out proposed statutory amendments and invites comment. If enacted as drafted, it would create new ongoing obligations for insurers, particularly around material change notification and shareholder/officer control notifications.

Key obligations

• Provide comments on the proposed Bill to the Authority (Mr. William Kattan, policy@bma.bm) no later than 5th November 2010
• If enacted, insurers and designated insurers would be required to serve notice on the Authority of an intended material change and refrain from implementing it until the Authority's 14 day objection period has passed or it has confirmed no objection
• If enacted, qualifying Long-Term insurers would need to apply to the Authority to be reclassified into the new class system, accompanied by the prescribed fee, and would have until September 2011 to complete reclassification
• If enacted, shareholder controllers of private companies would need to serve written notice on the Authority before becoming a 10%, 20%, 33% or 50% controller and await the Authority's 45 day non-objection period
• If enacted, shareholder controllers of public companies would need to file written notice with the Authority within 45 days of becoming such a controller
• If enacted, registered persons and designated insurers would need to give written notice to the Authority within 45 days of any person becoming or ceasing to be a controller or officer
• If enacted, Class 3B insurers would need Authority approval before reducing total statutory capital by 15% or more

Applies to

(re)insurers, Long-Term insurers, Class 1 insurers, Class 2 insurers, Class 3 insurers, Class 3A insurers, Class 3B insurers, Class 4 insurers, Special Purpose Insurers, Class A insurers, Class B insurers, Class C insurers, Class D insurers, Class E insurers, designated insurers, shareholder controllers

Deadlines

• 5th November 2010: Deadline for industry and interested persons to submit comments on the proposed Insurance Amendment (No. 3) Act 2010 to the Authority
• September 2011: Deadline for qualifying Long-Term insurers to re-classify under the new long-term insurer classification regime (transitional provision)
• 31st December 2010: Proposed commencement date of the Insurance Amendment (No. 3) Act 2010
• 14 days of receipt: Period within which the Authority may object to a notice of intended material change served under proposed section 30JB/30JC
• 45 days: Period within which shareholder controllers, or registered persons/designated insurers, must notify the Authority of relevant changes of control or officers under sections 30D, 30E and 30J

Related documents

• This document amends Insurance Act 1978