Consultation Paper – Collateralized Insurers Accounts, Returns and Solvency Rules 2019

Summary

This is a Bermuda Monetary Authority consultation paper proposing new Rules that would set out the annual filing, accounting and solvency requirements for Collateralized Insurers (CIs), a new insurer class created by the Insurance Amendment Act 2019. The draft Rules (attached as appendices) combine elements of the existing Special Purpose Insurer filing regime with a bespoke Capital and Solvency Return (CSR) reflecting a CI's collateralized business model. The BMA is seeking industry feedback before finalising the Rules, with an intended effective date of 1 January 2020.

• Statutory Financial Return: CIs would file an annual SFR built by mapping values from audited GAAP financial statements into a statutory balance sheet, statement of income and statement of capital and surplus, submitted with the Bermuda Solvency Capital Requirement - Collateralized model (BSCR); no additional statutory note disclosures or separate audit would be required for the SFR itself.
• Audit and actuarial opinions: CIs would need to submit audited GAAP financial statements plus a loss reserve specialist opinion (general business) or approved actuary certificate (long-term business), opining on the reasonableness (not adequacy) of technical provisions; the BMA may waive these on a case by case basis against stated criteria.
• Capital and solvency requirement: CIs would be subject to an Enhanced Capital Requirement (ECR) within the BSCR-Collateralized model, comprising market, credit and operational risk charges, floored at a Minimum Solvency Margin (MSM) of $250,000.
• Structural restrictions: CIs could not write general and long-term business in the same entity, and BMA approval would be required before a CI could own subsidiaries.
• Segregated accounts: CIs registered as segregated accounts companies would report general account and combined (segregated plus general account) figures separately in the Statements.

The BMA invited written comments on the proposed approach, including alternative methodologies, to be submitted to riskanalytics@bma.bm by Friday 29 November 2019. Subject to the consultation outcome, the Rules were intended to take effect from 1 January 2020.

Key obligations

• Submit written comments on the proposed Rules to riskanalytics@bma.bm no later than Friday 29 November 2019
• Under the proposed Rules, CIs would be required to prepare and file an annual statutory financial return and capital and solvency return four months after the end of the relevant financial year (or up to seven months if extended by the Authority)
• CIs would be required to submit audited GAAP financial statements with their annual returns unless a waiver is granted
• CIs would be required to submit a loss reserve specialist opinion or approved actuary certificate with their annual returns unless waived
• CIs proposing to own subsidiaries would need to obtain BMA approval before doing so
• CIs would be required to maintain statutory capital and surplus meeting the Enhanced Capital Requirement, floored at a $250,000 Minimum Solvency Margin

Applies to

Collateralized Insurers (CIs)

Deadlines

• Friday 29 November 2019: Deadline for submitting written comments on the consultation paper to riskanalytics@bma.bm
• 1 January 2020: Intended effective date of the new Collateralized Insurers Accounts, Returns and Solvency Rules 2019, subject to consultation outcome
• 4 months after the end of the financial year (extendable up to 7 months with BMA approval): Proposed filing date for a CI's annual statutory financial return and capital and solvency return