Consultation Paper - Funding Agreements (2015-07)

Summary

This is a Bermuda Monetary Authority consultation paper proposing to amend the Insurance Act 1978 to bring 'funding agreements' (also known as capital redemption contracts) within Bermuda's insurance regulatory framework. It applies to Long-Term (life) insurers and invites industry feedback before any amendments are finalised.

• New definition: Insert a definition of 'funding agreement' or 'capital redemption contract' into Section 1 of the Insurance Act 1978, covering agreements where an insurer accumulates money and makes payments not based on life contingencies.
• Classification: Clarify, via a new Section 1(6), that funding agreements/capital redemption contracts are deemed to be Long-Term business for all purposes under the Act.
• Regulatory treatment: Apply the same solvency, risk management and governance, and reporting and disclosure treatment given to equivalent life insurance activities with a substantial investment element.
• Timing: Proposed amendments are intended to take effect in 2015, with the regulatory treatment provision expected to take effect by 31 December 2015.

As a consultation paper, the document itself creates no binding rules yet; it sets out proposals and asks the insurance industry and other interested persons to comment by a stated deadline before the Authority finalises the amendments.

Key obligations

• Interested persons and the insurance industry should submit comments on the proposals to policy@bma.bm no later than 8 September 2015.

Applies to

Long-Term (life) insurers, Class A insurers, Class B insurers, Class C insurers, Class D insurers, Class E insurers

Deadlines

• 8th September 2015: Deadline for submitting comments on the consultation proposals to policy@bma.bm.
• 2015: Proposed amendments (definition of funding agreement and classification as Long-Term business) intended to be effected.
• 31st December 2015: Proposed amendment applying equivalent regulatory treatment (solvency, risk management/governance, reporting/disclosure) to funding agreements intended to take effect by this date.

Related documents

• This document amends Insurance Act 1978