Consultation Paper on Commercial Insurer's Solvency Self Assessment (June 2010)

Summary

This is a 2010 consultation paper in which the Bermuda Monetary Authority sets out its proposed approach to introducing a Commercial Insurer's Solvency Self Assessment (CISSA) regime, Bermuda's equivalent to an ORSA (own risk and solvency assessment) process. The Authority is seeking industry feedback on the design, principles, frequency, and filing requirements of CISSA before finalising the regime, including draft CISSA Return templates for different insurer classes.

• Scope: Proposals are intended to apply to Class 4, Class 3B and Class 3A commercial insurers, and to insurance groups, in accordance with a proportionality principle; a separate paper on Long-term insurers is expected later in 2010.
• Purpose of CISSA: Insurers would need to identify, assess, monitor, manage and report on their short and long term risks and determine the capital resources needed to remain solvent, going beyond the standardised BSCR calculation.
• Governance expectations: The Board and senior management would be expected, at least annually, to certify that CISSA is integral to the risk management framework, is documented, reviewed and evaluated regularly, and reflects material risks and business strategy.
• Key principles: CISSA should encompass all material risks, determine financial resources relative to risk tolerance and business plans, be forward-looking, satisfy a use test (embedded in management decision-making), and be appropriately documented.
• Reporting and filing: The paper outlines proposed reporting and filing requirements, including an annual CISSA Return, with draft templates provided in Appendix A (Class 4 and 3B insurers) and Appendix B (Class 3A insurers).
• Implementation timeline: Legislation was proposed for July 2010, with a trial run for Class 4, 3B and 3A insurers at year-end 2010, before full application from the 2011 reporting year-end.

As a consultation paper, none of these proposals were yet binding requirements at the time of publication; the Authority invited comments from insurers and other interested persons on the proposed CISSA framework.

Key obligations

• Interested persons and insurers wishing to respond must send comments on the CISSA proposals to policy@bma.bm no later than 31 August 2010.
• In the interim, all insurers must follow the self assessment process outlined in the Insurance Code of Conduct (effective 1 July 2010, with transitional period to 31 December 2010).

Applies to

Class 4 insurers, Class 3B insurers, Class 3A insurers, insurance groups, reinsurers

Deadlines

• 31 August 2010: Deadline for submitting comments on the Consultation Paper to policy@bma.bm.
• July 2010: Legislation implementing CISSA was proposed to be introduced.
• year-end 2010: Trial run of CISSA proposed for Class 4, Class 3B and Class 3A insurers.
• 2011 reporting year-end: Proposed full application of CISSA requirements to Class 4, Class 3B and Class 3A insurers.
• 1 July 2010, transitional period to 31 December 2010: Effective date and transitional period for the related Insurance Code of Conduct self-assessment requirement.