Consultation Paper - Proposed Introduction of Recovery Planning Regime for the Insurance Sector (June 2022)

Summary

This is a Bermuda Monetary Authority consultation paper proposing a new recovery planning regime for the insurance sector. It sets out the Authority's intended approach to requiring certain insurers to prepare plans for responding to severe financial stress, and invites industry feedback before rules are drafted. The Authority intends to amend section 6A(1) of the Insurance Act 1978 to create rule-making power for this regime.

• Purpose: Recovery plans would help insurers understand risks from severe stress scenarios and ensure they can act in an orderly, timely manner if under severe stress.
• Who could be required to have a formal plan: Designated internationally active insurance groups where BMA is group-wide supervisor; insurance groups as defined in the Insurance Act 1978 where BMA is group-wide supervisor; domestic insurers; and insurers with a three-year rolling average of at least 10 billion dollars in total assets or at least 5 billion dollars in gross written premiums that are commercial insurers under close monitoring.
• Proportionality: The Authority may require only limited recovery planning measures for some insurers, or a full formal recovery plan for those considered economically important, systemically significant, or a threat to Bermuda's financial stability, based on factors like class of registration, size, interconnectedness, complexity and risk profile.
• Relationship to existing tools: Recovery plans are intended to integrate with and complement existing Enterprise Risk Management tools such as the Commercial Insurer's Solvency Self-Assessment (CISSA), rather than duplicate them.
• Next steps: The Authority will draft actual recovery planning rules after considering consultation feedback, and those draft rules will themselves be subject to a further public consultation.

No binding rules are created by this paper itself; it is a proposal seeking industry input. Interested persons were asked to submit comments, including responses to a general question on practical issues raised by the proposals, to the Authority by a stated deadline.

Key obligations

• Interested persons wishing to comment on the proposals must send comments to FSRD@bma.bm no later than Friday, 29 July 2022.

Applies to

commercial insurers (Class 3A, 3B, 4, C, D, E), insurance groups, domestic insurers, reinsurers, internationally active insurance groups

Deadlines

• Friday, 29 July 2022: Deadline for industry and other interested persons to submit comments on the consultation paper to FSRD@bma.bm