Consultation Paper - Proposed Recovery Planning Rules for Bermuda Commercial Insurers

Summary

This is a BMA consultation paper proposing new Recovery Planning Rules for the Bermuda commercial insurance sector, made under proposed powers in section 6A(1) of the Insurance Act 1978. It follows a 2022 consultation and refines the proposed rules based on stakeholder feedback. The draft rules would let the Authority require certain insurers to prepare, maintain and submit recovery plans, and to act on or remedy deficiencies in those plans.

Who would be in scope

• Covered entities: Class 3A, Class 3B, Class 4, Class C, Class D and Class E commercial insurers, and insurance groups/internationally active insurance groups where the BMA is group-wide supervisor.
• Selection criteria: The BMA would use discretion and criteria such as designation as an internationally active insurance group, domestic business status, a three-year rolling average of at least $10 billion in total assets or $5 billion in gross written premiums, or being under enhanced supervisory monitoring, to decide which insurers must prepare a formal recovery plan.
• Proportionality: Insurers not required to have a formal plan may still be asked to take recovery planning measures (evaluating risks and recovery options) without a full formal plan.

What a recovery plan must contain (proposed)

• Content requirements: An executive summary; a description of legal structure, business, financial arrangements and operations; triggers for implementing the plan; governance policies for recovery planning; recovery methods; stress scenarios and timing for testing; and a stakeholder communication strategy.
• Ongoing maintenance: Insurers subject to the rules would need to keep their recovery plan up to date and submit updated plans to the BMA.
• Deficiency remediation: Where the BMA finds a plan deficient, it would notify the insurer in writing and require deficiencies to be addressed within a timeframe set by the BMA.
• Group deference: Where an insurer already must submit a recovery plan to another relevant supervisory authority (e.g. as group-wide supervisor), the BMA may determine a separate plan is not required.

The paper proposes that the final Rules would come into effect twelve months after publication, and it invites comments on the proposed rules and commencement date. This is a consultation only; the rules are not yet in force and obligations described are proposals pending finalisation by the BMA.

Key obligations

• Insurers within scope, if required by the BMA, would need to prepare, keep up to date and submit a recovery plan to the Authority
• A recovery plan would need to include an executive summary, description of the insurer/group, implementation triggers, governance policies, recovery methods, stress scenarios and testing timing, and a stakeholder communication strategy
• Insurers required to have a recovery plan would need to submit updated plans to the BMA on an ongoing basis
• Where the BMA identifies deficiencies in a recovery plan, the insurer would need to address them within the timeframe specified in the BMA's written notice
• Insurers may be required to execute (implement) all or part of their recovery plan if directed by the BMA

Applies to

Class 3A insurers, Class 3B insurers, Class 4 insurers, Class C insurers, Class D insurers, Class E insurers, insurance groups, internationally active insurance groups

Deadlines

• Wednesday, 21 July 2023 (close of business): Deadline for interested parties to submit comments on the consultation paper to FSRD@bma.bm
• twelve months after being published: Proposed commencement date for the finalised Recovery Planning Rules, following review of consultation feedback