Explanatory Memorandum for Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules 2011

Summary

This is an explanatory memorandum accompanying a draft set of Bermuda Monetary Authority rules for Class 3A insurers, published for industry consultation. It summarises the proposed Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules 2011 rule by rule and invites comment before the rules are finalised.

• Enhanced Capital Requirement (Rule 3): Sets the applicable eligible capital requirement for Class 3A insurers, calculated at year end using the standard BSCR-SME model or an Authority-approved internal capital model.
• BSCR-SME model (Rule 4): Requires Class 3A insurers to apply the standard BSCR-SME formula set out in Schedule I.
• Approved internal capital model (Rule 5): Allows a Class 3A insurer to apply to the Authority for approval to use an internal capital model instead of the standard BSCR-SME model, subject to conditions.
• Capital and solvency return (Rule 6): Requires Class 3A insurers to file printed and electronic versions of a capital and solvency return by a specified filing date, comprising Schedules II through VIII and X covering fixed income investments, loss provisions, premiums written, risk management, fixed income securities, commercial insurer's solvency self-assessment, catastrophe risk (for property catastrophe writers), and eligible capital.

As a consultation document, the rules described are proposals only and are not yet in force; the Authority invited industry comment before finalisation, with a proposed commencement date of 31 December 2011.

Key obligations

• Comment on the proposed Rules must be sent to the Authority at policy@bma.bm no later than 31 August 2011
• Under the proposed rules, Class 3A insurers would be required to calculate their Enhanced Capital Requirement using the BSCR-SME model or an Authority-approved internal capital model
• Under the proposed rules, Class 3A insurers seeking to use an internal capital model instead of the standard BSCR-SME model would need to apply to the Authority for approval
• Under the proposed rules, Class 3A insurers would be required to file a capital and solvency return (printed and electronic, comprising Schedules II-VIII and X) with the Authority by a specified filing date

Applies to

Class 3A insurers

Deadlines

• 31st August 2011: Deadline for industry and interested persons to submit comments on the proposed Rules to policy@bma.bm
• 31 December 2011: Proposed date on which the Rules would come into operation