Industry Feedback - Building Resources to Meet Advances in Global Insurance Supervision (2008-11-17)

Summary

This is a BMA feedback paper summarizing industry responses to its September 2008 consultation on revised supervisory fees for Bermuda's commercial insurance sector, and setting out the resulting changes to the fee proposals. It confirms which fee changes will proceed for 2009 and flags matters deferred to a further 2010 consultation.

• Affected classes: Fee changes affect class 3A insurers, class 3B insurers, class 4 insurers and long term insurers; the captive sector's existing regulatory framework and fees are explicitly left unchanged.
• Class 4 annual fees: The BMA removed the proposed increase to annual business fees for class 4 insurers, so no increase proceeds for this group.
• New mutual recognition fee: A new fee of $40,000 per company per annum will be assessed on class 4 insurers for 2009 and 2010 only, to fund mutual recognition initiatives, and will not continue beyond 2010.
• Class 3A and long term insurer fees: Annual business fees for class 3A and long term insurers are reduced from the original proposal to $19,000.
• Class 3B and class 4 convergence deferred: Full convergence of the class 3B and class 4 fee structures will not proceed at this time; the BMA will consult again on this in 2010.
• Service fee changes: Various service fees are increased or newly introduced, covering registration applications, re-registration as a different insurer class, extensions to statutory filing deadlines, reductions in statutory capital, section 56 applications, liquidity ratio asset designations, fixed capital approvals, shareholder control notifications, cancellation of registration, and internal model approval (new $50,000 fee).
• Fee remittance provision: A new provision allows the BMA to remit annual fees in whole or part where payment would be detrimental to an insurer's business, such as firms in run off or dormancy.

The paper reports on three industry submissions received (from BIMA, ABIR, and a third respondent) and explains how the BMA addressed specific concerns, including class 3 sector reclassification guidance issued 12 September 2008 clarifying the boundaries between class 3, class 3A and class 3B insurers.

Key obligations

• Class 4 insurers must pay a new mutual recognition fee of $40,000 per company per annum for 2009 and 2010.
• Class 3A and long term insurers will pay a revised annual business fee of $19,000.
• Insurers and insurance managers, brokers or agents must pay the revised (increased) service fees for registration, re-registration, filing deadline extensions, statutory capital reductions, section 56 applications, liquidity ratio asset designations, fixed capital approvals, shareholder control notifications, registration cancellation, and internal model approval as set out in the revised fee schedule.
• Insurers seeking fee relief due to run-off or dormancy may apply to the BMA for remittance of annual fees in whole or part.

Applies to

class 3A insurers, class 3B insurers, class 4 insurers, long-term insurers, insurance managers, brokers or agents, class 3 insurers (captives, rent-a-captives, SAC companies) - fee structure unchanged

Deadlines

• 10th October 2008: Deadline stated in Annex A for respondents to submit comments on the original consultation questions.
• 2009 and 2010: Period during which the new $40,000 per annum mutual recognition fee applies to class 4 insurers, after which it will cease.
• 2010: The BMA commits to consulting again on convergence of class 3B and class 4 supervisory fee structures.