Industry Feedback: Consultation on Class 3 Reclassification (2008-06-20)

Summary

This is a BMA industry feedback note summarising responses to its May 2008 consultation on reclassifying Class 3 insurers and creating a new Special Purpose Insurer (SPI) class. It reports on nine submissions received, the main concerns raised by industry, and a set of minor amendments the BMA is making to the draft legislation before it is tabled in the House of Assembly.

• Industry concerns raised: Cost of supervising new Class 3A and 3B insurers and how those costs will be funded; legal status of existing supervisory conditions and section 56 directions after enactment; treatment of commercial insurers in run-off; criteria for distinguishing unrelated versus connected business; and guidance on how affiliated (re)insurers, segregated accounts companies, sidecars, transformers and warranty writers will be treated in re-registration.
• Amendments the BMA is making: Fee schedule amended to add an annual business fee of 10,000 dollars for Class 3A, Class 3B and SPI insurers (with a further discussion paper on fee-setting principles due in Q4 2008); transitional provisions amended to introduce re-registration application fees of 500 dollars for Class 3A applicants and 1,000 dollars for Class 3B applicants; removal of the requirement for an approved actuary and actuarial certification on SPI annual statutory filings; and minor changes to the definitions of special purpose business and Class 3 insurer.
• Legislative process: The revised Insurance Amendment Act 2008 (also incorporating Bermuda Solvency Capital Requirement provisions for Class 4 insurers) was to be tabled before the House of Assembly on Friday 27 June 2008, with enactment expected by 1 July 2008, opening a Class 3 re-registration period running to 31 December 2008.

The BMA notes that detailed Guidance Notes will accompany the re-registration application form to clarify its position on the reclassification issues raised by respondents.

Key obligations

• Class 3A, Class 3B and SPI insurers will be liable for an annual business fee of 10,000 dollars per annum once the amended fee schedule takes effect
• Class 3A applicants for re-registration must pay a re-registration application fee of 500 dollars
• Class 3B applicants for re-registration must pay a re-registration application fee of 1,000 dollars
• SPI insurers are no longer required to appoint an approved actuary or provide actuarial certification with their annual statutory filing
• Insurers within the Class 3 category must complete re-registration under the new classification scheme during the re-registration period ending December 31, 2008

Applies to

Class 3 insurers, Class 3A insurers, Class 3B insurers, Special Purpose Insurers (SPI), Class 4 insurers

Deadlines

• Friday June 27th 2008: Revised Insurance Amendment Act 2008 legislation to be tabled before the House of Assembly
• July 1st 2008: Expected enactment date of the Insurance Amendment Act 2008, subject to a favourable reading in the House of Assembly
• December 31st 2008: End of the Class 3 re-registration period
• fourth quarter of 2008: BMA to introduce a discussion paper on draft principles for setting annual business fees