Instructions for the Proposed Long-Term Bermuda Solvency Capital Requirement Model (2013-07-22)

Summary

This is a Bermuda Monetary Authority circular accompanying a test version of an updated Long-Term Bermuda Solvency Capital Requirement (BSCR) model, issued to insurers writing long-term (life) business. It sets out how to use the test model and invites feedback before the model is finalised for 2013 year-end reporting.

• Purpose: The updated BSCR model reflects proposed changes described in the Authority's June 2013 consultation paper on Refinements to the Bermuda Solvency Capital Requirements, and is circulated so companies can assess the impact on their business.
• Technical guidance: Explains known quirks in the test spreadsheet (a VBA protection error message to ignore, reordered tabs, yellow highlighting of changed cells, hidden CISSA tabs), how to select the correct Long-Term business class, and how certain reinsurance-related assets should be allocated between Schedule II(a) investment risk and Schedule V(c) credit risk calculations.
• Simplifications for testing: Allows companies to enter an operational risk percentage charge directly rather than completing the full operational risk schedules, and permits use of estimates where data is not currently available.
• Feedback sought: The Authority asks for comments on the overall impact of the model, areas needing more guidance, difficulties in completion, alternative data approaches, and any errors or anomalies found.

Comments and feedback on the test model must be submitted by email to riskanalytics@bma.bm no later than close of business on 6th September 2013; responses will inform preparation of a final working model in time for 2013 year-end.

Key obligations

• Companies testing the model must submit feedback (on overall impact, guidance needs, difficulties, data alternatives, and errors) to riskanalytics@bma.bm no later than close of business on 6th September 2013.
• When completing the test model, companies should select the appropriate Long-Term business class on the Company Information tab (cell K11) to ensure the Minimum Solvency Margin is calculated correctly.
• Specific assets forming part of funds held by ceding companies where the reinsurer bears market risk should be identified and included in Schedule II(a), with remaining assets and associated ratings/collateral included in Schedule V(c).

Applies to

Long-Term (life) insurers, reinsurers writing long-term business

Deadlines

• 6th September 2013: Deadline for companies to submit feedback and comments on the test BSCR model to riskanalytics@bma.bm