Insurance Amendment Act 2016 (Draft Bill)

Summary

This is a draft bill that would amend the Insurance Act 1978 to bring insurance managers into Bermuda's prudential regulatory framework and to make a number of technical changes aligning the regime with Solvency II. It has not yet been enacted; it is a consultation draft published by the BMA. If passed, it would add new reporting, notification and financial soundness requirements primarily targeted at insurance managers, plus fee and penalty provisions affecting insurers and insurance groups.

• Insurance manager oversight: Insurance managers would become subject to Authority prudential rules and reporting requirements (new section 6A(1)(g)), and could apply for exemption or modification of those standards under section 6C if appropriate given their nature, scale and complexity.
• New notification duty: A new section 30CA would require an insurance manager to give the Authority written notice when a person becomes or ceases to be a shareholder controller or officer, within 14 days of becoming aware of the fact; failure would attract a civil penalty of up to $5,000 per week.
• Civil penalties extended: Section 18A would extend civil penalties (consistent with those applying to Class 1, 2, 3, A and B insurers) to insurance managers for breaches of duties or prudential rules.
• Fee and penalty changes: Annual fees for all registered persons would be tied to the calendar year ending 31 December; designated insurers failing to pay group fees would incur a late penalty of 10 percent of the fee due per month or part month outstanding (section 27B).
• Liquidity and indemnity requirements: Insurers would need to confirm compliance with the minimum general business liquidity ratio in their annual declaration (section 15A), and insurance managers would need to maintain sufficient indemnity insurance cover relevant to their business (Schedule amendment).
• Auditor reporting reduced: Requirements for approved auditors to report on additional GAAP or condensed general purpose financial statements would be removed (sections 16A and 17A).
• Regulatory investigation powers: The Authority's power under section 30 to appoint persons to investigate and report would be extended to cover insurance managers.
• Consequential regulation changes: Schedules to the bill would amend the Insurance Accounts Regulations 1980 and the Insurance Returns and Solvency Regulations 1980 (form line descriptions and financial statement notes).

If enacted as drafted, the Act would come into operation on the date of assent and apply to financial years commencing on or after 1 January 2016. As a draft consultation document, none of these provisions are currently in force; readers should treat the obligations described as proposed pending final legislative approval.

Key obligations

• Insurance managers would be required to give written notice to the Authority within 14 days of becoming aware that a person has become or ceased to be a shareholder controller or officer (proposed section 30CA)
• Insurance managers failing to give the required notice under proposed section 30CA would be liable to a civil penalty of up to $5,000 per week or part week of non-compliance
• Designated insurers failing to pay a prescribed fee on behalf of an insurance group would be liable for a late penalty fee of 10 percent of the fee due for each month or part month unpaid (proposed section 27B(14))
• Insurers would need to confirm in their annual declaration of compliance that they have met the minimum liquidity ratio for general business as at financial year end (proposed section 15A(e))
• Insurance managers would be required to maintain sufficient indemnity insurance cover relevant to the nature, scale and complexity of their business (proposed Schedule amendment)
• Insurance managers would become subject to civil penalties of up to $500 per week for non-compliance with duties under section 17 or prudential rules under section 6A (proposed section 18A)

Applies to

insurers (Class 1, Class 2, Class 3, Class A, Class B), insurance managers, insurance groups, designated insurers, approved auditors

Deadlines

• 14 days beginning with the day the insurance manager becomes aware of relevant facts: Proposed deadline for an insurance manager to notify the Authority of a change of shareholder controller or officer (new section 30CA)
• on assent: Proposed commencement date of the Act once enacted
• financial years commencing on or after 1 January 2016: Period to which the amendments would apply once the Act comes into operation

Related documents

• This document amends Insurance Act 1978
• This document amends Insurance Accounts Regulations 1980
• This document amends Insurance Returns and Solvency Regulations 1980