Insurance (Prudential Standards) (Class 3B and Class 4 Solvency Requirement) Amendment Order 20XX (Draft)

Summary

This is a draft amendment order that would update Bermuda's Insurance (Prudential Standards) (Class 3B and Class 4 Solvency Requirement) Order to introduce a tiered eligible capital framework. It defines new capital tiers (Tier 1, Tier 2, Tier 3, with basic and ancillary sub categories) by reference to the Insurance Returns and Solvency Regulations 1980, and sets limits on how much of each tier can count toward meeting the Enhanced Capital Requirement (ECR).

• New defined terms: Inserts definitions for capital instruments, encumbered assets, Tier 1 capital, Tier 2 capital (basic and ancillary), and Tier 3 capital (basic and ancillary) into the principal Order.
• Revised solvency requirement: Replaces paragraph 3(3) so that every Class 3B and Class 4 insurer must maintain available statutory capital and surplus equal to or exceeding the ECR while also meeting new eligible capital limits.
• Eligible capital limits: New paragraph 3(4) requires the eligible capital limit to be the sum of at least 60% of Tier 1 capital, no more than 30% of Tier 2 capital, and no more than 10% of Tier 3 capital.
• Schedule VII added: Adds a new Schedule VII requiring a schedule of ECR eligible capital that discloses, for each capital instrument in Tier 1, Tier 2 (basic/ancillary) and Tier 3 (basic/ancillary), a description, the date of issue, and the value.
• Consequential cross reference changes: Amends paragraph 6 to extend references from Schedule VI to Schedules VI and VII, and extends the paragraph's application from Class 4 insurers only to both Class 3B and Class 4 insurers.

The Order remains in draft form, with the commencement date left blank pending finalisation. Insurers should treat this as a preview of forthcoming capital tiering and disclosure requirements rather than a document currently in force.

Key obligations

• Every Class 3B and Class 4 insurer must maintain available statutory capital and surplus equal to or exceeding the value of the ECR and meeting the prescribed eligible capital limits
• Eligible capital must comprise at least 60% Tier 1 capital, no more than 30% Tier 2 capital, and no more than 10% Tier 3 capital
• Class 3B and Class 4 insurers must prepare and disclose a schedule of ECR eligible capital under new Schedule VII, itemising each capital instrument by description, date of issue, and value

Applies to

Class 3B insurers, Class 4 insurers