Insurance (Prudential Standards) (Class 4 and 3B Solvency Requirement) Amendment Rules 2015

Summary

This is a Bermuda Monetary Authority notice and draft rules proposing amendments to the Insurance (Prudential Standards) (Class 4 and 3B Solvency Requirement) Rules 2008. It implements changes flagged in the December 2014 Economic Balance Sheet Framework consultation paper, restructuring how the Bermuda Solvency Capital Requirement (BSCR) is calculated for Class 4 and Class 3B insurers.

• New Schedule XIV: Introduces the Economic Balance Sheet (EBS) requirements, with Form 1EBS becoming the basis for BSCR calculations, replacing prior references to available statutory capital and surplus.
• Consolidated and unconsolidated reporting: Because the EBS is prepared on a consolidated basis, certain schedules feeding the BSCR must also be filed on an unconsolidated (standalone legal entity) basis.
• New Schedule XV: Sets initial requirements for a Loss Reserve Specialist's Opinion on EBS technical provisions, including commentary on reserving assumptions, risk margins, discount rates and conflicts of interest; a related Guidance Note is planned and will be separately consulted on.
• New Schedule XVI: Adds a schedule supporting calculation of the Minimum Margin of Solvency, requiring data on affiliates (jurisdiction, entity type, participation interest, premiums, assets and MMS).
• Consequential amendments: Amends definitions in paragraph 2 (e.g. replacing available statutory capital and surplus with available statutory economic capital and surplus, redefining reserve risk) and expands the schedules referenced in paragraph 6 to include Schedules XI, XII, XIV, XV and XVI.
• New filing requirement: Adds paragraph 3A requiring insurers to file a loss reserve specialist opinion alongside their capital and solvency return.

The Authority proposed that these amendments take effect for submissions made after the end of the financial year starting on or after 1 January 2016, and invited written comments on the draft rules by 27 February 2015. As a consultation document, the rules described are proposals rather than settled binding requirements as of this notice.

Key obligations

• Interested parties wishing to comment on the proposed Rules must submit comments to policy@bma.bm by 27th February 2015.
• Once effective, Class 4 and Class 3B insurers would be required to file a loss reserve specialist opinion together with their capital and solvency return (new paragraph 3(3A)).
• Once effective, insurers would need to prepare and submit Form 1EBS (Economic Balance Sheet) and related schedules (XIV, XV, XVI) as part of their BSCR and Minimum Margin of Solvency calculations, on both consolidated and, where specified, unconsolidated bases.

Applies to

Class 4 insurers, Class 3B insurers

Deadlines

• 27th February 2015: Deadline for interested parties to submit comments on the proposed Amendment Rules to policy@bma.bm.
• submissions made following the end of the financial year starting on or after 1st January 2016: Proposed effective date for the amendments to apply to insurer submissions.