Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Schedules 2019

Summary

This document sets out detailed reporting schedules (Schedules IIB, IIC, IID and XXII, among others) that form part of the Bermuda Solvency Capital Requirement (BSCR) framework under the Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Rules. It prescribes the templates and detailed instructions insurers must use to classify and report fixed income, equity, mortgage, derivative and interest-rate-sensitive assets and liabilities by BSCR rating for solvency reporting purposes.

• Schedule IIB: Requires reporting of fixed income and equity investments held directly, classified by BSCR rating (0-8), asset type (corporate/sovereign bonds, mortgage-backed securities, bond mutual funds, mortgage loans) and equity holding category (strategic, listed, preferred stock, infrastructure, real estate, derivatives).
• Schedule IIC: Requires reporting of funds held by ceding insurers and funds held under retrocession, using the same BSCR rating and asset/equity classification methodology as Schedule IIB, plus cash and cash equivalents and total funds held.
• Schedule IID: Covers segregated account companies assets and liabilities classified by BSCR rating.
• Schedule XXII: Requires reporting of interest rate sensitive assets and liabilities (including hybrid instruments, deposits, loans, reinsurance receivables and derivatives) under interest rate up-shock and down-shock scenarios, broken down by currency.
• Rating methodology: Insurers must use the latest available S&P, Moody's, AM Best or Fitch ratings; where ratings differ across agencies, the most conservative rating must be used; unrated securities must be assigned BSCR rating 8; qualifying sovereign debt in a country's own currency rated AA- or better is assigned BSCR rating 0.

The schedules are technical prudential reporting forms rather than a standalone narrative rule; they operate together with the wider Prudential Standards Rules to determine how Class C, D and E insurers calculate and report BSCR-related capital and solvency figures to the Bermuda Monetary Authority.

Key obligations

• Classify fixed income investments (quoted and unquoted) into corporate/sovereign bonds, residential and commercial mortgage-backed/asset-backed securities, and bond mutual funds, by BSCR rating (0-8)
• Classify equity investments into long/short exposures, strategic holdings (Type 1/Type 2), listed equity securities, preferred stocks, other equities, infrastructure, real estate and derivatives categories
• Use the latest available AM Best, S&P, Moody's or Fitch rating to determine the BSCR rating of fixed income securities and preferred stocks, applying the most conservative rating where ratings differ across agencies
• Assign a BSCR rating of 8 to unrated securities
• Apply a BSCR rating of 0 to qualifying sovereign debt (AA- or better, issued in own currency) and to government-guaranteed debt (excluding government-issued mortgage-backed securities)
• Report funds held by ceding insurers and funds held under retrocession using the prescribed BSCR rating and asset classification methodology (Schedule IIC)
• Report segregated account company assets and liabilities by BSCR rating (Schedule IID)
• Report all interest rate sensitive assets and liabilities, broken down by currency, under prescribed interest rate up-shock and down-shock scenarios (Schedule XXII)
• Apply the Authority's prescribed criteria to determine whether exposures qualify as assets held for risk-mitigation purposes

Applies to

Class C insurers, Class D insurers, Class E insurers