Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2012

Summary

This is a BMA notice and draft amendment rules updating the Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011, which set the Group BSCR (Bermuda Solvency Capital Requirement) model for Bermuda insurance groups. The amendments are mainly housekeeping changes to align the Rules and their schedules with the 2011 year-end Group BSCR model, plus one substantive clarification on quarterly intra-group transaction reporting. The document is a consultation draft; BMA invited comments before finalising the Rules.

• Intra-group reporting scope: Rule 8(2)(b) is revoked and replaced to clarify that quarterly financial returns need only report intra-group transactions and reinsurance/retrocession arrangements that have materialised since the most recent quarterly or annual filing, plus details of the ten largest unaffiliated counterparty exposures.
• Schedule 1 capital charge tables: Table 2 (equity investments), Table 6 (debtors), Table 9 (net annual premium for disability income), Table 11 (variable annuity guarantee risk) and paragraphs 10-13 (mortality, stop loss, rider and critical illness charges) are amended or replaced for consistency with the 2011 Group BSCR model; capital factors themselves are unchanged.
• Schedule IV(B) - long-term business premiums: Replaced and aligned with Schedule VII, capturing premium information on long-term insurance products.
• Schedule V - risk management: Amended to require reporting of intra-group exposures and risk concentrations, consistent with the new Rule 8 requirements.
• Schedules VII and VIII: Amended to delete the "net premiums written" column for consistency with the Group BSCR model.
• Schedule IX - group solvency self-assessment: Amended to require a description of the group's business and strategy, and additional disclosures on upstreamed debt/double gearing and restricted subsidiary assets.
• Schedule X - catastrophe risk return: Amended for clarity, including TVaR labelling of occurrence loss figures.
• Schedule XII - group minimum margin of solvency: Table replaced to add "participation type" and "net premiums written" columns.

As drafted, the Rules were proposed to come into operation on 1 January 2013, with BMA seeking industry comments on the draft before that date.

Key obligations

• Insurance groups' quarterly financial returns must report only intra-group transactions, and intra-group reinsurance/retrocession/other risk transfer arrangements, that have materialised since the most recent quarterly or annual filing to the Authority
• Insurance groups must report details of the ten largest exposures to unaffiliated counterparties and any other unaffiliated exposures exceeding 10% of statutory capital and surplus
• Schedule V risk management filings must include details of intra-group exposures and risk concentrations, including exposure values, counterparties, transaction terms, duration and performance triggers
• Schedule IX group solvency self-assessment reports must include a description of the group's business and strategy, and disclosures on double/multiple gearing and restricted subsidiary assets not otherwise reported
• Comments on the draft Rules were to be submitted to policy@bma.bm by the stated deadline

Applies to

Bermuda insurance groups subject to the Insurance Group Solvency Requirement Rules 2011, registered insurers filing group financial returns under the Insurance Act 1978

Deadlines

• 15th August 2012: Deadline for submitting comments on the draft Amendment Rules to policy@bma.bm
• 1st January 2013: Proposed effective date on which the Amendment Rules would come into operation

Related documents

• This document amends Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011