Insurance - RBC Cover Ltr (2007-07-23)

Summary

This is a 2007 cover letter from the Bermuda Monetary Authority's Insurance Department to Class 4 insurers and reinsurers, inviting them to participate in the continued development of the Risk-Based Capital (RBC) model and a related proposal to allow use of company-specific Internal Models for determining regulatory capital requirements. It accompanies two consultation papers for industry comment and outlines the Authority's plans for rolling out RBC and expanding statutory return requirements.

• RBC model rollout: The RBC model, delivered to the Authority in June 2007, is expected to become operational by 2007 year end and accompany Class 4 statutory financial returns filed with the Authority in April 2008.
• Internal Models: The Authority proposes to allow approval of company-specific Internal Models as an alternative to the static RBC model, pending future amendment of relevant legislation; companies with proprietary models are encouraged to apply once legislation permits.
• Consultation papers: Two consultative papers are provided: one on company-specific Internal Models, and one on the Bermuda Solvency Capital Requirement and how the Authority will assess solvency for Class 4 insurers and reinsurers.
• Expanded statutory return: The Authority proposes to expand the statutory return to include additional forward-looking information such as MD&A and proforma financials, with drafts of amended statutory financial statements and the RBC model to be emailed to company representatives.
• Class 3 rollout: A separate calibration exercise and consultation is anticipated before the RBC model is applied to Class 3 commercial writers.

This letter is a consultation invitation rather than a binding rule, but it sets out specific comment deadlines for recipients to respond to the Authority.

Key obligations

• Class 4 companies invited to submit comments on the consultation papers and additional statutory return information by Friday September 14, 2007
• Class 4 companies invited to submit comments on the RBC model by Friday October 12, 2007
• Comments must be sent via email to the specified BMA contacts (dburgess@bma.bm and kanderson@bma.bm)

Applies to

Bermuda Licensed Class 4 Company, Class 4 insurers and reinsurers, Class 3 commercial writers (future phase)

Deadlines

• Friday September 14th, 2007: Deadline for comment on the consultation papers and additional information to be included with the statutory return
• Friday October 12th, 2007: Deadline for comment on the RBC model
• 2007 year end: Anticipated date for RBC model to become operational
• April 2008: Class 4 statutory financial returns to be filed with the Authority, to be accompanied by the RBC model