Insurance Returns and Solvency Amendment Regulations XXXX (DRAFT) - Eligible Capital

Summary

This is a draft amendment to Bermuda's Insurance Returns and Solvency Regulations 1980, released by the Bermuda Monetary Authority for consultation. It introduces a tiered capital framework (Tier 1, Tier 2 basic, Tier 2 ancillary, and references to Tier 3 capital under a separate Class 3B/4 Order) defining what qualifies as eligible statutory capital for insurers, and links these tiers to new eligible capital limit calculations and reporting requirements.

• New capital definitions: Adds definitions for capital instruments, ECR (enhanced capital requirement), encumbered assets, and detailed criteria for Tier 1 capital, Tier 2 basic capital, and Tier 2 ancillary capital, including subordination, maturity, redemption and coupon deferral conditions each instrument must meet to qualify.
• Eligible capital limit calculation: Amends Regulation 10 so that for Class 1, Class 2, Class 3 and Class 3A insurers the prescribed eligible capital amount is the greatest of three calculated figures (A, B, C) per a new Schedule I, and caps eligible capital as at least 80 percent Tier 1 capital plus not more than 20 percent Tier 2 capital.
• New filing for Class 3B and Class 4 insurers: Amends Regulation 5 to require Class 3B and Class 4 insurers to file an additional schedule of MSM (minimum solvency margin) eligible capital as part of their statutory returns.
• New Regulation 14B - disclosure detail: Requires the schedule of MSM eligible capital to separately disclose, for each capital instrument in Tier 1, Tier 2, Tier 2 basic and Tier 2 ancillary capital, a description of the instrument, its date of issue, and its value.

The Regulations remain in draft form with placeholder dates for the title, numbering and commencement, and have not yet been finalized or brought into force. Readers should treat this as a consultation proposal rather than a binding rule, and check the BMA source document for the current status before relying on specific figures.

Key obligations

• Once in force, Class 3B and Class 4 insurers would be required to file an additional schedule of MSM eligible capital with their statutory returns under amended Regulation 5
• Once in force, Class 1, Class 2, Class 3 and Class 3A insurers would be required to calculate their prescribed eligible capital amount as the greatest of three figures determined under Schedule I
• Once in force, insurers' eligible capital would need to satisfy the composition limit of at least 80 percent Tier 1 capital and no more than 20 percent Tier 2 capital
• Once in force, the schedule of MSM eligible capital for Class 3B and Class 4 insurers would need to itemize each qualifying capital instrument with a description, issue date, and value

Applies to

Class 1 insurers, Class 2 insurers, Class 3 insurers, Class 3A insurers, Class 3B insurers, Class 4 insurers

Related documents

• This document amends Insurance Returns and Solvency Regulations 1980