Insurance Statement of Principles Consultation Paper (Capital Add-On Policy) (2008-08-15)

Summary

This is a 2008 consultation memo from the Bermuda Monetary Authority to Class 4 insurers, proposing a new Part 7 (Capital Add On Policy) to be added to the Authority's Insurance Statement of Principles under Section 6D of the Insurance Act 1978. It explains when the Authority may apply a capital add on or reduction to an insurer's Enhanced Capital Requirement (ECR), and sets out a proposed appeals process, and invites industry comment before the policy and amended Statement of Principles are finalised.

• Trigger circumstances: Add-ons may arise from operational risk charge concerns, reserve deficiencies or premium inadequacy, significant premium growth, notifications under Section 8A(f), or reports under Section 31AA(1)(b) of the Act.
• Capital reduction: A capital reduction may be assessed where the Authority gives credit for hybrid capital on the insurer's application (non-admitted assets).
• Notification and representation: The Authority will notify the insurer of an intended adjustment to statutory capital and surplus or ECR; the insurer has 28 days to make representations to an in-house panel (Risk, Actuary, Supervisory staff).
• Timing of effect: If the insurer does not appeal, the adjustment takes effect not less than 90 days after notification; if appealed to the in-house panel or to a tribunal under Section 44A Part VIIIA, the adjustment takes effect 90 days or longer from the relevant decision.
• Consultation input: Industry and other interested persons are asked to send views on the amended Statement of Principles to policy@bma.bm.

As a consultation paper, this document does not itself impose binding requirements; it sets out proposed amendments and administrative procedures for which the Authority sought industry feedback before finalising and publishing the revised Statement of Principles.

Key obligations

• Interested persons wishing to comment must send their views on the amended Statement of Principles to policy@bma.bm by the stated deadline
• Under the proposed policy, an insurer subject to a proposed capital add-on or reduction must submit any representation to the in-house panel within 28 days of notification
• Under the proposed policy, an insurer disagreeing with the in-house panel decision must appeal to the tribunal under Section 44A Part VIIIA of the Act if it wishes to contest the adjustment

Applies to

Class 4 Insurers

Deadlines

• September 15, 2008: Deadline for industry and other interested persons to send comments on the amended Statement of Principles to policy@bma.bm
• 28 days: Period within which an insurer may make representation to the Authority's in-house panel after notification of a proposed capital add-on or reduction
• not less than 90 days after notification: Time before an adjustment or charge takes effect if the insurer does not appeal
• 90 days or longer from the Tribunal's or final decision: Time before an adjustment takes effect following an appeal to the in-house panel or tribunal