Notice - Insurance Amendment (No.2) Act 2012 (2012-06-16)

Summary

This is a BMA notice attaching a draft Insurance Amendment (No. 2) Act 2012 for industry consultation. It proposes significant changes to the Insurance Act 1978 to extend enhanced Solvency II-related regulatory requirements (currently applicable to Class 4, 3B, 3A and E insurers) to Class C and D insurers, and makes numerous related definitional, procedural and housekeeping changes.

• Solvency II extension: Enhanced reporting, prudential rule, group actuary and capital requirements previously applying only to Classes 4, 3B, 3A and E insurers are extended to Class C and D insurers.
• New/amended definitions: Adds or revises definitions of actuary, approved actuary, group actuary, loss reserve specialist, non-insurance business, and amends the definition of long-term business.
• Non-insurance business separation: New section 19 prohibits Class 4, 3B, 3A, E, D and C insurers from engaging in non-insurance business except where ancillary, with a transitional period allowing existing mixed business to continue until 1 January 2017.
• Actuary approval: Revised section 26 requires Class A, B, C, D and E insurers to appoint an Authority-approved actuary to assess adequacy of long-term insurance reserves, and introduces approval of a group actuary.
• Faster breach notification: Section 31A notification period for a breach of minimum margin of solvency is shortened from within 30 days to forthwith, with an action plan to be filed within 14 days of notification.
• Material change approvals: Section 30JA expands the list of matters treated as a material change to licensed insurance business requiring prior Authority approval, including certain acquisitions and outsourcing arrangements.
• Consequential regulatory amendments: Cross-reference corrections are proposed to the Insurance Returns and Solvency Regulations 1980 and the Insurance Accounts Regulations 1980.

As a consultation notice on a draft bill, the document itself does not yet impose binding obligations; it invites industry comment on the proposed amendments before they are finalised and enacted.

Key obligations

• Interested parties must submit comments on the draft Bill to policy@bma.bm by 27 June 2012.
• Once enacted, insurers must notify the Authority forthwith upon becoming aware of a breach of the minimum margin of solvency and file a remediation action plan within 14 days of that notification.
• Once enacted, Class A, B, C, D and E insurers must appoint an Authority-approved actuary to assess adequacy of long-term insurance reserves, and insurance groups must have an approved group actuary.
• Once enacted, Class 4, 3B, 3A, E, D and C insurers must not engage in non-insurance business except where ancillary to their insurance business, subject to a transitional period to 1 January 2017 for existing mixed operations.

Applies to

Class 4 insurers, Class 3B insurers, Class 3A insurers, Class E insurers, Class C insurers, Class D insurers, Class A insurers, Class B insurers, insurance managers, insurance brokers, insurance agents, insurance groups

Deadlines

• 27th June 2012: Deadline for submitting comments on the draft Insurance Amendment (No. 2) Act 2012 to policy@bma.bm.
• 1 January 2017: Transitional deadline by which insurers conducting non-insurance business as at 31 December 2012 must complete reorganisation to separate non-insurance business from insurance business.
• 14 days: Period within which an insurer must furnish the Authority with a remediation action plan after notifying a breach of the minimum margin of solvency (proposed amendment to section 31A).
• 180 days: Minimum period a draft Rule made under section 6A must be published before it can come into operation (proposed amendment).

Related documents

• This document amends Insurance Act 1978