Notice - Insurance (Eligible Capital) Amendment Rules 2015

Summary

This is a BMA notice and consultation draft proposing amendments to the Insurance (Eligible Capital) Rules 2012, moving the basis for valuing policyholder obligations and statutory capital from the existing Statutory Balance Sheet method to the new Economic Balance Sheet method set out in the relevant Prudential Standards Solvency Requirement rules. The document reproduces the draft amendment rules themselves alongside the covering notice inviting public comment.

• Terminology changes: Introduces new defined terms Form 1EBS and Form 4EBS (replacing Form 1A and Form 4) tied to the Economic Balance Sheet framework.
• Tier 1 basic capital: Replaces the definition of Tier 1 basic capital (sub-paragraph 3(a)) with a new formula based on statutory economic surplus and adjustments for encumbered assets held for policyholder obligations.
• Terminology in paragraph 3: Replaces references to statutory capital and surplus with statutory economic capital and surplus throughout paragraph 3.
• Transitional date change: Amends a January 1, 2024 reference in sub-paragraph 2(9) to January 1, 2026.
• Transitional treatment for Class 3A insurers: The existing (pre-amendment) definition of Tier 1 basic capital continues to apply to Class 3A insurers until 31 December 2018.
• Draft commencement date: The draft rules as reproduced state they come into operation on 31 December 2016, though the covering notice proposes different phased effective dates for submissions.

Because this is a consultation notice with draft rules, none of the changes are yet in force; they are proposals open for industry comment before finalisation.

Key obligations

• Submit comments on the draft Insurance (Eligible Capital) Amendment Rules 2015 to policy@bma.bm by 27th February 2015.

Applies to

Class 4 insurers, Class 3B insurers, Class 3A insurers, Class C insurers, Class D insurers, Class E insurers

Deadlines

• 27th February 2015: Deadline for submitting comments on the draft Rules to policy@bma.bm.
• financial year starting on or after 1st January 2016: Proposed effective date for the amendments (other than for Class 3A insurers) to apply to submissions following the end of that financial year.
• financial year starting on or after 1st January 2017: Proposed effective date for the amendments to apply to Class 3A insurer submissions.
• 31 December 2016: Commencement date stated in the draft Rules text itself (paragraph 5).
• 31 December 2018: Date until which the prior definition of Tier 1 basic capital continues to apply to Class 3A insurers under the transitional arrangements.