Notice - Insurance (Group Supervision) Amendment Rules 2012 (2012-11-14)

Summary

This is a BMA notice, dated 14 November 2012, summarising industry comments received on the draft Insurance (Group Supervision) Amendment Rules 2012 and confirming the Authority's proposed final position on several points, together with the text of the draft amendment rules themselves. It amends the principal Insurance (Group Supervision) Rules 2011 and is still open for further comment before finalisation.

• Internal audit compensation: Proposes a provision that compensation of persons responsible for the group internal audit function must not compromise their independence, with the parent board or a committee establishing and periodically reviewing head of internal audit pay and staff compensation guidelines.
• Board responsibilities: Language requiring the board to 'ensure' certain matters is replaced with language framing these as board 'responsibilities', and a new requirement is added for the board to review the group solvency self-assessment and any changes annually.
• Eligible capital transition: A transitional provision would allow instruments that otherwise meet capital requirements, but lack certain redemption/settlement restrictions, to count as eligible capital until 1 January 2024.
• Enhanced Capital Requirement (ECR): The ECR requirement is proposed to be suspended until 1 January 2014 pending separate consultation.
• Disclosure changes: Group Financial Statements would need to be accompanied by an unaudited statement for public disclosure on the group's compliance with the minimum margin of solvency (MSM) and ECR, and references to the Group Actuary's 'certificate' are changed to 'opinion'.
• Other amendments: Numerous paragraph-level wording amendments to the principal Rules covering internal audit, compliance, actuarial and risk management functions, and replacement of Forms 1, 2 and 8 of Schedule 1 and all of Schedule 2.

The Authority states the proposed amendments are intended to be final unless substantive policy issues require further review, and it invites remaining comments by 7 December 2012. The amendment rules, once made, are stated to come into operation on 1 January 2013, except for paragraph 20 (relating to eligible capital determination), which is stated to commence on 1 January 2014.

Key obligations

• Industry stakeholders wishing to comment on the draft Rules must submit comments to policy@bma.bm by 7 December 2012
• Once in force, insurance group parent boards or an appropriate committee must establish and periodically review compensation of the head of internal audit and guidelines for other internal audit staff compensation
• Once in force, parent boards must review the group's solvency self-assessment and any changes to it annually
• Once in force, Group Financial Statements must be accompanied by an unaudited statement for public disclosure of the group's compliance with the minimum margin of solvency and the Enhanced Capital Requirement

Applies to

insurance groups, parent companies of insurance groups, qualifying members of insurance groups, insurers subject to group supervision

Deadlines

• 7th December 2012: Deadline for industry to submit comments on the draft Insurance (Group Supervision) Amendment Rules 2012
• 1 January 2013: Proposed commencement date for the amendment rules generally (paragraphs 3 to 19, 21, 22 and 29)
• 1 January 2014: Proposed commencement date for paragraph 20 (eligible capital determination) and end of suspension of the Enhanced Capital Requirement
• 1 January 2024: Transitional deadline until which certain capital instruments not fully meeting redemption/settlement conditions may still count as eligible capital

Related documents

• This document amends Insurance (Group Supervision) Rules 2011