Notice - Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2013 (2013-07-01)

Summary

This is a Bermuda Monetary Authority consultation notice proposing amendments to the Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules 2011, which set out the Bermuda Solvency Capital Requirement for small and medium sized entities (BSCR SME). The Authority proposes revoking and replacing Schedules I through XII to the Rules and invites stakeholder comment before finalising them.

• Schedule I changes: Refines fixed income and equity investment risk charges, introduces a new credit risk charge basis using a refined set of BSCR ratings, and adds a new catastrophe risk charge calculation for funded Special Purpose Insurers, reducing a credit risk charge threshold from 12.2% to 10.0%.
• Schedule II: Aligned with the proposed amendments to Paragraphs 2 and 3 of Schedule I.
• New Schedule IIA: Captures underlying assets of an insurer's funds held by ceding reinsurers in segregated accounts or trusts, for which the insurer bears the corresponding market risk.
• Schedule V: Adds disclosure requirements reflecting the Schedule I paragraph 7 and 8 amendments and updates the accompanying instructions to give the Authority greater insight into an insurer's business and risk.
• Paragraph 6 amendment: Inserts a reference to new Schedule IIA alongside Schedule II wherever Schedule II is referenced in the principal Rules.

The changes are intended to reflect the new Schedule Held by Ceding Reinsurers in Segregated Accounts/Trusts, ensure continuity in how BSCR reporting requirements are submitted, and align capital and solvency reporting for Long-Term Insurers with commercial insurers. As drafted, this is a consultation document with proposed rules attached; it is not yet in force.

Key obligations

• Interested parties must submit comments on the proposed Schedules to policy@bma.bm by 6 September 2013
• Once effective, Class 3A (SME) insurers must calculate their BSCR using the revised Schedule I formulas for fixed income, equity, credit and catastrophe risk charges
• Once effective, insurers with funds held by ceding reinsurers in segregated accounts or trusts must report the underlying assets under new Schedule IIA and bear the corresponding market risk
• Once effective, insurers must provide the additional disclosures required under the revised Schedule V and its instructions

Applies to

Class 3A insurers, commercial insurers (small and medium sized entities), Long-Term Insurers, Special Purpose Insurers, ceding reinsurers

Deadlines

• 6th September 2013: Deadline for submitting comments on the proposed Schedules to policy@bma.bm
• 1st January 2014: Proposed effective date for the amendments to become operative

Related documents

• This document amends Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules 2011