Notice - Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2015 (2015-01-22)

Summary

This is a Bermuda Monetary Authority consultation notice (dated 22 January 2015) announcing proposed amendments to the Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules 2011. The changes are intended to align the Class 3A solvency framework with the Economic Balance Sheet (EBS) approach set out in the Authority's December 2014 consultation paper on the Economic Balance Sheet Framework. The document is a draft/consultation, not yet in force, and invites stakeholder comment before finalisation.

• New Schedule XIV: Introduces the Economic Balance Sheet requirements, which will underpin the Bermuda Solvency Capital Requirement (BSCR) calculation.
• Consequential Schedule changes: Amends other Schedules (I, II, IIA, III, IV, V, VI, IX, X, XII) so BSCR inputs are calculated from the EBS, with some Schedules to be reported on both consolidated and unconsolidated bases.
• New Schedule XV: Sets initial requirements for a Loss Reserve Specialist's Opinion on EBS technical provisions, including confirmation of qualifications, conflicts of interest, and working papers to be made available to the Authority on request.
• New Schedule XVI: Requires information (affiliate details, net premiums, assets, minimum margin of solvency) to support calculation of the Minimum Margin of Solvency.
• Definitional changes: Replaces 'available statutory capital and surplus' and related defined terms with EBS-based equivalents (e.g. 'available statutory economic capital and surplus', 'Form 1EBS').
• New filing requirement (paragraph 6(3A)): An insurer must file a Loss Reserve Specialist's opinion together with its capital and solvency return, covering technical provisions calculated under Schedule XV.

The Authority proposes that these amendments take effect for submissions made following the end of the financial year starting on or after 1 January 2017, and a separate Guidance Note on the Loss Reserve Specialist's Opinion will be subject to further consultation. Because this is a consultation notice, none of the proposed rule changes are yet binding; they describe what will be required if and when the amendment rules are made.

Key obligations

• Once effective, insurers subject to the Class 3A Solvency Requirement Rules must prepare their Bermuda Solvency Capital Requirement using the new Economic Balance Sheet (Schedule XIV) methodology.
• Insurers will be required to file, at the time of furnishing their capital and solvency return, an opinion of their Loss Reserve Specialist addressing technical provisions calculated in accordance with new Schedule XV.
• Insurers will need to report certain Schedule information on both a consolidated and unconsolidated basis to support the EBS-based BSCR calculation.
• Insurers will need to provide affiliate-level information (jurisdiction, entity type, participation interest, premiums, assets, minimum margin of solvency) under new Schedule XVI.
• Interested parties wishing to comment on the proposed Rules must submit comments to policy@bma.bm by the stated deadline.

Applies to

Class 3A insurers (Bermuda), Loss Reserve Specialists

Deadlines

• 27th February 2015: Deadline for interested parties to submit comments on the proposed Amendment Rules to policy@bma.bm.
• submissions made following the end of the financial year starting on or after 1st January 2017: Proposed effective date from which the amended EBS-based solvency requirements would apply to insurer submissions.